Iraq takes measures to increase local flour production

Traditionally a major importer of wheat flour, Iraq is taking measures to boost its local production and reduce reliance on imports.

The government has approved the local sale of wheat to licensed public and private mills at prices equivalent to the import price and imposed a gradually increasing customs tariff on imported flour.

As a result, the International Grains Council (IGC) said flour imports in 2024-25 are estimated to drop to a decade low. Still, the country is expected to remain the world’s second largest importer of flour. Wheat imports also are expected to drop from last year and the five-year average as domestic production increases.

Agriculture is a significant part of Iraq’s economy, accounting for about 10% of gross domestic product and employing 8.4% of the workforce. About 22% of the country’s land mass is suitable for agriculture production but only 5 million hectares are cultivated, according to the World Food Programme. A large portion of the agricultural lands are under irrigation, but it still depends on rain-fed agriculture for grain and sheep production, according to the Food and Agriculture Organization (FAO).

Crop production is the major source of income for farmers, about 75%, while the rest rely on livestock or a mix of the two. Key crops include barley, wheat, rice and corn (maize).

Years of war and social unrest have caused severe constraints across the agriculture value chain, including restricted access to land due to violence; internal population displacement; reduced availability and increased cost of farming inputs; physical damage to land, equipment and infrastructure; disruption of markets; and increased cost and reduced access to animal feed sources.

Iraq’s economy is heavily reliant on oil — more than 90% of the government’s revenue comes from oil. Any drop in prices or output could lead to serious economic instability.

Flour milling

Iraq has about 280 licensed flour mills with 3% belonging to the private sector. The government is heavily involved in the wheat value chain, and domestic production primarily is fed into the Public Distribution System (PDS), a ration card system that directly supplies food to middle and lower-income families.

Much of the wheat flour distributed under the PDS ends up either as animal or fish feed due to poor quality, or because families cannot bake bread at home, according to the Foreign Agricultural Service (FAS) of the US Department of Agriculture. Most families in the urban areas purchase bread from local bakeries. These bakeries use imported flour mostly from Turkey or Iran, or purchase flour from families that are not able to bake the bread at home.

Typically, a significant portion of the private sector milling capacity remains underutilized because of a decline in the frequency in which mills receive grain, the FAS said. Private mills receive wheat after the public sector capacity is filled.

However, this August the government approved the sale of wheat to licensed public and private mills at prices equivalent to the import price of similar wheat, in a move to enhance local flour production and reduce reliance on imports.

Also, as part of the National Product Protection Program, the government imposed a gradually increasing customs tariff on imported flour, starting at 10% from Sept. 1-Dec. 31 and increasing to 25% from Jan. 1, 2025-June 30, 2025. It will review the tariff after six months.

In addition, the Ministry of Trade and its contracted companies will work with commercial mills to supply flour to social welfare beneficiaries under new contracts. Ministers including defense, interior, trade, justice, labor and social affairs will be supplied exclusively with locally produced flour.

A 30% customs duty will be imposed on imported packaged flour (1 kg) starting Oct. 1.

This July, Prime Minister Mohammed S. Al-Sudani met with several owners of private mills that have been producing flour since April. He commended the millers for their contribution to local production and creating jobs. He said that all obstacles facing the mill owners will be removed to ensure fair competition between local and imported products.

He added that “special” decisions will be issued to protect their products if they cover half of the market’s demand for flour.

Iraq will continue to import flour in 2024-25 but the IGC lowered its estimate to 1.5 million tonnes, down from 2.1 million tonnes imported in 2023-24. Due to its higher quality, most of the imports are bound for private bakeries and other processors, the FAS said.

A significant amount of wheat flour is imported from Turkey (about 100 mills produce only for the Iraqi market) and Iran with a small amount from Jordan and Russia. Mills outside of Iraq have the capability to make flour in specification to Iraqi preference at a lower cost than Iraqi mills, the FAS said.

Crop production

Wheat imports also are expected to drop in 2024-25 as Iraq increases domestic production, according to the IGC. Imports are estimated at 2 million tonnes, down from 2.2 million tonnes last season, and below the five-year average of 3.2 million tonnes.

Wheat is a strategic crop in Iraq, accounting for 70% of total cereal production in the country, the FAS said.

“The government invests considerable resources into domestic production in the form of subsidized inputs and direct purchase of harvests,” it said.

Wheat production is estimated at 6.3 million tonnes in 2024-25, up from 5.2 million tonnes in 2023-24, according to the IGC. Wheat is grown on irrigated and rain-fed lands, with the bulk of the rain-fed cultivation concentrated in the north. Most of the irrigated cultivation occurs in the central and south regions.

The FAS expects a 65% increase in barley production in 2024-25 to 1.4 million tonnes, up from 200,000 tonnes last season. It is also up from the five-year average of 849,000 tonnes. Water shortages and widespread crop failure in the north impacted the 2023-24 crop.

Domestic barley primarily is used as feed for livestock, the FAS said. It also is used in about 10% to 15% in poultry feed for laying chickens.

The trade of barley normally is handled by the private sector after receiving licenses for importation from the Ministry of Agriculture. Imports were estimated at 450,000 tonnes in 2023-24.

Corn production is estimated at 500,000 tonnes in 2024-25, a 7% increase from the 450,000 tonnes produced in the last season, according to the FAS.

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Tags: corn, wheat, flour, Iraq