Iran has faced severe food inflation in the past decade, driven by multiple factors. These include agricultural, climatic and energy challenges, significant issues in water management, and inefficiencies in the food supply chain. A major contributing factor is the involvement of the Iranian Revolutionary Guard Corps (IRGC) in the economy, particularly in the agriculture and food sectors but also due to significant spendings on Iran's proxies which increase the public deficit. The IRGC’s influence has been linked to mismanagement and corruption, exacerbating problems in water resources, agricultural practices, and food production.
Poor usage of Iran's agricultural land Approximately one-third of Iran's total surface area consists of arable farmland; however, less than one-fourth of this—equivalent to about one-tenth of the total land area—is actively cultivated. This limited cultivation is due to poor soil quality and inadequate water distribution across many regions. Of the cultivated land, less than one-third benefits from irrigation, while most rely on dry farming techniques. The most fertile soils are found in the western and northwestern regions of the country.
The increase in food prices Since 2014, Iran has faced a persistent decline in food production, coupled with significant increases in food prices. For instance, the price of rice has surged by 2.11 times between 2012 and 2023, while bread costs have risen 3.4 times from 2011 to 2023. Potatoes have tripled in price over the same period, and chicken fillets have seen a 2.06-fold increase from 2010 to 2023. Despite these inflationary trends, the median net salary in Iran has only grown by 33% between 2020 and 2023, between 2022-2023 alone the Iranian rial lost half of its value, inflation surpassed 50% and the minimum wage rose only by 27%. This discrepancy underscores the nation’s food crisis, with recent data revealing that in a period of several weeks in 2024, bread prices rose by 66% and milk prices rose by 25%. These trends indicate ongoing food shortages and exacerbate food insecurity in Iran, where approximately one-quarter of the population resides in slums, facing moderate to severe food insecurity. Between January 2025 and January 2026, the price of food has nearly doubled.
As a result the number of people that cannot afford a healthy diet increased substantially:
Food inflation causes
International sanctions In response to Iran's nuclear and ballistic missile advancements, as well as its backing of militant organizations that compromise regional peace, the United States, in conjunction with a network of international allies, has imposed a rigorous sanctions regime. This multifaceted approach extends beyond Iran’s military activities, with its record of human rights abuse further justifying the global punitive measures. The sanctions have specifically targeted Iran's crucial oil sector and banking systems, which are central to its economy. As a result, these measures have significantly undermined the nation's ability to earn foreign currency, dealing a critical blow to its economic infrastructure and foreign trade relationships. This limitation has considerably impeded Iran's capacity to import essential food products and agricultural inputs, including seeds, fertilizers, and machinery. Consequently, the sanctions have led to increased production costs and higher food prices. Furthermore, the disruption of critical supply chains has increased transportation expenses, intensifying inflationary pressures within the country.
Exchange rate volatility Due to international sanctions and ineffective economic management, the Iranian rial depreciated significantly by approximately 37% between October 2014 and October 2024. This depreciation rendered imports more expensive, directly affecting the prices of food products, particularly those reliant on imported goods. Moreover, the government's efforts to manage multiple exchange rates have introduced market distortions and inefficiencies, further exacerbating price volatility.
Agricultural challenges Iran is grappling with severe water scarcity and desertification that adversely impact its agricultural output. Over the past century, Iran's population surged from ten to over eighty-five million, and its renewable water resources declined from 130 BCM (Billion Cubic Meters) to 80-85 BCM. Projections suggest that by 2041, water resources could be halved, posing significant challenges as the population is expected to exceed 100 million. Per capita water availability is anticipated to fall below 500 cubic meters, marking absolute scarcity. Extended periods of drought and inefficient water resources management, in addition to outdated infrastructure and agricultural practices continue to limit productivity, further contribute to rising prices.
Global factors Global factors, including climate change, armed conflicts (e.g., the war in Ukraine), and international market fluctuations, affect food prices worldwide. As Iran is a significant importer of food and agricultural inputs, these global trends directly affect its domestic pricing. In particular, increases in the prices of key commodities such as wheat, corn, and vegetable oils contribute to Iran's food inflation.
Subsidy reforms and economic policies The Iranian government has, at times, cut subsidies on essential goods or tried to reform the subsidy system to address budget deficits. These changes often lead to sudden price hikes in food items. The subsidies have been replaced with in-kind transfers.
For several decades, the Iranian government has regulated the prices of over 20 essential goods. These prices, known as administered prices, are determined by the Consumer and Producer Protection Organization (CPPO) in collaboration with the Iranian Parliament. The CPPO sets consumer prices below both reference (border) prices and producer prices, with the government budget absorbing the resulting financial gap.
In 2007, food subsidies represented approximately 2.8 percent of Iran's GDP. These subsidies are primarily directed toward cereals, which account for 50 percent of the total, while other basic food items such as sugar, cooking oils, and baby formulas comprise an additional 25 percent. The remaining 25 percent is allocated to various goods, including paper, agricultural machinery, fertilizers, and pharmaceuticals.
As part of the Targeted Subsidies Reform, the government raised bread prices by as much as 25 percent in December 2010. After this adjustment, the CPPO prohibited any further price increases and instituted regular market inspections to prevent public unrest that could arise from inflationary pressures.
The subsidy cuts continue, despite the public unrest they cause to Iranian citizens who are grappling with rising poverty and rampant inflation, to reduce budget deficits.
Smuggling and black-market activity Smuggling of subsidized goods, such as wheat and other food staples, is common in Iran due to price discrepancies between Iran and its neighboring countries. Traders profit from exporting these goods illegally, reducing domestic availability and inflating prices. This problem is compounded by insufficient enforcement and border control, allowing such activities to thrive.
Hoarding by intermediaries Intermediaries, who play a significant role in Iran's distribution network, often hoard food products when they anticipate price increases. By controlling the release of these goods, they can manipulate market conditions to maximize profits. This practice not only increases prices but also leads to significant volatility in the market.
Lack of infrastructure and transparency The absence of modern infrastructure and transparent regulatory oversight allows corrupt practices to flourish. Inefficient transportation and storage systems result in spoilage and loss, reducing the effective supply of food. Additionally, the government's lack of proper market monitoring mechanisms enables these inefficiencies and manipulations to persist unchecked.
Inefficiency and corruption Inefficiencies and corruption in distribution systems can lead to artificial shortages and price manipulation, contributing to inflation. This situation is rooted in several systemic issues:
Corruption and monopolies Corruption within Iran's food supply chain represents a significant structural challenge, where politically connected businesses and individuals exploit their influence to monopolize distribution channels. These actors secure preferential access to subsidized food commodities, a privilege often derived from their ties to political elites. By hoarding these essential products, they deliberately engineer artificial shortages, only to later release the goods into the black market at significantly higher prices. This form of market manipulation not only distorts supply dynamics but also exacerbates inflationary pressures, undermining both economic stability and equitable access to essential goods.
Government policy failures and subsidy mismanagement The Iranian government's control of prices through subsidies and other measures frequently backfires. For example, subsidies meant to make essential items affordable are sometimes misappropriated by corrupt officials and traders who sell these goods outside official channels at inflated rates. This diversion exacerbates shortages in the official markets and pushes up prices.
IRGC and corruption in water management Rapid urbanization and agricultural demands have exacerbated the country's already scarce water supply. With approximately 90% of Iran's water resources allocated to agriculture, the inefficiency of irrigation practices and the overreliance on groundwater are leading to severe depletion of these vital reserves. The role of climate change, which is intensifying droughts and reducing available surface water, further stresses the system. Iran's water management strategies, including the construction of dams and water transfer projects, have been politically driven and often disregard environmental and social impacts. These policies contribute to ecological damage, including the drying up of rivers and wetlands, such as Lake Urmia, which has shrunk by over 80% due to diversion projects and the construction of dams without proper environmental assessments. Such ecological damage affects biodiversity and threatens agricultural productivity, as salinization renders once-fertile land unusable, and further intensifies dust storms and land subsidence in regions like Khuzestan and Sistan-Baluchestan. Such environmental degradation, combined with insufficient governmental oversight and transparency, worsens living conditions for marginalized communities, reinforcing cycles of poverty and socio-political marginalization. These policies fail to address the root causes of scarcity and disproportionately affect rural and peripheral communities, leading to civil disorder.