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Indian traders have sold at least 120,000 tonnes of soybean meal to Iran in private deals.—Reuters Photo

SINGAPORE: Indian traders have sold at least 120,000 tonnes of soybean meal to Iran in private deals signed in the last four weeks, three trade sources said on Tuesday, as Tehran steps up food imports to fight tough western sanctions.

Iran is likely to buy another 100,000 tonnes of soy meal from India in the coming weeks which has pushed up prices of the commodity in the domestic market, traders said.

“We expect more sales taking place from Iran to India in the coming weeks, at least 100,000 tonnes more,” said one trading manager with a Singapore-based trading company.

Food shipments are not targeted under the sanctions, but Iranian companies have been cut off from much of the global banking system because of the financial measures against Tehran, making payments difficult and discouraging traders.

Indian meal was sold to Iran at around $420 a tonne, free on board, after which Indian soy meal prices have risen to $440 a tonne, traders said.

“India's soy meal has become expensive and it is not viable for buyers in Southeast Asia anymore,” said another senior executive with a leading global trading company.

Expensive Indian meal

Iran's purchase has pushed Indian soy meal prices above rival South American cargoes for the first time in a year, making exports uncompetitive to Southeast Asia, India's traditional market.

“India's soy meal has become expensive and it is not viable for buyers in Southeast Asia anymore,” said another senior executive with a leading global trading company.

Typically, Indian soy meal is quoted $10 to $15 below Latin American cargoes to win business in some of its top markets such as Vietnam, Indonesia, Malaysia, Japan and South Korea.

Indian meal was sold to Iran at around $420 a tonne, free on board, after which Indian soy meal prices have risen to around $440 to $450 a tonne.

On a delivered basis Indian meal was quoted around $470 a tonne in Southeast Asia, compared with $450 being offered for Argentine shipments.

Iran is likely to buy another 100,000 tonnes of soy meal from India in the coming weeks which could make the commodity, used to fatten animals, more expensive, traders said.

“The window to Iran could reduce exports to traditional destinations in Southeast Asia,” said Rajesh Agrawal, coordinator at Soybean Processors Association of India. “Some soy meal export deals to Iran took place earlier this month.”

The soy meal cargoes are scheduled to be shipped to Iran in April and May.

Iran is estimated to import 2.1 million tonnes of soy meal in 2011/12, up from 1.7 million tonnes shipped a year ago, according to the US Department of Agriculture.

A delegation of Indian exporters has just returned from a trip to Tehran which aimed to boost overseas sales and partially redress the imbalance in trade between the two, but with no major success.

New Delhi and Tehran have set up a mechanism to use the rupee, which is not freely traded on global markets, for 45 per cent of oil dues and to pay Indian exporters in order to skirt western sanctions.

India is Iran's second-biggest oil client after China, buying around $11 billion a year, but its own exports to Tehran are worth only about $2.7 billion.