Iran Nuclear Deal Seen Pushing Indian Rice Sellers to Cut Prices

Rice exporters from India, the biggest supplier to Iran, may cut prices to retain market share as easing of sanctions on the Persian Gulf nation opens doors for increased supplies from Thailand and Pakistan, traders said.

Prices of Indian basmati rice, used in dishes including biryani and pilaf, rallied as much as 50 percent in the past year as Iran paid a premium to secure supplies amid international economic sanctions, said R.S. Seshadri, a director with Tilda Riceland. Iran’s deal with the U.S. and five other world powers on Nov. 24 may prompt Thailand and Pakistan to grab a share of the market, he said.

“The question is, will Iran keep paying when they have other options,” Seshadri said in a phone interview yesterday. “India’s special position as far as Iran’s rice imports are concerned will be diluted to some extent and the rice trade will rebalance itself.”

Iran will get as much as $7 billion in relief from economic sanctions over six months as the accord reached in Geneva broke a decade-long diplomatic stalemate and set limits on the nation’s nuclear program. Easing curbs may lower Indian sales to Iran, which bought $1.2 billion of rice in the year ended March, said Vijay Setia, a former president of the All India Rice Exporters’ Association.

Direct commercial benefits from the accord will be limited because the primary sanctions on oil and banking remain. It’s significant as the first break in a pattern of ever-tighter sanctions on Iran and a potential first step toward its return to the international economy. The American sanctions penalize other nations that trade with Iran, including U.S. allies.

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India continued to export rice, soybean meal and tea under a government-to-government payment mechanism and as Iran paid U.S. dollars at a preferential rate to importers of some staple goods. Basmati rice exports fetched Indian sellers $1,700 a metric ton to $1,800 ton, compared with Thai jasmine rice price of $1,100 a ton, Seshadri said.

“If sanctions are released and currency settlement with other rice exporting countries is eased then naturally Iran will have more options and Indian basmati will have to become more competitive,” Seshadri said. Thailand and the U.S. may seek to export rice to Iran, he said.

India controls 65 percent of the overseas basmati rice market, while the only other producer Pakistan accounts for the rest, according to government data. Saudi Arabia and Iran are two the biggest buyers of Indian basmati, while the U.S., Europe and Africa also purchase the premium grain.

Iran bought about 50 percent of India’s total basmati rice exports of 3.53 million tons in 2012-2013, according to the data from the Commerce Ministry. The Persian Gulf nation bought 1.8 million tons of rice in the year ended Sept. 30, up 20 percent from 1.5 million tons a year earlier, according to data from the Foreign Agricultural Service of the U.S. Department of Agriculture.

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