Wednesday 4 April 2012

Kurdistan & Iraq grain harvests 2012توقعات انتاج الحبوب للموسم الحالي

Grain pile up in the Silo yard
      The forecasts for this year’s net grain harvests for Kurdistan and Iraq are now available and the Ministry of Agriculture has announced that the 2012 support prices for wheat, will remain unchanged at 720, 620, 520,000 ID/MT for grades1, 2, and 3 of wheat respectively.  This means that farmers will again receive government support for wheat production through the price paid at the silo. This system of supporting farmers by maintaining the cost paid for the end product results in farmer choosing to grow crops that they know the government will pay high support prices for and this can have serious detrimental impacts as:
• Farmers do not implement conservation efforts, such as crop rotations
• Farmers may be induced to plant marginal land
• Farmers reduce plantings of unsupported crops

• High support price increases feed cost in poultry/livestock sector.
In addition traders import wheat, purchased at a low price, transport it across the country and sell it as home produced grain at a high profit. In this way the trader can make a healthy profit from the system set up to assist farmers.

The more effective way of supporting agricultural production is a system of direct payments that support the farmer’s income where farmers market their crops at market determined price levels and receive a supplemental payment to support their incomes during a transition period. The added benefits of this approach are that there are no incentives to smuggle imported wheat into Iraq, the overall budget cost is lower and pasture land is not cultivated.  Direct payments also give the advantage of targeting production sectors e.g. sheep or fruit producers,  by giving additional direct payments based upon their participation in a program to achieve a particular policy goal.

Iraq’s intention to support producers through output prices and to reduce support for purchased inputs is questionable and should be reviewed. The implication is that high domestic support prices, as a standalone policy, will be very expensive and not produce the desired results. Evidence from similar countries where this system was used reveals that a 100% rise in support price will result in only a 40% rise in productivity. Quite simply maintaining high output prices is just a form of income support and does not lead to increased productivity. It is essential that production and output costs for all crops and livestock and investment requirements are considered and an overall agricultural policy based on input support and import control is determined.

Food security and reduced reliance upon imports is a policy goal for Iraq and Kurdistan but increased productivity and greater food security will not be achieved by only increasing support of output prices. Productivity is seriously constrained by input availability, lack of available production credit for producers, and overall lack of capital investment in agriculture.

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