August 26, 2008

Drought-stricken Iran buys US wheat for 1st time in 27 years

Despite tensions over nuclear allegations and other diplomatic quarrels, Iran, wracked by drought, has turned to the US for wheat for the first time in 27 years.

Iran has bought about 1.18 million tonnes of US hard wheat since the beginning of the 2008-2009 crop season in June, USDA reported. The number, which has been growing steadily all summer, already represents nearly 5 percent of US annual exports forecast by the Department of Agriculture.

Bill Nelson, a grains market analyst at Wachovia Securities said Iran needed wheat right now and the US is the place to go.

According to Nelson, Iran's wheat production has been hammered by several months of drought, with crop forecasts of roughly 10 million tonnes this year, five million short of the country's needs.

US wheat was the first to arrive on the markets, as it is harvested ahead of wheat from the EU, Russia and Ukraine, and Australia.

Iran's US wheat purchases require authorization from the US Treasury because of a law Congress approved in 2000, the Trade Sanctions Reform and Export Enhancement Act.

Wachovia's Nelson underscored the tense U.S.-Iranian relationship for many years: "it is still surprising that they are buying wheat from the US instead of waiting to buy wheat from someone else."

"Maybe the relationship between Iran and the U.S. is not as terrible as it has been," Nelson said.

The US has not had diplomatic relations with Iran since 1980 following the Islamic Revolution.