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Food commodity prices have moderated across the board in response to falling oil prices through most of the summer, although they have begun to rise again as August comes to an end. Overall, the market gradually appears to be readjusting after record-high peaks. Two countries are particularly noteworthy: Iran and Argentina.
Iran has experienced significant declines in its crop production due to drought conditions. Its wheat crop is expected to decline by more than 16 percent from initial predictions and a whopping 33 percent from the 2007-2008 season. Iran’s rice crop is similarly suffering, with expected production dropping nearly 22 percent from the 2007-2008 season and by more than 32 percent from this year’s initial projections.
The poor Iranian harvest will not impact the global supply of these commodities, but they will likely increase prices in Iran, forcing Tehran — which already is a net importer of both rice and wheat — to lean more heavily on the global market to satisfy domestic demand. Rising food prices also will contribute to rising economic instability in the country, and an exacerbation of domestic issues will contribute to a decline in Iran’s ability to play hardball with the United States as it reacts to the resurgence of Russian influence in the Caspian region. In fact, given that the United States remains the world’s largest food exporter, the deteriorating food situation in Iran could be fertile ground for a rapprochement between the two countries.
In Argentina, increased uncertainty over government policy and lowered expectations regarding profit have led some regions of Argentina to lower plantings by a total of 25 percent. The disruption in the industry threatens Argentina’s status as a major agricultural producer.
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