Research and Markets: Iran Agribusiness Report Q4 2010 – Milk Consumption Growth Predictions to 2013/14: 17% to 3.2mn tonnes

The Iran Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Iran’s agribusiness service.

We forecast strong consumption growth across most of the agricultural complex in Iran, expect for pork, which is prohibited in the country. Despite this, there are significant challenges ahead. With the government seriously considering rolling back important food subsidies due to costs, potential food price inflation could weigh significantly on our forecasts. The threat of disease could also decrease domestic wheat production, and given Iran’s fractured political relationship with many countries, a decrease in staple grain availability could have long lasting consequences.

Key Views:

Industry Developments

Rising disposable incomes should benefit the consumption of beef at the expense of poultry, as mainly higher income consumers trade up to the more expensive meat. However, a reliance on imports for domestic beef consumption will keep beef prices too high for many Iranians, to some extent muting income-related trading up. We therefore forecast poultry demand to continue to grow strongly over our forecast period as well. Poultry will benefit from its growing ubiquity and its consumption is rarely confined to special occasions any more.

The government has been active in the local rice market, exercising control over production and imports to control prices. However, government involvement is not viewed as sufficient to encourage producers and consequently the country’s import dependency continues to grow. Import tariffs are used to prevent cheaper rice inflows from completely flooding the local market and wiping out the domestic industry. But with Iran reliant on imports and with rice an important staple the government must balance these tariffs and the need to keep rice affordable without dramatically increasing its subsidy spending.

Iran’s wheat production is under threat from a new variety of stem rust. The rust can cause up to 100% crop loss and according to the UN Food and Agriculture Organisation (FAO) and up to 80% of Asian and African wheat varieties are susceptible to it. It was first discovered in Iran in 2007 in Lorestan and Hamedan in the west of the country. Egypt is exporting 1.5 tonnes of wheat to Afghanistan at no charge to try and slow the spread of the rust there and prevent its arrival in Egypt from the north. Iran is also taking the threat seriously and is attempting to cooperate closely with other countries in the region. However, with the often poor relations between Iran and its neighbours this is not always easy.