Industry Spotlight: Agriculture

By Andrew Lumsden, Research Fellow

Although Iran is primarily thought of as an oil-producing country, it is also one of the Middle East’s largest and most diverse agricultural producers. Due to the country’s expansive geography and extremely varied climate, Iran is able to produce a wide range of agricultural products, including grains such as wheat, barley and rice; fruits such as melons and grapes, as well as teas and medicinal herbs.

According to the United Nations Food and Agriculture Organization, close to 30% of Iran’s territory consists of croplands and livestock pastures. From an economic standpoint, the agricultural sector makes up about 10% of Iran’s GDP and employs about 16% of its labor force. Despite its size and importance to the country’s overall economy however, Iran’s agricultural sector still consists primarily of small, privately owned farms, generally no bigger than 24 acres. (The average family farm in the U.S. state of Texas, by contrast, is about 523 acres)

Iranian agriculture has performed well in recent years. Output reached 118 million tons in 2017, a 20 million ton increase over the previous year, and a 44 million ton increase over 2015. Iran is among the world’s top 15 producers of wheat, with a production rate rivaling those of Australia and Russia. It also surpassed the United States as the world’s largest pistachio producer in 2017.

Domestic production meets about 90% of Iran’s domestic food requirements, and between 2011 and 2015, the country exported an annual average of seven million tons of agricultural produce, netting an average of over US$1.6 billion a year in revenue. Iran overperformed this average in 2017, exporting about 3.7 million tons of agricultural produce and earning nearly US$4 billion in revenue. 

Despite these impressive figures however, the Iranian agricultural sector faces several critical challenges which threaten to severely imperil the country’s economy and food security in the coming years.

• Water Shortages: Iran’s average rainfall stands at a meager 250 millimeters a year, about one-fourth the global average. Climate change threatens to reduce rainfall even further. An estimated 90% of the country is currently experiencing droughts of varying intensity.

• Declining Soil Quality: Decades of insufficient fallow periods have reduced soil qualities across Iran. A 2016 study from Stanford University found that about 52% of its croplands have soil which is of “poor,” “very poor,” or “unsuitable” quality. This decreases output and increases the probability of crop failures.

• Low Mechanization: The use of machines such as tractors and combine harvesters in Iranian agriculture remains relatively low. Agricultural mechanization levels are measured by horsepower per hectare of farmland (hp/ha). Iran’s mechanization rate is little over 1hp/ha, compared with 3hp/ha in the Philippines, 4hp/ha in South Korea, an average of 5hp/ha in the European Union and 14hp/ha in Japan.
   
• Trade Deficits: Although Iran is able to meet most of its food needs through domestic production, it relies on expensive foreign imports to fully meet demands. Between 2013 and 2015, imports of foreign barley, corn and rice cost Iran nearly US$40 billion, roughly US$21 billion more than its agricultural exports earned during that period.
   
• Urbanization: Iran’s rural population has declined every year since at least 1960 and rural-dwellers now make up only about 25% of the national population. Urbanization means that every year, Iran loses tens of thousands of rural farmers and agricultural laborers. Given that urbanization has yet to be met with major agricultural mechanization, Iran’s agricultural production is at risk for decline.

The Iranian government has taken notice of these challenges and taken steps to address them. To combat water shortages, the Rouhani administration halted the construction of 14 planned dams in 2017, opting instead to invest in setting up water distribution networks through underground routes to reduce evaporation. The government has also required farmers to install water meters, shut down illegal wells, begun importing more efficient irrigation equipment and encouraged more farmers to plant crops such as pistachios which have low water requirements.

Also, since President Hassan Rouhani took office in 2013, about US$1.2 billion has been spent on helping farmers access machines such as tractors and combine harvesters. Nearly 12,000 tractors have been distributed to farmers so far, and this year alone about US$130 million has been spent towards helping farmers rehabilitate damaged machines. The recent initiative is expected to lift Iran’s agricultural mechanization rate above 2hp/ha by 2021.

Iran has also signed several agreements over the past year with several countries including Denmark, Ghana, Kazakhstan, the Netherlands and Vietnam, to expand agricultural trade and cooperation. However, the May 2018 decision by the United States to re-impose economic sanctions on Iran may damage these burgeoning trade relationships.

Below, more information can be found regarding Iran’s upcoming agricultural trade show.

Event:

IranAgro

Where:

Tehran International Permanent Fairgrounds

When:

June 29 - July 2, 2018

Additional Details:

https://www.tradefairdates.com/iran-agro-M4117/Tehran.html