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Iraq faces severe wheat shortages in 2008

Baghdad, February 4, 2008

Iraq may face its worst wheat shortages in years this year, aggravated by a delay in purchasing that clouds deliveries for the rest of the year.

Food experts, millers, traders and even senior grain officials privately warn a crisis looms even though Iraq is about to return to the international market after a nearly four-month halt in new purchases.

'We cannot envisage how future supplies can be smoothly delivered with the exceptional delays that will no doubt create a big gap in deliveries...We are already far behind in fulfilling the country's monthly needs,' an official who requested anonymity told Reuters.

The delays have undermined the efficiency of the state food rationing system which distributes wheat and other key commodities to a population of 28 million.

Wrangling over allocation of funds in the 2008 budget for commodities has suspended grain tenders since mega sales of over 1 million tonnes of mostly North American wheat in September and October.

Official data obtained by Reuters show Iraq has imported only 2.1 million tonnes of wheat in 2007, almost a third less than in 2006 or 2005.

Year-end figures of actual deliveries contrast with more than 3 million tonnes of wheat that had been discharged at Umm Qasr, the primary entry point for imports of commodities, from January through December 2006.

The end result is that consumption of wheat -- estimated at over 3 million tonnes annually --  has fallen dramatically.

Officials and aid groups talk about lower intake of bread -- a staple for the majority of Iraq's low-income bracket -- and consequent malnutrition in parts of the oil-rich country.

The impact of the delays will only worsen an already chronic shortage that since last year has seen deliveries of wheat, with the exception of February and March 2007, way below the 300,000-330,000 tonne monthly requirement, they added. All other imports in previous months of last year ranged as low as 16,000 tonnes in June to 242,899 tonnes in November.

Although shipments since January 2008 of mostly North American wheat have been stepped up, the delay in purchasing since September will create a serious gap in future deliveries, official and trade sources contacted by Reuters said. Iraq is relying on deliveries from 1 million tonnes bought in September and October, of which at least 750,000 tonnes is scheduled to be discharged by end March, officials say.

Traders say a gap in supply will remain even if Iraq this month buys large quantities under its first tender of the year, whose delay to a new bidding deadline on February 4 further cast doubt on the authorities' ability to expedite purchases. The political wrangling now delaying grain board financing of sales also slowed the chartering of cargo vessels, further bringing forward arrival dates, international traders say.

Unless purchases are stepped up substantially, the most optimistic scenario is that Iraq will maintain at best last years' deliveries of around 2 million tonnes. This was even with more regular tenders in the course of 2007 to ensure smoother supplies.

'Speeding purchases soon is crucial... The delays casts doubt on their ability to meet annual import needs,' an Iraqi trade source close to grain procurement officials told Reuters. Government proposals to revamp the state distribution system that allows private imports of grains can only worsen the grim 2008 supply outlook, say some officials familiar with the plans.

They warn of more political interference in the procurement system -- already blamed for erratic imports -- that allows political favouritism in awards to middlemen away from major reputable global traders who directly sell to Iraq through international tenders. 'Non-commercial considerations in awarding contracts will only raise prices for Iraq and bring less reliable deliveries than already exist and complicate further the supply<




Tags: Iraq | wheat | Shortage |

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