Recently published research from Business Monitor International, "Iran Agribusiness Report Q2 2012", is now available at Fast Market Research
Boston, MA -- (SBWIRE) -- 06/06/2012 -- BMI View: The prospect of prolonged sanctions against Iran will be in the spotlight over the next few quarters. In addition to affecting the country's economic development, the impact on agriculture will also be significant. As such, we highlight the downside risks sanctions would pose in terms of consumption growth. Should sanctions stay in place for a drawn-out period of time, we would expect incomes to be hit; in turn, consumers would cut down on food consumption, especially with subsidies recently removed. We believe that the most affected segments of the market would be rice and dairy, and meat consumption.
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- Milk consumption growth to 2016: 17.4% to 3.39mn tonnes. However, as per capita consumption is expected to rise by an even smaller 11.7%, this suggests that population growth surpasses milk consumption growth per capita.
- Rice production growth to 2015/16: 16.3% to reach 1.75mn tonnes. Demand growth and forecast short-term increases in global prices will encourage some domestic rice farmers to try to compete with imports. The government has been making some attempts to restrict imports through tariffs, but political wrangling appears to be scuttling any significant progress.
- Poultry production growth to 2015/16: 16.6% to reach 1.93mn tonnes. Poultry production will grow as feed prices moderate in coming years and domestic demand for meat, especially chicken, increases.
- 2012 real GDP growth: 2.1% (compared to 0.9% in 2011; predicted to average 2.1% from 2011-2016).
- Consumer price inflation: 25.0% year-on-year (y-o-y) in 2012 (up from 12.3% y-o-y in 2011; predicted to average 21.1% from 2011-2016).
In our view, the Iranian grains sector could benefit from the Government Trading Corporation of Iran's decision in February to take over grains imports on behalf of local private grains traders, enabling the country to buy 800,000 tonnes of wheat from Russia and Australia. Iran managed to partially get around payment constraints by using currencies other than dollars and euros and bartering using gold or oil. However, we believe this will not be sufficient to keep the domestic market well supplied in 2011/12. Subdued domestic supplies will very likely keep food prices high in Iran in the medium term.
Skyrocketing food prices in November 2011 have resulted in increasing public discontent with the regime. This compounded by the government making changes to its food subsidy system, increasing the price burden for the vast majority of consumers but privileging the poor. Upwards pressure on prices could turn more Iranians against the current government amid its standoff with the West over sanctions regarding its ongoing nuclear program.
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