Boston, MA -- (SBWIRE) -- 10/04/2013 -- Financial sanctions imposed to pressure Tehran over its nuclear programme are playing havoc with Iran's ability to import goods. Food price inflation is soaring, leading to a serious decrease in meat consumption. The replacement of regular trade for barter can be seen as a feasible, albeit temporary, way of circumventing sanctions to meet demand. Although the newly elected President Hassan Rouhani, more moderate than his predecessor Mahmoud Ahmadinejad, will most likely adopt a more conciliatory stance with the West, sanctions will remain in place. Over the longer term, we believe that the continued investment by the government to improve infrastructure - such as the improvement of irrigation systems - will help the country to turn away from its backward agrarian system and will yield results in terms of better-quality grains. We are especially upbeat in our outlook for grains and sugar production.

Key Forecasts

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- Wheat production growth to 2016/17: 18.3% to 16.0mn tonnes. Wheat yields are expected to improve owing to the modernisation of technology, including hardier grains variants, greater access to relevant inputs and a larger area of the country benefiting from new irrigation facilities.
- Sugar consumption growth to 2017: 30.4% to 2.5mn tonnes. Sugar demand will be mainly driven by population growth.
- Poultry production growth to 2016/17: 8.3% to 872,000 tonnes. Growth will be driven by domestic demand and the effects of increased investment.
- BMI universe agribusiness market value: US$11.9bn in 2013 (up 3.0% compared with 2012, growth forecast to average 2.1% annually between 2013 and 2017).
- 2013 real GDP growth: -2.0% (up from -3.4% in 2012; predicted to average 2.5% from 2013-2017). - 2013 consumer price inflation: 28.0% year-on-year (y-o-y) (down from 28.5% y-o-y in 2012; predicted to average 17.0% y-o-y from 2012-2017).

Key Developments

The new wave of international sanctions imposed on Iran in connection with its disputed nuclear programme has increased the difficulty in importing food. The US National Defense Authorization Act (NDAA), which came into effect on July 1 2013, blacklists Iran's shipping, shipbuilding, energy and ports management sectors, adding to other sanctions targeting the banking sector and key oil exports. The extra burden placed on the import of basic goods will in turn push up food prices, which are already skyrocketing. These additional hurdles mean grain shipments to Iran can command a risk premium of US$10-20/tonne over international prices, according to industry sources.

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