One of the most important sectors in today’s Iran, both economically and socially, is agriculture. Over the last 20 years, the country has regained its self-sufficiency in agricultural production and increased its food security index to 96%, and exports have begun to increase rapidly. Through making use of its natural advantages such as climate and geographical diversity, and through improving mechanization levels and irrigation methods, the country aims to strengthen this position in the future and increase the share of agricultural output in its export basket.
The contribution of agricultural activities to Iranian GDP stands at 13%, although the gross capital formation makes up only 5% of the national total. In 2006, the agricultural sector provided almost one in five jobs, down slightly on the 23% recorded in 1996. It is estimated that one-third of Iran’s total surface area is suited for agricultural production, but currently only 11.4% (18.5 million hectares) is being used for cultivation. Out of 18.5 million hectares under cultivation, 8 million hectares are used for irrigated farming, about 6.3 million hectares used for dry (rain-fed) farming, and the rest utilize a mix of both. One-third of all land is used for grazing, which is mainly conducted on the dasht, or Iran’s semi-arid rangeland.
Small average plot size is regarded as one of the major drawbacks to large-scale agricultural production in Iran. More than one-third of agricultural producers own less than 1 hectare of land, while 87% of farmers possess less than 15 hectares. Although some
see this as a problem for the expansion of the agricultural industry in Iran, the government tends to regard it as a necessity for social justice, and the record of growth since the Revolution is a testament to its ability to assist smaller landholders while still being able to promote the creation of larger agricultural production units.
The state’s primary goal for agriculture has been to attain self-sufficiency, despite the fact that Iran had been a net importer of foodstuffs for over a generation. Attaining self-sufficiency was no easy task, as the population of Iran had also doubled between 1976 and 1986. During the first three of the Five-Year Development Plans (FYDPs), policies emerged to improve farming infrastructure and increase the level of mechanization in agricultural production. In addition, the state assisted in providing higher yielding crop types to farmers, promoted improved animal husbandry methods, and increased the level of financial support from the banking industry. In addition, international agricultural development agencies were invited to assist in improving the agricultural sector. The International Center for Agricultural Research in Dry Areas (ICARDA) provided Iran with four new varieties of barley, five new varieties of wheat, two new chickpea varieties, and two lentil varieties specialized for use in Iran’s more arid environmental conditions. In response, agricultural output increased from 65 million tons in 2000 to 90 million tons by 2004.
Iranian agricultural exports have also been on the rise. In 2000, the value of agricultural exports was $1.46 billion, and by 2007 it had increased to $3.7 billion. In that period, there were years in which Iran approached a trade surplus of agricultural products, such as 2005, in which agricultural products worth $3.2 billion were imported. The most significant product exported by Iran is dried fruits, which make up 30% of all agricultural exports. Dried fruits are followed by vegetables and livestock products, which make up 27% and 19% of exports respectively.
Needless to say, there are also unusual years when it comes to agriculture. Due to recent drought conditions, domestic production has decreased in 2010, leading to increased imports and falling exports. The level of the rial has also had an effect, although its devaluation in 3Q 2010 will help make Iran’s agricultural exports more competitive. All in all, in 2008 Iran was forced to import $9 billion in agricultural products, while exports stagnated at $3.2 billion.
The government is looking to reverse this trend by increasing the area of irrigated land, improving productivity, and expanding the area of land under cultivation. Another priority is on increasing the level of mechanization. The mechanization index rose from 0.67 hp/ha in 2005 to 1.05 hp/ha in 2009. The small average size of agricultural plots and the low education level of the rural population also pose some challenges to meet these targets, but the government aims to increase the mechanization level up to 3 hp/ha by the end of the Fifth FYDP.
To reach these targets, Bank Keshavarzi (or Agricultural Bank) offers the most prominent form of assistance. As the only specialized banking entity serving the agriculture sector, the bank plays a prominent role in financing rural development projects. In 2009, Bank Keshavarzi granted financial facilities to the value of $7 billion to 1.4 million individuals for agricultural sector development. Agricultural mechanization is also among the priorities for Bank Keshavarzi, and $2 billion in credits was allocated for the purchase of agricultural machinery and tools. The bank intends to play a more significant role in financing the sector by establishing new funds and finance companies.
CROP & PLANT PRODUCTION
More than 12 million hectares are allocated to the production of crops, vegetables and fruits across the country. The diversity of climatic zones in Iran enables farmers to cultivate a wide spectrum of products ranging from cereals to fruits (dates, figs, melons, and grapes) and from vegetables to cotton. Iran is one of the leading pistachio producers and exporters in the world. In saffron, as well, Iran holds first place in production with 80% of the world’s total output. The total crop and plant production in Iran stood at 88 millions tons in 2007 and 65 million tons in 2008, the latter caused by drought conditions.
Animal husbandry plays an important role in the Iranian agricultural sector, and constitutes 30% of the agriculture sector’s value-added as well as providing a significant portion of the national food basket. Production in every branch of livestock increased after 2000, especially as private sector investors began to play a more prominent role. Red meat production increased to 870,000 tons in 2008 from 729,000 tons in 2000. In the same period, egg production increased to 727,000 tons from 580,000 tons, and poultry production recorded an annual growth rate of 9% to expand to 1.5 million tons from 803,000 tons. Milk production used in the dairy industry also grew at an annual rate of 6%. The growth in livestock production has also been felt in a positive fashion in the development of the local processed food industries.
Iran has access to the Caspian Sea, the Persian Gulf, and the Arabian Sea, as well as having many inland lakes and rivers. Despite such ample resources, the aquaculture and fisheries industry is rather underdeveloped. However, the Iranian State Fisheries Organization has been undertaking a plan to increase annual production to 700,000 tons from 400,000 tons. In 2008, production had already increased to 563,000 tons. Iran holds important potential in this area, because its exports are gaining entry into new markets as a result of the careful observation of international standards by producers. This attention to detail has enabled Iran to become the only country in the Middle East with permission to export seafood to the EU.
Although important aquatic species such as bream, whitefish, salmon, perch, roach, and shrimp are present in Iran’s waters, it is the sturgeon that gathers the most international attention. The Caspian Sea is the home of the sturgeon fish, though it is the fish’s roe that connoisseurs truly seek as served in the world’s finest restaurants as caviar. Iran is the world’s largest producer and exporter of caviar, exporting more than 300 tons annually. The export of caviar is expected to reach $22 million by March 2009.
Iran also has significant forestry resources, with some 18% of the country still covered by forest. Dense forests are mostly found in the Caspian Sea region, though other major stands are found in the western and southern parts of Iran. The largest and most valuable woodland areas are in the Caspian region and on the northern slopes of the Alborz mountains, where many forests are used commercially. The government has plans to raise the hectarage of exploitable forests through better management, while maintaining tight controls to avoid exploitation.
© The Business Year