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Iran’s food industry

Source:Ringier Food

Date Published:1/29/2015 12:01:36 PM

Amidst tightening sanctions, Iran manages to improve food trade, writes ZAINAB MANSOOR

IN RECENT years, Iran has managed to improve trade with countries like China, Turkey, Russia, and India, despite international sanctions. With an increasing agricultural output and improving food processing industry, Iran not only caters to its fast growing population which now stands at 77.45 million, but also to neighbouring Afghanistan, Iraq, Turkmenistan, Tajikistan as well as Persian Gulf countries.

According to a report from the World Trade Organization, the country’s food exports reached US$5.2 billion, whilst imports amounted to US$13.1 billion, in 2013. With its food trade accounting for $18.3 billion last year, Iran continues to be one of the most important F&B markets in the Middle East. It is a leading supplier of pistachios and caviar, as well as spices, fruits and vegetables. 

The World Bank defines Iran – the second largest country in the Middle East as an upper-middle income developing countryAccording to 2013 statistics, its GDP was 368.9 billion.  

Though political instability impacts the region, there has been significant improvement over the years in managing food insecurity in Iran. The Global Hunger Index (GHI) suggests that Iran’s score is below five, down from 8.5 in the 1990s, marking the highest reduction in GHI ranking across the Middle East. According to the U.S. Institute of Peace, Iran imported 65% of its food in 1979. But now it produces 66% of its food portfolio, marking a significant improvement in its self-sufficiency. 

Pistachio nuts

Iran exports about 150,000 to 200,000 tons of pistachios annually, according to Iran Traders
Pistachio nuts © Dollarbin |

Food and agricultural policies

Iran began to deploy food subsidies during the Iraq-Iran war in 1980s to help provide food and resources to its people. Post-war, governments have tried to reduce or decommission the subsidies. Subsidies, mainly energy and food, cost between $70 billion to $100 billion, 25% of Iran’s GDP. Unfortunately, these subsidies are not targeted towards the most deserving and it has been seen that the top wealthy citizens happen to receive the maximum government subsidies which is not only escalating government expenditures but also those in need of most assistance aren’t receiving any. 

“Iran pays an estimated $40-$100 billion annually for subsidies to its citizens for energy, water, fuel and basic food.  By comparison, the entire restaurant industry in Saudi Arabia – the region’s largest economy – is less than $20 billion.  Clearly, these subsidies – and isolationist government policies – are unsustainable, especially in the face of falling oil prices and with quarterly budget shortfalls in the billions,” said Aaron Allen, CEO of Aaron Allen & Associates, a restaurant consultancy in the U.S

Export and imports

The UN Food and Agricultural Organizations’ Global Information and Early Warning System (GIEWS) confirmed that initial forecasts for 2014 wheat production stood at 13 million tonnes, 7% lower than 2013 predominantly due to drought conditions. 

Wheat is Iran’s staple food, and wheat and barley happen to be the main cultivated crops across the country, accounting for almost 70% of the aggregated cereal production. GIEWS suggests that total cereal imports are forecast at 12.6 million tonnes in 2014/15 – maize (4.8 million tonnes), wheat (6 million tonnes), rice (1.6 million tonnes) and barley (1 million tonnes). This accounts for 14% more than last year.  

“Importing wheat or other food items is not a problem as long as you have the money to pay for such imports and world markets stay open. As an oil exporter, Iran is in a relatively comfortable position, but sanctions bite,” according to Eckart Woertz, Senior Research Fellow at Barcelona Centre for International Affairs (CIDOB). “Food is exempted from such sanctions, but financial transactions are not. Thus Iranian importers have found difficulties in arranging payments for their necessary trade, food or otherwise. In good years Iran was almost self-sufficient in wheat, but a lot of its production is rain-fed and thus volatile. In drought years it has been a major importer in recent years.” 

Only 10.05% of the land in Iran is arable whilst 1.08% is used for permanent crops, according to the CIA’s The World Factbook. Limited agricultural produce and increasing health issues are creating significant challenges for Iran’s food security. Access to food, its availability and affordability is impacted by international sanctions. Mr Woertz suggested that maintaining import channels open for food availability and food processing machinery under the condition of sanctions remains to be a continuous challenge for Iran.

Living with a negative image

Surveys conducted by the Pew Research Centre show that Iran’s image to the world remains negative.

“Sanctions, public policies, and public perceptions of Iran have caused serious damage to Iran’s F&B industry,” explains Aaron Allen, CEO of Aaron Allen & Associates, a restaurant consultancy in the U.S. “Inflation has skyrocketed and forced consumer cutbacks on non-essential food items.  Iran’s food industry – as a percentage of GDP – is half that of more stable and developed economies; a clear sign of the industry hardships and hampered potential for Iran. While the sanctions have opened up more trading channels with Russia, China, and others, the benefit of insights and systems from world’s largest and most sophisticated F&B players (mostly Western brands) are diminished, and this hinders Iran’s F&B industry overall.”

However, Iran and the Middle East in general have a clear challenge of dealing with its public image. The UAE, for one, has successfully shaped its positive image on the world map that has not only attracted investments but increases traffic in terms of tourism and travel. While it may take time, Iran has to work harder to improve its face to the international public.

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