Exclusive: Iraq Poised to Face High Costs for Bumper Wheat Harvest, Reports Reuters

By Sarah El Safty and Muayad Kenany

DUBAI/NAJAF, Iraq – A significant wheat surplus in Iraq, which has traditionally been one of the largest wheat importers in the Middle East, poses a financial dilemma for the government, potentially resulting in a net loss of nearly half a billion dollars, based on recent calculations.

This year, Iraq has produced a surplus of 1.5 million metric tons of wheat, attributed to favorable rainfall and substantial government subsidies. While this is beneficial for farmers, who receive more than double the global market price for their produce, it places a heavy financial burden on the government.

Calculations based on official sources and discussions with various stakeholders, including government officials, farmers, and analysts, indicate that the government’s loss could reach approximately $458.37 million after compensating farmers and assuming it manages to sell the surplus to private millers at an agreed price.

Critics argue that the government needs to better navigate the challenges of incentivizing farmers while managing limited resources. "This is poor planning," remarked Adel Al Mokhtar, a former adviser to the Iraqi parliament’s agriculture committee. He questioned the rationale behind producing more than necessary, which he noted leads to wasted water resources.

To sustain its subsidy program, the government requires between 4.5 and 5 million tons of wheat annually. Historically, Iraq is part of the Fertile Crescent, a region known for its agricultural significance for over 10,000 years. However, recent years have seen Iraqi agriculture struggle due to reduced rainfall caused by climate change, decreased water flow in the Tigris and Euphrates rivers, and the impact of prolonged conflict on farming activities.

The United Nations categorizes Iraq as one of the world’s most vulnerable nations to climate change, highlighting food security as a crucial priority for the government. Compounding these challenges, Iraq, a leading oil producer, is anticipated to face a reduced budget in 2025 due to lower oil prices.

"If oil prices decline, the government will prioritize salaries for public service employees, leaving uncertain funding for agricultural subsidies," said Harry Istepanian, an independent energy and water expert.

Storage Constraints

While Iraq could consider exporting its wheat surplus, the government prefers to keep it domestically to support local millers. Due to limited storage capacity, retaining the surplus for future use is not a viable option, according to Haider Nouri, the director general of Iraq’s grain board.

Though the government buys wheat at 850,000 Iraqi dinars and sells at 450,000 dinars, Nouri argues that this does not equate to a loss since the expenditures support the domestic economy.

Farmers expressed that while favorable weather played a role in their success, the government subsidy was essential for increased productivity. For instance, Ashour Al Salawi, a farmer from Najaf, noted that the attractive government price allowed him to expand his wheat planting area by 50%. Farmers also reported timely payments this year, contrasting with previous years.

Mohsen Abdul Amir Hadhud, head of the agricultural cooperative in Najaf, highlighted the overall improvement in farmers’ living conditions due to government support for the wheat crop.

The government is also backing the cultivation of other crops, such as rice, purchasing it at varying prices based on quality.

Tensions with Millers

The decision to retain surplus wheat domestically may lead to pressure from millers for reduced buying prices since they have the option of cheaper imports. Ali Fadhel, director of a private milling company, noted that the procurement price set by the government is unlikely to remain unchanged.

Looking ahead, farmers might see diminished rewards in the 2025 season, with potential reductions in the prices offered to them. Nouri stated that while the purchase price may decrease, it will still be above global market rates.

Farmers in Najaf expressed concern that such changes could lead to a reduced wheat output next year. "It would be a disaster if they decrease the price next year," warned Hussein El Morshedy, whose production increased significantly this year.

In summary, while Iraq’s wheat surplus presents opportunities for farmers, it also highlights the complexities and financial challenges faced by the government in balancing agricultural support with economic sustainability.