A bumper harvest and a hefty grain surplus in Iraq, typically one of the Middle East’s biggest wheat importers, has left the government with the prospect of a net loss of nearly half a billion dollars, according to calculations by Reuters.
The 1.5 million metric ton wheat surplus, helped by better than expected rains but above all by government subsidies, is excellent news for farmers. For the Iraqi government, however, which pays them more than double the global market price to encourage cultivation of the food staple in often arid conditions, the price is high.
According to the calculations, based on official figures and conversations with government officials, farmers, mill owners, analysts and exporters, the government will have made a loss of $458.37m once it has paid the farmers and assuming it manages to sell the excess to private millers in Iraq at an agreed price.
Critics say that the government needs do better at balancing the challenges of motivating farmers and limited financial and other resources. “This is poor planning,” said Adel Al-Mokhtar, a former adviser to the Iraqi parliament’s agriculture committee. “Why do we produce more than we need, which also leads to wasting water?”
To meet the requirements of its subsidy programme, the government needs between 4.5 and 5 million tons annually.
Historically, as part of the Fertile Crescent from the Mediterranean to the Gulf, Iraq is where farming developed more than 10,000 years ago. In recent years, though, Iraqi agriculture has suffered from a lack of rainfall linked to climate change, less water flowing through its two main rivers, the Tigris and the Euphrates, and decades of conflict, including the 2003 invasion and occupation led by the US, that have disrupted cultivation.
The UN puts Iraq among the five countries most vulnerable to climate change globally, making food security a priority for the government. However, the country, the second largest producer in the Organisation of Petroleum Exporting Countries (OPEC), is also facing a reduced budget in 2025 due to lower oil prices.
“If oil prices start coming down the government has first to pay salaries of public service employees so how much will be left to subsidise the agriculture sector?” asked Harry Istepanian, an independent energy and water expert in Washington and a senior fellow at the Iraq Energy Institute. “That’s the question nobody knows the answer to.”
Baghdad could try to export its surplus, but said that it prefers to keep it inside the country and support its millers. “Limited storage space, though, means it cannot store the surplus for next year,” explained Haider Nouri, director general of Iraq’s grain board.
Although the government was buying grain for 850,000 Iraqi dinars ($649.35) and selling for 450,000 dinars, it did not consider that to be a loss because the grain is staying in the country, added Nouri. “There is no loss considering that the money is spent inside the country and in Iraqi currency, employing workers, supporting flour [mills], relying on the local product and abandoning flour imports from Turkiye, the Emirates and Kuwait.”
Farmers said rains had helped them, but the government subsidy is crucial. Ashour Al-Salawi, a farmer in Iraq’s southern province of Najaf, said that the government price had led him to increase the area he planted with wheat by 50 per cent to a total of 15 dunums. A dunum is a land measure of less than an acre. Unlike previous years, he said, the money was paid on time.
“There’s a huge difference between this year and previous years,” said Abbas Obeid, another farmer in Najaf. “It was the compensation but we were also provided with water, electricity and subsidised fertilisers.”
According to the head of the agricultural cooperative in Najaf, Mohsen Abdul Amir Hadhud, most farmers had seen a major improvement in their lives. “The farmers’ living conditions have improved due to government support for the wheat crop. They have restored their homes, increased the cultivated areas, and purchased good agricultural supplies.”
The government also provided support for other crops such as rice, buying it at a price between 850,000 and 1 million Iraqi Dinars depending on its quality.
The decision to keep the surplus wheat in Iraq could lead to pressure on the government from the millers for lower selling prices given that they can potentially import for less.
“The price set by the government, which is 450,000, is not final, and we expect the price to be reviewed by the government, since the price that the government will sell to mills is higher than the global price,” said Ali Fadhel, the director of private sector miller Al-Aswar Company.
Farmers, meanwhile, may find themselves less well rewarded in the 2025 season, which is when, Nouri pointed out, Baghdad is considering a cut in the price it pays them. “It is possible that the price of purchasing wheat will decrease [next year] … but it will not be significant, and will be higher than the global market.”
The farmers in Najaf, say that such a cut will, undoubtedly, mean less wheat. “It would be a disaster if they decrease the price next year,” claimed Hussein El-Morshedy, whose production increased more than 60 per cent this year.