By Anthony DiPaola and Caroline Alexander
Aug. 5 (Bloomberg) -- Iraq may have its worst harvest in a decade this year as an extended drought cuts its water supply, forcing the third-biggest OPEC producer to increase grain imports as oil revenue drops.
This year’s harvest of wheat, Iraq’s most important crop, is likely to fall to 40 percent of normal levels as rainfall declines by 50 percent, said Fadel El-Zubi, head of the Iraqi office at the United Nations Food and Agriculture Organization.
“This is the fourth consecutive year of drought in Iraq,” El-Zubi said in a phone interview on July 30. The country will have to import 4 million tons of wheat this year to meet its annual demand of about 5 million tons, he said.
Iraq, holder of the world’s third-largest oil reserves, is struggling to rebuild its economy six years after U.S.-led forces ousted Saddam Hussein. The government depends on oil for more than 90 percent of revenue according to the Central Intelligence Agency’s World Factbook. It is seeking to attract foreign investors to expand its petroleum industry.
The FAO forecasts Iraq’s wheat production will be less than 1 million metric tons this year, compared with average output of 2.5 million tons from 2000 to 2007. Iraq produced 1.5 million tons of wheat last year.
Global wheat production will drop to 654 million tons in 2009-10, from 687 million tons in the previous year, the London- based International Grain Council said July 30. Wheat stocks will rise to 174 million tons from 161 million tons a year earlier as production outpaces consumption for a second year, according to the council.
Oil Plunges
Wheat traded on the Chicago Board of Trade, a global benchmark, has dropped 11 percent this year to $5.4525 a bushel today, extending last year’s 31 percent decline.
Oil declined more than 50 percent in New York today from a record $147.27 in July last year. Iraq raised $6.7 billion from oil exports in that month compared with $3.7 billion in June this year, according to the Oil Ministry, making less cash available for grain purchases.
The combination of rainfall as low as about 25 percent of normal levels and less water from rivers flowing out of Turkey and Syria has hurt the country’s grain-growing areas, according to the U.S. Department of Agriculture.
“Crop yields are expected to be significantly reduced in major southern irrigated provinces this year owing to critical shortages of irrigation water in the Tigris and Euphrates river systems during the wheat growing season,” USDA analyst Michael Shean said in a May 12 report.
Iraq will import 3.8 million tons of wheat in the 12 months ending June 2010, the most since the period ending June 2006, according to the USDA.
Water Sharing
Iraq depends on water from rivers passing through Syria and Iran, which are also facing drier than normal conditions, Shean said in a phone interview on July 29.
Syria and Turkey use water from the Tigris and Euphrates rivers for their agriculture and power generation. El-Zubi of the FAO said an agreement on water sharing between these countries is necessary for Iraq to tackle the drought.
“If you want to have an agricultural strategy to produce more, you need to have a water master plan,” El-Zubi said. “For that you need to know how much water you have and when you’ll have it.”
The FAO is working with Iraq on a water plan that involves upgrading the country’s irrigation infrastructure, cutting water consumption through more efficient use and better crops, and brokering a treaty among the neighbors, El-Zubi said.
To contact the reporter on this story: Anthony DiPaola in Dubai at ; Caroline Alexander in London at .
Last Updated: August 5, 2009 05:57 EDT