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India Soymeal Exports To Iran Hit As Sanctions On Tehran Ease

Date 04-April-2014
Subject India Soymeal Exports To Iran Hit As Sanctions On Tehran Ease

India's near-monopoly in soymeal exports to Iran has been diminishing and exports could drop by nearly a third as Tehran's nuclear deal with the West paved the way for rival south American suppliers to boost their trading with the oil-rich country, industry officials said.

The south Asian country's total soymeal exports would drop due to lower purchases by Iran in the 2013/14 year ending Sept. 30 and force Asia's biggest soymeal exporter to rationalise prices for other buyers like Japan and Vietnam.

"Iran has emerged as the largest buyer of soymeal in the recent past, mainly due to sanctions from the West and barter trade opportunities with India in rupee terms," Dinesh Shahra, managing director of Ruchi Soya Industries Ltd, India's biggest soybean processor, told Reuters.

"With Iran and west reaching to some sort of settlement, Iran has opened up doors for other destination. This has left Indian meal with huge premiums having very limited buyers even in Iran," Shahra said.

India's soymeal exports to Tehran rose fourfold in just three years to 2012/13. But in the current year exports to Tehran are likely to drop by 30 percent from last year's record 964,255 tonnes, Shahra estimates.

The landmark deal struck between the Islamic Republic and six world powers in November eased some of the sanctions on trade with Iran that had slashed the OPEC member's oil exports by more than half and narrowed its options to secure food and agriculture goods to just a few countries.

The sanctions had forced India to trim oil purchases from Iran, but it remained a loyal and large customer. In 2012 as sanctions stalled dollar payments, it started settling part of its oil debt in rupees and Iran was using those to buy goods from India.

That trade in rupees gave India an edge over other soymeal suppliers such as Argentina and Brazil who do not have such huge debts with Tehran and quickly the south Asian country established a near-monopoly in exports.

Iran's difficulties in securing soymeal from other producers due to the sanctions also prompted Indian exporters to seek hefty premiums over global prices, sometimes as high as 20 percent.

"The premium needs to be rationalised or we will lose share to other suppliers," said Rajesh Agrawal, chief co-ordinator at the Soybean Processors' Association of India (SOPA), a trade body.

On Thursday, India was quoting soymeal at $620 per tonne free-on-board basis, compared with $580 for rival south American supplies.

But now reducing the premium quickly is difficult as soymeal availability is stretched due to a drop in soybean supplies.

"Farmers are slowly releasing soybeans in the market due to lower production. Without a substantial rise in soybean supplies, soymeal prices won't come down," Agrawal said.

India's soybean output in 2013/14 is estimated to have fallen by 4.4 percent from the previous year to 10.23 million tonnes after heavy rains damaged the crop.

The hefty premium, sometimes as high has $90 per tonne, is forcing buyers to other destinations, said Shahra of Ruchi Soya. In February, India's soymeal exports to Iran plunged 63 percent from a year earlier, while total exports during the month dropped 68 percent, according to SOPA data.

"As Iran is making fewer purchases, we need to attract traditional buyers like Japan, Vietnam and Indonesia by offering soymeal at competitive price," said an oil miller based in central Indian city Indore.

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