Exclusive-Iraq prepares to pay high price for bumper wheat crop By Reuters

By Sarah El Safty and Muayad Kenany

DUBAI/NAJAF, Iraq (Reuters) – A bumper harvest and large grain surplus in Iraq, normally one of the Middle East’s biggest wheat importers, has left the government facing a net loss of nearly half a billion dollars , according to Reuters calculations.

The wheat surplus of 1.5 million metric tons, helped by better-than-expected rains but mostly government subsidies, is excellent news for farmers.

Still, for the government, which pays them more than double the global market price to encourage the cultivation of staple foods in often arid conditions, the price is high.

According to the calculations, based on official figures and conversations with more than 10 government officials, farmers, mill owners, analysts and exporters, the government will have posted a loss of $458.37 million 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 it needs to better balance the challenges of motivating farmers and limited financial and other resources.

“This is bad 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 water wastage?” he asked.

To meet the needs of its subsidy program, the government needs between 4.5 and 5 million tons annually.

Historically, Iraq, as part of the Fertile Crescent from the Mediterranean to the Gulf, is where agriculture developed more than 10,000 years ago.

In recent years, Iraqi agriculture has suffered from lack of rainfall linked to climate change, less water flowing through its two main rivers, the Tigris and Euphrates, and decades of conflict that have interfered with cultivation.

The United Nations ranks Iraq among the five most vulnerable countries to climate change globally, making food security a priority for the government.

But the country, the second-biggest producer in the Organization of the Petroleum Exporting Countries (OPEC), also faces a tight budget in 2025 after falling oil prices.

“If oil prices start to fall, the government has to pay the salaries of civil servants first, so how much will be left to subsidize the agricultural sector, that’s the question nobody knows the answer to,” Harry Istepanian, an independent expert on energy and water. Washington and a senior fellow at the Iraq Energy Institute, said.

THE STORAGE PROBLEM

Baghdad may try to export its surplus, but has said it prefers to keep it inside the country and support its millers. Limited storage space means it cannot store the surplus for next year, Haider Nouri, director general of Iraq’s grain board, told Reuters.

Although the government was buying for 850,000 Iraqi dinars ($649.35) and selling for 450,000 dinars, it did not consider it a loss because the grain remains in the country, Nouri said.

“There is no loss considering that the money is spent inside the country and in the Iraqi currency, hiring workers, supporting flour (mills), relying on the local product and abandoning flour imports from Turkey, the Emirates and Kuwait,” he said he. .

Farmers said the rains helped them, but the government subsidy was crucial.

Ashour Al Salawi, a farmer in Najaf province in southern Iraq, said the government price had prompted him to increase the area he planted to wheat by 50 percent, to a total of 15 dunums. A dunum is a measure of land smaller than an acre.

Unlike previous years, he said the money was paid on time.

“There is a huge difference between this year and previous years,” said Abbas Obeid, another farmer in Najaf.

“It was the compensation, but we were also given subsidized water, electricity and fertiliser.”

Mohsen Abdul Amir Hadhud, head of Najaf’s agricultural cooperative, said most farmers have seen a major improvement in their lives.

“Farmers’ living conditions have improved due to the government’s support for the wheat harvest. They restored their houses, increased their cultivated areas and acquired good agricultural assets,” Hadhud said.

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.

MILLERS BARGAINING POWER?

The decision to keep the surplus wheat in Iraq could lead to pressure on the government from millers for lower selling prices, given that they can import less.

“The price set by the government, which is 450,000, is not final and we expect the price to be revised by the government because the price the government will sell to the factories is higher than the global price,” Ali Fadhel, director. of Al-Aswar Company, a private sector factory.

Farmers, meanwhile, may find themselves less rewarded in the 2025 season, when Nouri said Baghdad was considering reducing the price it pays.

“It is possible that the purchase price of wheat will decrease (next year) … but it will not be significant and it will be higher than the global market,” he said.

Farmers in Najaf say it will undoubtedly mean less wheat.

“It would be a disaster if the price drops next year,” said Hussein El Morshedy, whose output has risen more than 60 percent this year.

($1 = 1,309.0000 Iraqi dinars)