Iraq, a country with 39 million people is considered as one of the countries with the most vulnerable political and socio-economic environment. In addition to the local population, the country also has 1.6 million displaced refugees including 250,000 from Syria. Based on UN estimates, about 4.1 million people in Iraq require humanitarian assistance with 20% of them in need of food aid.
The domestic agriculture sector is unable to fulfil the country’s food requirement as the sector has not progressed due to lack of supporting technology for the sector’s advancement. Thus, imports of food supplies play a major role in meeting the demand. The country’s economy is heavily reliant on oil revenue and when the price of curde oil goes through a low price cycle, that puts the country’s economy in instability state. To make matters worse, a decade of conflict and displacement have worsened food security situation in Iraq.
Food security issues
Agriculture plays an integral part in Iraq’s economy, but only 27% of the total land area is suitable for agricultural production. Out of the total agricultural area, it is estimated that only 8 million hectares or 67% is under cultivation. The contribution of agriculture to the country’s GDP is very minimal, at less than 5%. However, about 30% of the population mainly those in the rural area are dependent on agriculture as their source of income.
Wheat and barley is the main produce of Iraq’s agriculture sector. According to UN Food and Agriculture Organization (FAO), it is estimated that the country produced 4.7 million MT wheat and 1.5 million MT barley for its domestic food requirements.
It has been very challenging for the agriculture sector in Iraq to progress, especially since the country went into war with Iran and Persian Gulf War which saw the production of agriculture products progressively declining. Restricted access to land due to violence, population displacement, increased cost of farming, disruption of markets is among the factors affecting the country’s agriculture output.
Due to the low agriculture output, the country has to rely on imports and the Iraqi Government has stepped up their efforts to provide support through food subsidies to the vulnerable groups. These food subsidies are distributed through Public Distribution System (PDS), a social welfare program created to assist the vulnerable Iraqis. Iraq’s PDS was created in September 1999 and to date, the system has supported the marginal population through the distribution of essential food items such as flour, rice, sugar, cooking oil (fortified vitamin A and D), and infant formula.
Oils and Fats Scenario
The Iraq oilseed area is very small with only 22,000 ha planted with sunflower and sesame seeds. The area produced 29,000 MT of both oilseeds. The volume is insignificant and very small to meet the growing domestic demand, especially the demand for sunflower oil. The country also has to deal with various constraints in improving the oilseed production. Among the constraints include outdated cultivation and management practices, limited access to high quality planting materials and minimum government support for farmers.
Iraq – Oilseed Production (‘000 MT)
| 15/16 | 16/17 | 17/18 | 18/19 | 19/20 | |
|---|---|---|---|---|---|
| Sunflower Seed | 20 | 18 | 18 | 18 | 18 |
| Sesame Seed | 10 | 11 | 11 | 11 | 11 |
| 30 | 29 | 29 | 29 | 29 |
Source: Oil World
In view of the low oilseed production, the country has to rely on imports of oils and fats to supplement domestic requirements. Imports of oils and fats can be categorized as follows:-
| Spreadable Oils and Fats | Butter and Margarine |
|---|---|
| Vegetable Oils | sunflower, soybean oil, corn oil, palm oil, canola oils and others |
| Cooking Fats | Ghee and Vanaspati |
Cooking fats accounted for the largest component of Iraq’s oils and fats market with vanaspati being the most consumed fats in that category. In addition to that, butter has now become popular and its consumption is expected to grow further.
Oils and fats are distributed to the population through Public Distribution System (PDS) as well as the open market channel. The volume distributed via PDS is sold at fair price shops at reduced prices to those below the poverty lines.
Consumption
Most of the oils and fats consumption growth was recorded in the consumption of sunflower oil, which expanded to 66% in 2020 from 32% in 2010. The accessibility of sunflower oil mainly from Turkey has supported the increase in sunflower oil consumption in Iraq. In contrast, the consumption of palm oil has actually shrunk from 42% to 23% over the last 10 years.
Iraq – Oils and Fats Consumption 2010 vs 2020
The overall oils and fats consumption is expected to grow in tandem with population growth. It is estimated that the consumption of oils and fats by the country to reach 1.1 million MT by year 2025, that is an addition of about 300,000 MT of oils and fats requirement by the country within the next four years.
Furthermore, the country is in the process of rebuilding its economy with new policies which are geared towards improving incomes and livelihood. With that in the pipeline, the edible oils and fats market is expected to grow and undergo major changes.
Imports
Iraq imported more than 800,000 MT of various oils and fats which comprises mostly sunflower and palm oil. These two oils accounted for 90% of the total oils and fats imported. Most of sunflower oil came from Ukraine and Turkey. Palm oil, which accounted for 26% of the total oils and fats came from Egypt, UAE, Indonesia and Malaysia.
Iraq – Oils and Fats Import (‘000 MT)
| PRODUCT | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|---|
| Butter fat | 5.00 | 5.00 | 5.00 | 5.10 | 5.30 | 5.0 |
| Coconut oil | 1.10 | 1.70 | 2.00 | 3.0 | ||
| Corn oil | 11.20 | 16.10 | 15.50 | 13.20 | 13.20 | 13.0 |
| Linseed oil | 0.30 | 3.70 | 0.00 | 0.00 | 0 | |
| Olive oil | 3.50 | 4.50 | 3.40 | 3.90 | 2.90 | 5.0 |
| Palm kernel oil | 3.00 | 3.00 | 3.00 | 3.00 | 3.00 | 4 |
| Palm oil | 179.10 | 146.40 | 159.80 | 149.30 | 179.40 | 200.0 |
| Rapeseed oil | 0.10 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Soybean oil | 104.70 | 71.40 | 59.10 | 45.70 | 41.10 | 44.0 |
| Sunflower oil | 433.20 | 407.30 | 571.00 | 508.30 | 432.00 | 540.0 |
| Tallow & Grease | 1.40 | 1.40 | 1.40 | 1.40 | 1.40 | 1.0 |
| 741.20 | 655.40 | 823.00 | 731.60 | 680.30 | 816.0 |
(Source: Oil World)
The Supply of Palm Oil to Iraq
Egypt, UAE, Indonesia and Malaysia are four major palm oil suppliers to Iraq. In 2010, Egypt dominated the palm oil market in Iraq with market share of 60%, UAE 33% and Malaysia 7%. . The ongoing crisis in Iraq has put the country as a high risk trade destination, thus trade is done mostly with its neighbouring countries. Direct imports of Indonesian palm oil starts coming into the market in 2015, taking up some Malaysian palm oil market share. Egypt market share reduced to 54% while UAE expanded its exports to 38%.
As of 2020, Both Malaysia and Indonesia exported 42% of the total palm oil to Iraq and in 2020, out of the total palm oil import volume, only 13% came from Malaysia. Direct imports from Indonesian have expanded to 29% from just 1% five years ago.
Malaysian Palm Oil in Iraq
Generally, the export of Malaysian palm oil to Iraq grew from just 7,602 MT in 2015 to 25,869 MT in 2020. Apart from palm oil, which mostly comprised of RBD palm olein, more than 20,000 MT of finished palm oil products from Malaysia are also exported to Iraq in the form of vegetable ghee/ vanaspati, shortening and soap chips.
Malaysian Palm Oil and Products Exported to Iraq
| 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | |
|---|---|---|---|---|---|---|
| Palm Oil | 7,602 | 12,229 | 14,669 | 16,511 | 11,468 | 25,869 |
| Palm Kernel Oil | 745 | 1,195 | 940 | 805 | 2,752 | 4,838 |
| Oleochemicals | 817 | 617 | 649 | 16,751 | 1,771 | 1,236 |
| Finished Products | 20,337 | 31,791 | 18,960 | 38,278 | 24,792 | 22,357 |
| 29,501 | 45,832 | 35,218 | 72,344 | 40,783 | 54,300 |
Source: MPOB
RBD PL will be the main component of imports as it supplies to food industry, bakery fats, and vanaspati industry. The volume is expected to grow as the country has slowly reduced imports of processed food items from Turkey in their efforts to develop domestic food processing industry.
Potential and Challenges
According to a market study by Transparency Market Research, Iraq edible oils & fats market is predicted to be worth US$2.3 billion by the end of 2025, rising at 6.0% CAGR between 2017 and 2025. With a population of almost 40 million, and as one of the oil rich nations, Iraq has huge potential to expand its oils and fats imports.
Changing lifestyles and changing eating habits are fuelling the demand for traditionally prepared food and ready-to-eat packaged foods. This is one of the areas palm oil could explore and provide the solution to the food processing sector.
Should the country’s rebuilding plan progress well and internal conflict is rectified, it is estimated that the country would require a minimum of 300,000 MT of oils and fats by year 2025. Based on the current palm oil market share of 20 -25%, at least 75,000 – 100,000 MT of palm oil could go into the market. This potential volume can be capitalized by Malaysian palm oil either through direct imports or Malaysian offshore investment such as in Egypt and Saudi Arabia.
At the end of 2020, Saudi Arabia reopened its border with Iraq through Arar Desert after the border was closed some 30 year ago. The opening of the land connection to Iraq will facilitate more trade of goods and movement of pilgrimage.
On the downside, political and economic instabilities are a key constraints to the growth of Iraq edible oils & fats market. Furthermore, a substantial number of Iraqis are still living below the poverty line and are dependent on aid for their food supply. The country is heavily relying on IMF as well as World Food program to supplement their economic and social needs. Malaysian palm oil could also explore how to possibly participate in the UN World Food Program and supply our palm oil through the program.
Prepared by: Fatimah Zaharah
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