Agriculture in Iran - Government Policy

Government Policy

See also: Ministry of Agriculture (Iran) and Government Trading Company

In theory, Iranian agricultural policy is intended to support farmers and encourage the production of strategically important crops. The policy is twofold: first, to purchase certain crops at guaranteed prices and second, to encourage the production of specific crops through farm subsidies. The policy of purchasing agricultural crops from farmers at guaranteed prices was put in place in the 1989 crop year. On average, the guaranteed prices increased at the rate of inflation over the past 15 years. Individual subsidy levels for major crops, however, vary annually.

In the 1990s and early 2000s, government agricultural planning was only marginally successful. According to government figures, during the 1990s—coincident with the first two Islamic Republic economic plans—only 40.5 percent of the agricultural modernization projected by those plans was accomplished, and only 40.2 percent of government and private-sector financial commitments materialized.

Because wheat is considered Iran’s most strategically important crop, it received the largest subsidies, and its production grew at the fastest rate between 1990 and 2005. From FY 2003 to FY 2004, wheat subsidies increased by 17.2 percent, reaching a record of US$1.5 billion. Between 1981 and 2004, the area cultivated with wheat remained stable at 5 million hectares, but wheat production increased from 5.7 million to more than 11 million tons.

Beginning in 1990, the government expanded its agricultural support programs to include a guaranteed purchase price for major agricultural crops, subsidies, favorable interest rates, government investment, and favorable foreign-trade policies. Primarily because of government support for domestic agriculture, between 1989 and 2003 the import volumes of wheat, sugar, and red meat declined by 77.7 percent, 39.6 percent, and 88.2 percent, respectively. Concurrently, the value of agricultural exports increased from US$461.5 million in 1989 to US$1.7 billion in 2004. However, over the same period total food and live animal imports increased from US$1.37 billion to US$2.65 billion.