India to Hold Talks with Iran on Wheat Exports

Dated: 2012-05-24

NEW DELHI: India plans to aggressively push wheat exports to Iran by offering lower prices than rival Pakistan and will hold talks with Tehran early next month to resolve objections over traces of a fungal disease found in grain exports.

Iran, which has been scouting for food supplies due to Western sanctions, is eager to buy wheat from India but wants to ensure a supply of grain free of Karnal bunt, a fungal disease found in India's breadbasket northern states.

"We are hoping to arrive at an agreement with Iran," a Food Ministry official was quoted as saying by WSJ.

The government is also trying to identify regions in the country that can supply disease-free grain. It is aiming to export up to four million metric tons of grain to Iran this year.

India, the world's second-largest wheat producer, is looking to export grain to Iran at $280 a ton, free on board, compared with $290-$300/ton for Pakistani wheat.

India's need to export grain has acquired greater urgency due to a storage crunch of more than 10 million tons. India is also anxious to export agricultural commodities following a bumper crop.

Shipments to Iran have to be cleared by a ministerial panel, but the government is hoping to expedite clearance and start exports as early as mid-June.

The panel may meet within a fortnight, another Food Ministry official said. Iran may not have much choice. Wheat imports will likely become more difficult amid sanctions and tightening global wheat supplies. For example, Russian exports are expected to fall to 15.5 million tons from 17 million tons due to lower-than-estimated production, according to Rabobank. Separately, Indian exporters have contracted to ship around 300,000 tons of soymeal to Iran during the marketing year that ends on Sept. 30, said Davish Jain, former president of the Central Organization for Oil Industry and Trade.

He said around 50,000 tons of soymeal exports had been contracted with Iran last week, in the price range of $572/ton free on board.

Earlier this month, an Iranian trade delegation visited India to buy, rice, sugar, soymeal and wheat. Iran has emerged as one of the top buyers of Indian soymeal and has been paying a premium for its purchases.

India and Iran recently arrived at a payment mechanism, as tightening Western sanctions made payment in dollars difficult. The mechanism allows Indian oil importers to make 45% of their payments in rupees, which Iran parks in a local bank and uses to settle payments to Indian exporters.

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