A poor production outlook for the 2023 crop, uncompetitive prices, and subsequent weak export demand have led to one of the worst export years for Iranian pistachios in recent history. The country exported only 32,257 mt up to the fifth month of the marketing year (from 23 Sep - 19 Feb). This is far lower than the 5-year average of 74,210 mt and last season’s 62,664 mt over the same period and the worst since 2018, when frost severely damaged the crop. According to calculations from the Iran Pistachio Association (IPA), as of February 19th, the country still had ample inventories of 74,000 mt available. The 2023/24 season will be an "on-year" for pistachio production in Iran's bi-annual cycle, however, fears of a crop failure have kept domestic prices high, causing Iranian pistachios to be less competitive in the export market, and exports to tumble.
Iran's pistachio production has been declining for the past decade due to drought, frequent frost damage caused by climate change, and illegal water use. In the Kerman region, several wells used for pistachio irrigation have dried up, leading producers to shift production to other regions. Unregulated digging and withdrawals from wells in the province have increased, depleting groundwater resources, deteriorating water quality, and increasing water salinity, according to several news sources.
Due to the arid climate in Kerman Province, pistachio trees are typically irrigated, with an annual rainfall of only 131mm. So far this year, until the third week of March, there have been 48mm of rainfall, compared to the average of 53mm. While the fairly normal rainfall may aid production to some extent, without proper irrigation, production could still fail, even if 2023 is an "on-year" in the bi-annual production cycle.
The crop has gone unscathed from frost damage so far this season, but frost remains a threat throughout April, as late cold spells as late as mid-April caused significant damage in previous seasons.
Due to water scarcity and the potential for frost damage, prices have increased to include a risk premium. Prices found further support from strong demand leading up to the Nowruz - the Persian new year, as well as the Holy Month of Ramadan. The increase in prices has rendered Iranian pistachios uncompetitive in the export market. Iranian pistachio prices have been ranging above that of the US for most of the 2022/23 marketing year. This has led to a preference for US pistachios and disappointing exports from Iran.
The increase in prices could be overdone, at least over the short term. Even with a poor production outlook in 2023 Iran will have a huge surplus of pistachios if exports do not pick up. Domestic consumption, although price sensitive, is around 20,000 mt. This means Iran will be a net exporter for the foreseeable future, even if pistachio production decreases significantly. China made strong purchases of US pistachios throughout January and February, an opportunity missed by Iranian exporters. Iranian pistachios were as much as 10% more expensive than that of the US to the world’s second-largest importer, Germany. Prices could come under downward pressure after the Nowruz and Ramadan celebrations wrap up and domestic demand drops.