Iraq’s bumper wheat harvest a financial burden rather than a triumph

IRAQ – Iraq, one of the Middle East’s largest wheat importers, could lose up to US$458 million from 1.5 million metric tons of surplus wheat this season.

According to calculations by Reuters, the 1.5 million metric tons surplus, largely due to favourable rains and significant government subsidies, has been a boon for Iraqi farmers but could prove costly for the state.

The government, aiming to encourage wheat cultivation in Iraq’s often arid landscape, pays local farmers more than double the global market price for their wheat.

While this strategy has bolstered domestic production, it comes at a high financial cost. According to official figures, alongside interviews with over ten government officials, farmers, and analysts, the government is projected to lose US$458.37 million once it has compensated farmers and sold the surplus to private millers at a reduced price.

Adel Al Mokhtar, a former advisor to Iraq’s parliamentary agriculture committee, criticized the situation as an example of poor planning.

 “Why produce more than is needed, especially when it wastes water, a scarce resource in Iraq?” he asked.

With Iraq needing 4.5 to 5 million tons of wheat annually to support its subsidy program, this surplus is being viewed as a financial burden rather than a triumph.

Historically, Iraq has been part of the Fertile Crescent, the birthplace of agriculture. However, in recent years, the country has faced several challenges, including a significant decrease in rainfall linked to climate change, water shortages from the Tigris and Euphrates rivers, and disruptions caused by decades of conflict.

These factors have severely impacted agricultural productivity, making food security a critical government priority. The United Nations ranks Iraq among the five countries most vulnerable to climate change globally.

However, the country’s budget constraints are exacerbating the situation. As a major oil exporter and the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), Iraq’s budget is tightly linked to oil revenues.

With oil prices declining, the government’s financial ability to sustain agricultural subsidies is now in question.

 “If oil prices continue to drop, the government will have to prioritize public sector salaries, leaving less for agricultural subsidies,” commented Harry Istepanian, an energy and water expert at the Iraq Energy Institute.

Export challenges amid limited storage

Baghdad has expressed reluctance to export the surplus, preferring to keep the grain within Iraq to support local millers.

However, limited storage capacity presents an additional challenge, as the country lacks the facilities to stockpile the excess wheat for future use.

Haider Nouri, director general of Iraq’s grain board, noted that while the government buys wheat from farmers for 850,000 Iraqi dinars (US$649.35) and sells it for 450,000 dinars, they don’t consider this a loss.

 “The money is spent within the country and supports the local economy by employing workers and supporting local flour mills, reducing dependence on imports from Turkey, the UAE, and Kuwait,” he explained.

However, there are growing concerns that millers may pressure the government to lower the wheat selling price, given that they could potentially import wheat at a cheaper price.

The director of a private mill, Ali Fadhel of Al-Aswar Company, anticipates that the price the government will charge mills may need to be reviewed since it currently exceeds global market prices.

Looking ahead, Iraqi farmers may face reduced government payouts in 2025. Nouri has indicated that the government is considering lowering the price it pays to farmers, though it will still remain above the global market rate.

This decision could significantly impact production, with farmers warning that a reduction in subsidies could result in lower wheat cultivation next season.

“It would be disastrous if they reduce the price next year,” said Hussein El Morshedy, a farmer whose wheat output increased by 60% this year.

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