Iran seals first big wheat deal for 2014, buys about 400,000 tonnes
Iran has bought at least 400,000 tonnes of wheat in the first big state-sponsored purchase since December, traders said on Friday, as relaxed Western sanctions make deals easier, Reuters reported.
Iran was never barred from buying food under sanctions imposed over the country's disputed nuclear programme, but EU and U.S. financial measures made trade more difficult for the past two years by hindering payments and shipping.
A breakthrough agreement between world powers and Iran in November has temporarily eased sanctions on some sectors of Iran's economy, which is already coaxing more companies to seal lucrative contracts with the Islamic Republic.
European trade sources said on Friday Iran's state grains buyer GTC bought the cargoes to be sourced from Russia and the European Union, including Germany, for shipments between March and May.
One European wheat exporter put the total bought at around 600,000 tonnes.
"Iran is using its new financial freedom with sanctions being relaxed to build up wheat stocks in a reaction to weather problems in their region," one trader said.
"There seems to be growing nervousness in Iran that a drought in Turkey may damage Turkish crops which could encourage Iranian farmers to smuggle wheat into Turkey."
The last big purchase GTC made was in December for around 250,000 tonnes of Mexican wheat for pasta making and 180,000 tonnes of bread making wheat from the Black Sea after making other sizeable purchases earlier in 2013.
"While the payment process is still not as quick as other destinations not impeded by financial sanctions, Iran is becoming a big volume game which is an increasingly lucrative market. They will be expected to buy more," said a European commodities trade source active in Iran.
Iran was a leading customer for German wheat last season with just over 1 million tonnes bought. About 250,000 tonnes of German wheat was due to be shipped to Iran in January.
Trade sources also expected private Iranian buyers to make more active purchases in coming months.
Iran's President Hassan Rouhani, who took power last August, has vowed to reform Iran's chaotic finances.
Iran's parliament has approved politically sensitive plans to slash subsidies on fuel and food, but delayed implementation for several months while authorities try to soften the blow to consumers by handing out food packages.
"The change in the subsidy system will help free up more of the private sector to import goods and also mean less pressure on government funds to keep the subsidies in place. This can only be more positive for the commercial import sector and hopefully mean purchasing and distribution gets easier," the European commodities source said.
The easing in sanctions is expected to modestly boost throughput activity at the country's top ship container handling port Bandar Abbas, which has been hit by a slump in trade and fewer companies willing to trade, analysts say.
Business intelligence firm Business Monitor International (BMI) forecast container handling volume in Bandar Abbas will grow by 3.1 percent this year in sharp contrast to a 25 percent fall in 2013. Grains and sugar can be shipped in containers.
"The outlook in 2014 is moderately brighter than it has been for some years," said Daniel Richards of BMI.
"Low base effects and a rebound in oil exports, coupled with improving business and consumer confidence ... ensure that growth returns to positive territory in 2014," he said in a recent report.