With employment in the services sector growing, now just over 20% of the workforce is engaged in the agriculture sector in Iran, a declining percentage. However, the latest Five-Year Development Plan (FYDP), which began in 2011, has earmarked significant funding to the sector to boost output following a slowdown in growth to 2.8% in 2010-2011, compared to 6.2% in 2008-2009 and 3% in 2009-2010. The dominance of crops in total farm income as well as exports means that water resource management is of increasing significance. The government now aims to increase levels of irrigation by covering the cost of up to 85% of water used in agricultural processes. Having achieved self-sufficiency in production over the last 20 years, Iran now aims “to increase the quality of Iranian agricultural products even further," Mohammad Talebi, President of Bank Keshavarzi, explained to TBY. With exports in mind, the first $3 billion payment has been made as part of the Agriculture Sector Development Program under the FYDP, with an estimated total of $15 billion to be transferred to the program in the coming years. Domestic consumption is also rising alongside production, with consumers gradually moving toward more expensive meats and rice, and away from wheat products, vegetables, and chicken as disposable incomes swell.
LAY OF THE LAND
Iran has 163.6 million hectares of land, of which 30 million hectares is arable. Currently, 18 million hectares are being utilized for crop growth and animal husbandry and approximately 28% of the population live in rural areas. The sector remains a large contributor to the economy, making up 10% of the country's GDP, 26% of non-oil exports, and 80% of domestically consumed foodstuffs, according to the ECO Trade and Development Bank. The production of crops represents up to two-thirds of total agricultural income, with major agricultural products including wheat, milk, fruits, nuts, potatoes, tomatoes, rice, barley, and grapes. The amount of cultivated land that is irrigated totals 8 million hectares, while 10 million hectares remain rain-fed. This could soon change though, as the government is rolling out a program to cover up to 85% of the cost of water used in agricultural processes, with the rest covered by Bank Keshavarzi, the main financial institution involved in the agriculture sector. This is seen as complementary to investments made in reservoirs and dams over recent years, and vital to the west of the country, where rainfall is often not enough for farming.
Now estimated at 2 million tons annually, the production of meat, including lamb, chicken, beef, and goat, is sufficient to meet domestic demand and represents around 30% of the sector's value-added. However, the government has been willing to import halal products in order to maintain price stability. Difficulties in accessing external markets may put pressure on consumers as prices become more volatile during the prolonged drought that is affecting the country. This could, however, be offset as rising disposable incomes allow consumers to move somewhat away from wheat and vegetable products to meat- and rice-based dishes. In that respect, beef consumption is expected to rise by 9.8% by 2015 and reach 664,300 tons, according to Business Monitor International, as consumers move away from meats such as chicken.
Following an increase in poultry prices in July 2012, the government also acted quickly to stabilize the market with prices dropping by up to 20% by September. Ambitious targets to increase the production of table poultry meat to over 1 million tons will now rely on the supply of feed. The government additionally plans to boost local milk production to 12 million tons from the current 6.5 million tons over the next eight years in response to growing domestic consumption and export opportunities.
CROP & PLANT PRODUCTION
As a result of efforts to reach self-sufficiency in food production, Iran became an exporter of wheat in 2006. However, during periods of drought the country resorts to imports. Wheat yields are comparable to Turkey, yet remain below those seen in Pakistan. According to Teatro Naturale International, wheat production will continue to grow slowly and reach 14 million tons by 2015. Government efforts have recently been focused on increasing the production of domestic cereals that, among other things, are vital for the production of the animal feeds the country needs if it is to significantly boost its livestock industry. With production figures on the up over recent years, the country now faces a temporary grain/oil seed storage facility deficit of around 2 million to 3 million tons. A greater need for mechanization will also characterize the sector over coming years as urbanization continues apace and employment in the agriculture sector continues to decline. In this respect, foreign investors have long been present in Iran, with Swiss company Bühler the supplier of 70% of Iran's flour production machinery and 60% of pasta production machinery, as well as 80% of chocolate production machinery and 40% of animal feed production machinery. “Our big initiative in Iran at the moment is rice milling," says Sharif Nezam-Mafi, Managing Director of Bühler in Iran, “with the inauguration of the biggest parboiling rice mill in the Middle East in Mazandaran province." Rice consumption is also growing in Iran and is expected to reach 3.5 million tons by 2016.
Thanks to a deregulation program, the production of bread has become more competitive in recent years and the quality of flour has increased, resulting in a reduction in consumption of almost 30%. “This newly found competitiveness in the flour business has in turn increased the quality of flour, but not necessarily the bread. The bread industry is far from becoming industrialized anytime soon," concluded Nezam-Mafi.
DRIED FRUITS & NUTS
The dried fruits and nuts sector is also following a development trend that will soon require investment in production and packaging methods in order to increase international competitiveness. In terms of exports, the country's dried fruit and nut basket sits high and the pistachio is its king. With 70% of the 175,000 tons harvested in 2011 exported, the nut represents 11% of Iran's non-oil export mix. Dates enjoy the highest national consumption rate, with 850,000 tons of the 900,000 produced in 2011 sold and consumed locally. Other major produce includes sultanas, almonds, walnuts, hazelnuts, figs, apricots, prunes, and peanuts.
Saffron also remains a significant product, with 200 tons grown annually over 50,000 hectares. The country lost its position as the world's prime saffron exporter to Spain in 2004, however, with lower-quality packaging deemed the major cause.
Iran's long coastline complements the country's diverse climate suitable for various forms of aquaculture to make Iran one of the largest fishing nations in the region. The country's fisheries industry is generally broken into three categories: the Caspian Sea, inland aqua farms, and the southern coast. The Caspian Sea is by far the largest center of seafood production, famed for its caviar industry that makes the country the world's largest exporter of the delicacy. In addition to caviar, major export products include sturgeon, shrimp, and canned products. By 2020, it is estimated the value of Iran's caviar exports will reach $57.5 million, compared to $6 million in sturgeon exports and $14 million in shrimp exports.
Despite representing only 1% of the agriculture sector, the sugar industry is attracting more attention from investors. In 2011, as a result of currency devaluation, the price of sugar sparked activity on the Tehran Stock Exchange (TSE) that saw the sector index gain over 340%. Producers are now adjusting to lower prices again, however, as the global price of the commodity drops and production increases take effect. A predicted drop in imports could provide another boost to local producers and allow agro-producers to clear excess stock levels. Over the next few years to 2015, sugar production is expected to increase by over 20% and reach 1.3 million tons, up from a peak of 910,000 tons in the 2006/2007 period. The state-run Sugar Cane Development Company (SCIDC) also aims to increase production even more by the end of 2020, reaching over 2 million tons of production per year by almost doubling the area planted with sugar cane. Plans are also in place to boost the yield from its current 88 tons per hectare to 110 tons per hectare.