Boston, MA -- (SBWIRE) -- 07/23/2013 -- Financial sanctions imposed to pressure the Iranian government over its nuclear programme are playing havoc with the country's ability to import goods. Food price inflation is soaring, leading to a serious decrease in meat consumption. The replacement of barter for regular trade can be seen as a feasible, albeit temporary, way of circumventing sanctions to meet demand. Over the longer term, we believe that the continued investment by the government in 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

- Wheat production growth to 2016/17: 21.9% to 16.5mn 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: 5.8% to 2.6mn tonnes. Sugar demand will remain mild and will be mainly friven 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 2.3% annually between 2013 and 2017).
- 2013 real GDP growth: -2.3% (up from -3.4% in 2012; predicted to average 2.2% from 2013-2017).
- 2013 consumer price inflation: 28.0% year-on-year (y-o-y) (down from 30.0% y-o-y in 2012; predicted to average 16.6% y-o-y from 2012-2017).

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Key Developments

Financial sanctions imposed by the US and EU to pressure Tehran over its nuclear programme are playing havoc with Iran's ability to import goods, including food. Food and consumer items are not targeted by sanctions, but the sanctions make deals and payments between traders difficult. Iran defaulted on payments for rice from India, its top supplier, in 2012. As a result, some exporters to Iran have stopped selling rice to the country with the customary 90 days credit for payment. Even payments considered more secure, via agents in the UAE, are being affected due to currency fluctuations. That said, we believe Iran's imports will be relatively unaffected in 2013, as the country is diversifying its providers, with Argentina exporting to Iran again after a 20-year break.

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