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Wheat-Quality Concern May Spur Iranian Imports, Macquarie Says

Concern about the quality of Iran’s wheat crop may lie behind indications of higher imports of the grain into the country, according to Macquarie Group Ltd.

Iran plans to buy as much as 3 million metric tons of wheat, India’s Agricultural and Processed Food Product Export Development Authority said on its website. That would be more than a fifth of the U.S. Department of Agriculture’s estimate for this year’s Iranian harvest. The U.S. made its biggest sale of wheat to Iran since 2008, the USDA said March 1.

“The only reason I can justify Iran having massive imports is that they’re preparing for a quality problem in a couple of months,” Christopher Gadd, a London-based analyst at Macquarie, said by phone today.

Iranian wheat production may fall 11 percent this year to 13.75 million tons as imports almost double to 1 million tons, according to the USDA. Higher wheat imports also may enable Iran’s government to control unrest over food prices that sparked riots in the Arab world and led to the ouster of leaders in nations including Egypt, Gadd said in a report last month.

Gadd also pointed to sanctions by the U.S. and European Union against Iran aimed at curbing the Middle East nation’s nuclear program. They may “limit the number of banks globally that are willing to offer letters of credit” for grain trading in Iran, he said.

Domestic Output

The sanctions exclude raw materials used in food production. Increasing domestic production of goods is the best way to counter the measures’ effects, Supreme Leader Ayatollah Ali Khamenei told Iranians last week as they began almost two weeks of celebrations for Nowrouz, the start of the Iranian calendar year.

About 400,000 tons of mostly Russian and Ukrainian grain sat in ships outside Iranian ports as buyers were unable to pay because of the sanctions, Gadd said. The grain was mostly sold to other importers at a “deep” discount, he said. Malaysia and Indonesia stopped supplying Iran with vegetable oils because of worries about receiving payment.

“Letters of credit have become scarce for the grains trade as EU banks have pulled away from Iran,” Gadd said in the report. “This has left it increasingly difficult for private Iranian traders to source replacement grains.”

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