Required Report - public distribution

**Date:** 4/20/2008

**GAIN Report Number:** IZ8003

IZ8003

**Iraq**

**Grain and Feed**

**Annual**

**2008**

**Approved by:**

Jonathan Gressel![](media/image1.wmf), Agricultural Counselor

US Embassy, Baghdad

**Prepared by:**

Joseph M. Carroll, Senior Agricultural Attaché

**Report Highlights:**

Serious drought conditions will severely damage Iraq's domestic grain
prospects in 2008. Wheat production for all 18 provinces in MY 2008/09
is forecast at 1.5 MMT, down 36 percent from last year's estimated
harvest of 2.3 MMT. The predominately rain-fed barley crop is expected
to fall even more precipitously (60 percent) with the 2008 crop forecast
at 450,000 MT. In an attempt to get ahead of the curve on rising world
wheat prices, Iraq stepped up its pace of wheat imports, consequently
Post's estimate of Iraq's MY2007/08 wheat imports was raised to 3.5 MMT.
Wheat imports are expected to remain strong in MY 2008/09 in response to
the drought and are forecast at 3.5 MMT. In the absence of a concerted
campaign to step up feed grain imports, Iraq's vulnerable livestock
sector can be expected to endure economic hardship in the coming year.
The government's success in introducing new, higher-yielding rice
varieties should enable Iraq's rice production to remain stable in this
drought year, with 2008 production estimated at 410,000 MT. Rice imports
are also projected to remain stable and are projected at 900,000 MT.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Unscheduled Report

Baghdad \[IZ1\]

\[IZ\]

**Note:** The estimates included in this report take into account the
grain situation in the three Northern provinces of Erbil, Suleimanyah
and Dohuk administered by the Kurdistan Regional Government of the
Republic of Iraq. Consequently Post's estimates differ from official
Government of Iraq estimates which do not include data from the three
Northern provinces.

  --------------- ----------- ----------- ----------- ---------- ----------- ----------- ------------ ---------- -----------
  **PSD Table**                                                                                                  

  **Country**     **Iraq**                                                                                       

  **Commodity**   **Wheat**                                                              (1000                   
                                                                                         HA)(1000                
                                                                                         MT)(MT/HA)              

                  2006        Revised                 2007       Estimate                2008         Forecast   

                  USDA\       Post\       Post\       USDA\      Post\       Post\       USDA\        Post\      Post\
                  Official    Estimate    Estimate\   Official   Estimate    Estimate\   Official     Estimate   Estimate\
                                          New                                New                                 New

  **Market Year               07/2006     07/2006                07/2007     07/2007                  07/2008    07/2008
  Begin**                                                                                                        

  Area Harvested  1514        1852        1852        1800       1880        1880        0            1000       1000

  Beginning       1200        300         300         516        300         300         350          600        600
  Stocks                                                                                                         

  Production      2286        2484        2484        2200       2340        2340        0            1500       1500

  MY Imports      3000        3000        3000        3000       3000        3500        0            3500       3500

  TY Imports      3000        3000        3000        3000       3000        3500        0            3500       3500

  TY Imp. from    898         898         898         0          1600        2300        0            2000       2000
  U.S.                                                                                                           

  Total Supply    6486        5784        5784        5716       5640        6140        350          5600       5600

  MY Exports      0           0           0           0          0           0           0            0          0

  TY Exports      0           0           0           0          0           0           0            0          0

  Feed            500         300         300         200        200         300         0            200        200
  Consumption                                                                                                    

  FSI Consumption 5470        5184        5184        5166       5140        5240        0            5200       5200

  Total           5970        5484        5484        5366       5340        5540        0            5400       5400
  Consumption                                                                                                    

  Ending Stocks   516         300         300         350        300         600         0            200        200

  Total           6486        5784        5784        5716       5640        6140        0            5600       5600
  Distribution                                                                                                   

  Yield           1.509908    1.3412527   1.3412527   1.22222    1.2446809   1.2446809   0            1.5        1.5
  --------------- ----------- ----------- ----------- ---------- ----------- ----------- ------------ ---------- -----------

**Wheat**

**Production**

Iraq's wheat production in marketing year (MY) 2008/2009 (July/June) is
forecast at 1.5 million metric tons (MMT), down 36 percent from the
estimated 2.3 MMT harvested in 2007. Total area harvested in 2008 is
forecast at 1 million hectares (HA), down by nearly 50 percent from last
year. In the northern, mainly rain-fed provinces of Nineveh, Kirkuk and
Erbil (which accounted for about 1/3 of last year's wheat production)
wheat area harvested is forecast to decline by an average of 80 percent
due to a lack of rainfall in November and December.

Iraq's wheat is grown as a winter crop in the northern and central
portions of the country. Plantings in the primarily dryland northern
regions are large in scale and largely governed by the onset of seasonal
rains which typically stretch from November into December. In the
central portion of the country, wheat is produced on both large and
small-scale plots using both traditional flood as well as modern
irrigation methods (center pivot sprinklers). Harvest begins as early as
May in central Iraq and progresses northward when the bulk of the
country's wheat is harvested in June and July. Despite the drought,
average yield is expected to increase as a larger portion of the crop
will be harvested from irrigated fields.

Iraq's domestic production of grains is hampered by the lack of improved
seed varieties, fertilizer, herbicides and insecticides. In light of
this year's poor crop and drought damage to whatever crop is harvested
in the North, many farmers will be unable to use seeds held back from
the upcoming harvest for next year's crop. This season the MOA was able
to provide only 10% of the seedstock, but farmers will need access to a
significantly higher proportion to plant next year's crop.

**Trade**

Iraqi wheat and wheat flour imports in marketing year (MY) 2008/09
(July/June) are forecast at 3.5 MMT wheat equivalent, the same as MY
2007/08 estimate of 3.5 MMT. Approximately 70 percent of Iraq\'s wheat
consumption needs are supplied through imports. The bulk of wheat
imports are administered by the Ministry of Trade (MoT), while private
sector imports are allowed, consistent data are not available. Flour
imports are extrapolated from third-country export data (mainly from
Turkey).

Sea movement of grain cargoes into Iraq is expected to improve as a
result of developments in the Port of Umm Qasr. Located in Basra
Province, Umm Qasr is Iraq\'s major seaport, but has long been plagued
by inefficient operations, corruption, fraud, and militia activity. As
part of a long range plan to ensure the security and commercial
development of Umm Qasr, the Iraqi armed forces occupied the port
beginning April 1, 2008. Conditions in Umm Qasr have since been calm,
and port related activity has returned to normal, with improvements in
grain discharge. Security gains in Umm Qasr will set the stage for the
commercial development of the port in line with strategic
recommendations proposed by the US Embassy-Iraq and Multi National
Forces-Iraq. These recommendations include the improvement of operations
in Umm Qasr\'s North Port under a management contract with a private
operator and the development of a world class marine terminal in Umm
Qasr South Port under a long term concessionary agreement with a major
terminal operator or ocean carrier.

  ---------------------------- --------------- ------------ --------------
  **Import Trade Matrix**                                   

  **Country**                  Iraq                         

  **Commodity**                Wheat                        

  Time Period                  MY              Units:       1000 MT

  Imports for:                 2006/07                      **2007/08**

  U.S.                         880             U.S.         2300

  Others                                       Others       

  Canada                       720                          500

  Turkey                       710                          500

  Syria                        210                          0

  Australia                    360                          200

  Germany                      120                          0

                                                             

  Total for Others             2120                         1200

  Others not Listed            0                            0

  Grand Total                  3000                         3500
  ---------------------------- --------------- ------------ --------------

**Distribution**

**Consumption**

Wheat imports purchased by the MoT, Grain Board of Iraq (GBI) are
distributed under the auspices of the Public Distribution System (PDS),
Iraq's food subsidy program. The PDS is designed to provide all Iraqis
with a basic basket of foodstuffs free of charge, including wheat flour,
rice, vegetable oil, sugar, dried milk and beans, salt, soap, and
detergent. The PDS per capita food ration for flour is set at 9
kilograms (kg) per person per month, which means the program is
responsible for the distribution of nearly 4 million tons of wheat per
year. PDS was the second largest line item in Government of Iraq's (GOI)
2007 budget, with an outlay of more than \$3 billion. Owing to high
international commodity prices, the PDS budget will likely top \$7
billion in 2008.

The MOT recently presented a proposal for reform of the PDS program to
Parliament. Proposed reforms include the establishment of an income
threshold for the receipt of benefits, monetization of benefits, and
increased private sector participation in the Iraqi wheat and flour
markets. By 2010 the MoT plans to reduce its role in commodities import
and distribution and handle only a "strategic reserve" of essential
basic products. Implementation of the reforms is targeted to begin in
January 2009. Whether, and how quickly the GOI implements reform to the
PDS remains open to question, as reforming the system is politically
sensitive. The MOT's proposed reform is consistent with recommendations
long championed by the U.S. government, the World Bank, the
International Monetary Fund (IMF), and others. The reform effort also
honors an important GOI undertaking in the International Compact with
Iraq, and reflects a genuine capacity for the GOI to generate a
coherent, actionable approach to a major reform initiative.

Given current increases in international food prices, the GOI is likely
to take any reforms slowly. The PDS food basket accounts for a sizeable
portion of caloric intake of the average Iraqi and, as it is sold at a
fixed price, helps to isolate most Iraqis from skyrocketing prices. At
the same time, government oil revenues have increased making the
increased expenditures on the PDS more affordable.

In 2008, the MoT is projected to purchase 1.0 MMT of the domestic wheat
crop for use under the PDS and for animal feed, with the balance held on
farm for planting purposes, used as animal feed or sold in the free
market. In 2007, an estimated 1.4 MMT of the domestic wheat crop was
sold by farmers to the MoT. For 2008, the MoT has set a domestic
procurement price for #1, food quality wheat at 625,000 Iraqi Dinar/MT
(\$520/MT), about 15 percent higher than the 2007 domestic procurement
price. By comparison, the landed price of wheat paid by the GBI under
its last international tender was about \$630/MT.

  ------------------------------------------- ---------------------------
  **Prices Table**                            

  **Country**                                 Iraq

  **Commodity**                               Wheat

  Prices in                                   \$ US/MT

                                              

  Year                                         

  2007 Sept                                   313

  Oct                                         317

  Nov                                         302

  Dec                                         305

                                               

  2008 Jan                                    315

  Feb                                         326

  March                                       333

                                              

  Exchange Rate                               ID1220 = \$1

  Date of Quote                               4/20/2008
  ------------------------------------------- ---------------------------

**Barley**

**Production**

  --------------- ------------ ------------ ----------- ---------- ---------- ----------- ---------- ---------- -----------
  **PSD Table**                                                                                                 

  **Country**     **Iraq**     (1000                                                                            
                               HA)(1000                                                                         
                               MT)(MT/HA)                                                                       

  **Commodity**   **Barley**                                                                                    

                  2006         Revised                  2007       Estimate               2008       Forecast   

                  USDA\        Post\        Post\       USDA\      Post\      Post\       USDA\      Post\      Post\
                  Official     Estimate     Estimate\   Official   Estimate   Estimate\   Official   Estimate   Estimate\
                                            New                               New                               New

  **Market Year                07/2006      07/2006                07/2007    07/2007                07/2008    07/2008
  Begin**                                                                                                       

  Area Harvested  1025         1406         1406        1000       1440       1440        0          550        550

  Beginning       52           52           52          122        50         50          22         50         50
  Stocks                                                                                                        

  Production      920          1245         1245        800        1060       1060        0          450        450

  MY Imports      0            0            0           0          0          0           0          110        110

  TY Imports      0            0            0           0          0          0           0          0          0

  TY Imp. from    0            0            0           0          0          0           0          0          0
  U.S.                                                                                                          

  Total Supply    972          1297         1297        922        1110       1110        22         610        610

  MY Exports      0            0            0           0          0          0           0          0          0

  TY Exports      0            0            0           0          0          0           0          0          0

  Feed            250          1200         1200        300        1010       1010        0          600        600
  Consumption                                                                                                   

  FSI Consumption 600          47           47          600        50         50          0          0          0

  Total           850          1247         1247        900        1060       1060        0          600        600
  Consumption                                                                                                   

  Ending Stocks   122          50           50          22         50         50          0          10         10

  Total           972          1297         1297        922        1110       1110        0          610        610
  Distribution                                                                                                  

  Yield           0.897561     0.885491     0.885491    0.8        0.73611    0.736111    0          0.81818    0.81818
  --------------- ------------ ------------ ----------- ---------- ---------- ----------- ---------- ---------- -----------

Iraq's barley production in MY 2008/2009 (July/June) is forecast at
450,000 MT, down about 60 percent from the estimated 1.06 MMT harvested
in 2007. Total area harvested in 2008 is forecast at 550,000 hectares,
down by about 62 percent from last year. Barley production is
predominantly rainfed and was devastated by this year's drought. In
light of this year's poor crop, serious consideration is needed with
regard to the availability of planting seeds for next year's crop.

For 2008, the MoT has set a domestic procurement price for barley at
400,000 Iraqi Dinar/MT (\$335/MT), about 38 percent higher than the 2007
procurement price. In 2007, an estimated 250,000 MT of the domestic
wheat barley was sold by farmers to the MoT. The MoT subsequently sells
the barley back to registered farmers at the subsidized price of
\$180/MT. The MoT will likely face difficulty in maintaining this
program in MY 2008/09 given the small size of this year's crop.

The MoT also maintains a domestic procurement price for corn, set at
approximately \$250/MT for 2008.

**Trade**

In light of the projected sharp down turn in domestic barley production,
imports in MY 2008/09 are forecast at 110,000 MT. It is uncertain
however, how this level of imports will be realized as by most accounts
the private sector is not in a position to import the volume of barley
needed to off set the sharp decline in production. Unlike neighboring
countries such as Iran and Syria which import an average of about
500,000 MT of barley per year, Iraq has not purchased significant
quantities of barley off of the world market since 2000, when imports
totaled about 250,000 MT. To date, the Government of Iraq has provided
no indication that it intends to initiate any measures (e.g., a
livestock culling program or government imports of feed grains) to
mitigate the impact of the anticipated short fall in barley supplies. In
the absence of an upturn in barley imports and/or other feedgrains,
Iraq's vulnerable livestock sector can be expected to endure significant
economic hardship in the coming year. Reports indicate that MOA may
purchase 200,000 MT of barley, but their tendering system has not always
worked well for international purchases.

  ------------------------------------------- ---------------------------
  **Prices Table**                            

  **Country**                                 Iraq

  **Commodity**                               Barley

  Prices in                                    \$US/MT

                                              

  Year                                         

  2008 Sept                                   223

  Oct                                         225

  Nov                                         226

  Dec                                         237

                                               

  2008 Jan                                    242

  Feb                                         255

  March                                       266

                                              

  Exchange Rate                               ID1220=\$1

  Date of Quote                               4/20/2008
  ------------------------------------------- ---------------------------

**Rice**

**Production**

  --------------- ---------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- -----------
  **PSD Table**                                                                                               

  **Country**     **Iraq**                                                                                    

  **Commodity**   **Rice,                                                             (1000                   
                  Milled**                                                            HA)(1000                
                                                                                      MT)(MT/HA)              

                  2006       Revised                2007       Estimate               2008         Forecast   

                  USDA\      Post\      Post\       USDA\      Post\      Post\       USDA\        Post\      Post\
                  Official   Estimate   Estimate\   Official   Estimate   Estimate\   Official     Estimate   Estimate\
                                        New                               New                                 New

  **Market Year              01/2007    01/2007                01/2008    01/2008                  01/2009    01/2009
  Begin**                                                                                                     

  Area Harvested  110        125        125         110        135        135         0            135        135

  Beginning       100        100        100         60         15         15          63           88         88
  Stocks                                                                                                      

  Milled          153        250        250         200        273        273         0            273        273
  Production                                                                                                  

  Rough           230        375        375         300        410        410         0            410        410
  Production                                                                                                  

  Milling Rate    6660       6660       6660        6660       6660       6660        0            6660       6660
  (.9999)                                                                                                     

  MY Imports      613        615        615         900        900        900         0            900        900

  TY Imports      613        615        615         900        900        900         0            900        900

  TY Imp. from    0          283        283         0          300        300         0            250        250
  U.S.                                                                                                        

  Total Supply    866        965        965         1160       1188       1188        63           1261       1261

  MY Exports      0          0          0           0          0          0           0            0          0

  TY Exports      0          0          0           0          0          0           0            0          0

  Total           806        950        950         1097       1100       1100        0            1200       1200
  Consumption                                                                                                 

  Ending Stocks   60         15         15          63         88         88          0            61         61

  Total           866        965        965         1160       1188       1188        0            1261       1261
  Distribution                                                                                                

  Yield (Rough)   2.090909   3.0        3.0         2.72727    3.037037   3.037037    0            3.037037   3.037037
  --------------- ---------- ---------- ----------- ---------- ---------- ----------- ------------ ---------- -----------

Iraq's paddy rice production in calendar year (CY) 2009 is forecast at
425,000 MT, slightly higher than this year's estimated production level
of 410,000 MT. For 2008, the MoT has set a domestic procurement price
for rice at 900,000 Iraqi Dinar/MT (\$720/MT).

Iraq produces several varieties of medium-grain, aromatic and
semi-aromatic rice, most of which is grown under irrigation in the
south-central region. The traditional, aromatic "Anbar" rice carries a
market premium over most imported rice. The most common varieties of
Anbar rice are Anbar 33 and Mishkhab 36, the yields for which have
increased from about 1.7 MT/Ha to 2.5 MT/Ha in recent years. The
Ministry of Agriculture's Rice Development Program has had notable
success in introducing higher-yielding rice varieties to Iraqi farmers.
The most common non-aromatic rice varieties grown in Iraq are Furat (1)
and Yasmeen, the yields for which are 5.2 MT/Ha and 4.0 MT/Ha
respectively.

**Trade**

Iraqi rice imports in 2009 are estimated at 900,000 MT, roughly
equivalent to the estimated 900,000 MT imported in 2008. Despite several
years of record production levels, domestic production only meets about
20 percent of the country's current consumption needs. As a result, rice
consumption has been increasingly met through imports since the early
1970's. Like the case of wheat, greater incomes in Iraq are likely to
result in increased total per capita rice demand in the future.

  ------------------------- ----------------------- ----------- ---------
  **Import Trade Matrix**                                       

  **Country**               Iraq                                

  **Commodity**             Rice, Milled                        

  Time Period               2006                    Units:      2007

  Imports for:                                                  

  U.S.                      308                     U.S.        256

  Others                                            Others      

  Thailand                  300                                 320

  Vietnam                   108                                  

  Uruguay                   31                                   

  Pakistan                  15                                   

  South Amer.               30                                  60

                                                                 

                                                                 

                                                                 

                                                                 

                                                                 

  Total for Others          484                                 380

  Others not Listed                                              

  Grand Total               792                                 636
  ------------------------- ----------------------- ----------- ---------

**Distribution**

The PDS food ration for rice is 3 kg per person per month. PDS
distribution of rice is therefore estimated at 90,000 MT/month, or 1.1
MMT/annum.

  ------------------------------------------- ---------------------------
  **Prices Table**                            

  **Country**                                 Iraq

  **Commodity**                               Rice, Milled

  Prices in                                   \$US/MT

                                              

  Year                                         

  2007 Sept                                   794

  Oct                                         815

  Nov                                         839

  Dec                                         869

                                               

  2008 Jan                                    898

  Feb                                         903

  March                                       918

                                              

  Exchange Rate                               ID1220=\$1

  Date of Quote                               4/20/2008
  ------------------------------------------- ---------------------------