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  • By Lynda Kiernan-Stone, Global AgInvesting Media

Islamic State, Iraq’s Shrinking Budget Threaten Iraq’s Wheat Supply

In June the UN Food and Agriculture Organization announced that the country faces a serious lack of food security due to the Islamic State’s advance, disruptions in transportation and marketing, and the Iraqi government’s shrinking budget which is negatively impacting wheat production and supply. Now, Islamic State militants control an area in northern Iraq that produces about one third of the country’s wheat supply.

In the past, when Iraq was faced with wheat supply disruptions, it would increase imported wheat paid for by its large oil complex. But as global oil prices have fallen by 40% this year, the country’s budget has taken a $20 billion hit – equal to 20% of the country’s total expenditure.

All farmers in Iraq sell their crops to the government at subsidized prices that are double the global rate, and due to subsidies, retail flour prices have remained stable in the peaceful regions of the country. But because of the increasing instability and the shrinking government budget, farmers are not being paid and industry experts warn of impending rapid food price inflation.

Adding to the crisis, Islamic State continues to have a grip on Iraq’s primary farming provinces in the north, which due to a wet winter, saw a bumper harvest this year, while farming regions in the peaceful south of the country, which rely on an antiquated irrigation system, had difficulty because of a lack of water. Turkey’s construction of dams that restrict the flow of water on the Euphrates and Tigris rivers by 80% over the past few decades, and Islamic State reducing the flow of water through a dam near Ramadi in order to flood the surrounding dessert in a move to halt the advance of security forces have only compounded the difficulties for producers in the country’s southern regions.

The government hopes that farmers in the south can fill the gap left by the loss of wheat from the country’s northern provinces, but the lack of payment for their crops, the lack of water, the poor distribution of inputs including seeds, fertilizers and pesticides, and lacking infrastructure are placing doubt on this outcome.

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