About $3 billion (1.89 billion pounds) in Iranian import arrears have accumulated since December 2010, M. Rafeeque Ahmed said, when a previous payment conduit was closed under pressure from Washington, which is using sanctions to try to stop Tehran’s suspected nuclear programme.

“The government has told us the mechanism for payment in rupee (to Indian exporters) will be in place in two weeks’ time,” Ahmed, president of the Federation of Indian Export Organisations, told Reuters in an interview.

“Between December 2010 and January 2012 we have sent goods worth about $3 billion and almost all of it is stuck.”

Ahmed is taking part in government negotiations to find a solution to the payment problems that have hit trade between the two countries after U.S. sanctions on dollar deals. His organisation is a quasi-government body set up by the trade ministry.

Indian oil importers have been paying for around $11 billion a year of crude since the middle of 2011 through Turkey’s Halkbank (HALKB.IS: Quote, Profile, Research), but this route would have been expensive for Iranian importers given sharp falls in the rial.

India was Tehran’s second-biggest crude customer last year after China and Iranian oil accounts for about 12 percent of its needs.

Most of the Iranian arrears are for imports of iron and steel ($623 million), chemicals ($453 million) and cereals ($419 million), machinery ($143 million) and pharmaceuticals ($87 million), Ahmed said.

Indian rice suppliers have also reported defaults by Iranian buyers and have said they are owed at least $144 million.

With payments for oil through Halkbank now looking vulnerable to fresh sanctions, India and Iran have agreed to settle 45 percent of this trade in rupees and boost exports to narrow their trade gap. Oil buyers are waiting for tax issues to be cleared up before they use the mechanism.

Iran’s central bank has already deposited with India’s UCO bank about $1 billion which had been used in the Asian Clearing Union (ACU), the longstanding mechanism that ended in 2010.

This will be used to kick off rupee payments to India’s exporters — allowing Tehran a way to use the restricted currency it would otherwise find hard to spend.

India abides by United Nations sanctions on Iran, but has refused to go along with new financial measures imposed by the United States and European Union which aim to punish Iran for its nuclear ambitions.

India has pushed back the visit of a delegation to Iran to March 10 to 14 from this month to explore boosting exports, said Ahmed, who will be part of that team.

(Editing by Krittivas Mukherjee and Ron Popeski)

About $3 billion in Iranian import arrears have accumulated
since December 2010, M. Rafeeque Ahmed said, when a previous
payment conduit was closed under pressure from Washington, which
is using sanctions to try to stop Tehran’s suspected nuclear
programme.

“The government has told us the mechanism for payment in
rupee (to Indian exporters) will be in place in two weeks’
time,” Ahmed, president of the Federation of Indian Export
Organisations, told Reuters in an interview.

“Between December 2010 and January 2012 we have sent goods
worth about $3 billion and almost all of it is stuck.”

Ahmed is taking part in government negotiations to find a
solution to the payment problems that have hit trade between the
two countries after U.S. sanctions on dollar deals. His
organisation is a quasi-government body set up by the trade
ministry.

Indian oil importers have been paying for around $11 billion
a year of crude since the middle of 2011 through Turkey’s
Halkbank, but this route would have been expensive
for Iranian importers given sharp falls in the rial.

India was Tehran’s second-biggest crude customer last year
after China and Iranian oil accounts for about 12 percent of its
needs.

Most of the Iranian arrears are for imports of iron and
steel ($623 million), chemicals ($453 million) and cereals ($419
million), machinery ($143 million) and pharmaceuticals ($87
million) , Ahmed said.

Indian rice suppliers have also reported defaults by Iranian
buyers and have said they are owed at least $144 million.

With payments for oil through Halkbank now looking
vulnerable to fresh sanctions, India and Iran have agreed to
settle 45 percent of this trade in rupees and boost exports to
narrow their trade gap. Oil buyers are waiting for tax issues to
be cleared up before they use the mechanism.

Iran’s central bank has already deposited with
India’s UCO bank about $1 billion which had been used in the
Asian Clearing Union (ACU), the longstanding mechanism that
ended in 2010.

This will be used to kick off rupee payments to India’s
exporters — allowing Tehran a way to use the restricted
currency it would otherwise find hard to spend.

India abides by United Nations sanctions on Iran, but has
refused to go along with new financial measures imposed by the
United States and European Union which aim to punish Iran for
its nuclear ambitions.

India has pushed back the visit of a delegation to Iran to
Mar. 10 to 14 from this month to explore boosting exports, said
Ahmed, who will be part of that team.

(Editing by Krittivas Mukherjee and Ron Popeski)

Palm oil imports — the bulk of India’s edible oil purchases
– rose 3.1 percent last month to 569,750 tonnes, according to
the survey of eight traders, with soyoil imports seen up 360.3
percent to 34,000 tonnes over December.

India mainly buys palm oils from Indonesia and Malaysia, and
small quantities of soyoil from Argentina and Brazil. About half
of India’s 15-16 million tonnes of edible oils demand is met
through imports.

The survey suggested total vegetable oil imports, including
non-edible oils, would rise 6.6 percent in January to 714,375
tonnes from the previous month.

“Imports rose as local supplies almost dried and a gain in
rupee also helped,” said Sat Narain Agarwal, a Delhi-based
trader, giving reasons for the rise in month-on-month imports.

The Indian rupee logged its best monthly gains in
over 17 years by strengthening about 7.45 percent against the
dollar in January, making the imports of cooking oil cheaper.

Traders imported about 80,000 tonnes of sunflower oil as the
cooking oil variety was cheaper than substitute soyoil by about
$25 per tonne in January.

Soft oils such as soy and sunflower are preferred during the
wedding season in winter as they do not solidify unlike palm
oil.

Higher imports in January, the third month of the oil year,
are likely to push up stocks at Indian ports, the survey showed,
with the month’s end stocks seen rising 34 percent to 534,285
tonnes from December.

Traders said the vegetable oil imports could drop in
February with the start of the harvest season for rapeseed, the
main oilseed crop in winter.

“Edible oil imports could be around 650,000 tonnes in
February,” said Govindbhai G. Patel, a trader based in Rajkot.

India’s rapeseed output could fall by a quarter in 2012,
meaning that vegetable oil imports by the world’s top buyer
could rise by about half a million tonnes in the import year
ending Oct. 31.

Higher imports due to lower rapeseed output in 2012 could
push up Malaysia’s benchmark palm oil futures prices
which lost 2.4 percent this year.

Last year, vegetable oil imports fell after a gap of five
years on higher local oilseed supplies, but a growing population
and higher incomes are expected to boost demand this year.

India, the world’s top vegetable oil buyer, imported 8.4
million tonnes of cooking oil in the marketing year to October,
down 4.5 percent from the previous year.

(Editing by Krittivas Mukherjee)

The default prompted the head of the All India Rice Exporters’ Association to call on members to stop rice exports to Iran based on credit, which would be a fresh blow to a country where imports of staple foods are already being hampered by sanctions.

“It is a serious issue and we do not rule out further payment defaults by Iran,” said Vijay Setia, the association’s president.

Indian sources said the Iranian buyers had defaulted on payments worth about $144 million (91 million pound) for rice shipments under long-term supply deals. Iran shipped the cargoes from Indian ports in October and November. Most Indian rice exporters allow 90 days credit.

In other supply disruptions, five deliveries of grain to Iran were diverted to new destinations because payments were held up, ship tracking data showed last week. Other cargoes are sitting offshore Iran because of difficulty with payments.

Under a tightening grip of sanctions, the country of 74 million people is finding it increasingly difficult to repatriate the hard currency from its crude oil exports, its major foreign currency earner, that it needs to pay for shipments of food and other imports.

A sharp drop in the value of the rial is adding to Iran’s import costs and the financial sanctions make it difficult for traders in the country to channel import payments through unofficial routes involving middlemen based in Dubai.

India is Iran’s top rice supplier, accounting for some 70 percent of its annual requirement of 1-1.2 million tonnes of the grain, mainly the aromatic variety called Basmati.

Traders and officials in Iran could not be immediately reached to comment.

The United States slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem oil revenues and persuade Iran to abandon a suspected nuclear weapons programme.

U.S. President Barack Obama tightened those sanctions on Sunday, again targeting Iran’s central bank and giving U.S. banks new powers to freeze assets linked to Tehran.

The European Union has agreed to ban Iranian oil imports, a measure expected to take full effect within six months.

SANCTIONS BITING?

The rice defaults could be the latest sign that those sanctions are biting as Iranian importers find it increasingly difficult to settle payments.

Ukraine’s maize exports to Iran dropped 40 percent in January due to payment problems, Ukrainian consultancy ProAgro said last week.

Ukrainian and European traders said they were no longer booking Ukraine grains shipments to Iran because of the payments difficulties, although talks were underway to save the market, the country’s farm minister said.

Five ships of grain have been diverted away from Iran to other destinations and about 400,000 tonnes of grains on at least 10 vessels have been held up outside Iranian ports because of payments problems, trade sources said last week.

The Indian rice association’s Setia said the group had approached the Indian government to recover their dues.

“As part of efforts to minimise losses, we are asking our colleagues to avoid sending rice on credit,” he said, adding they were not calling for a ban on exports to Iran.

A government source acknowledged exporters had sought help.

The rice default is the latest snag in India-Iran trade, which is heavily skewed towards Tehran.

India is Iran’s second-largest buyer of crude and it has struggled to settle payments worth some $11 billion annually after New Delhi scrapped a long-standing mechanism in 2010 under pressure from Washington.

While New Delhi has switched to a payment conduit for its Iranian oil using a Turkish bank, Indian rice exporters have been using a loose, unofficial route involving a network of middlemen based in Dubai.

The middlemen receive payments from Iranian importers in rial and pay Indian exporters in U.S. dollars. The consignments are sent directly from India to Iran.

But Indian traders said the defaults started after the rial plunged over the past month, making previous purchases costlier for Iranian importers.

The cost of transactions also went up for the Dubai middlemen as they use U.S. dollars to pay Indian exporters.

On January 26, Iran announced an 8 percent devaluation of the rial and said it would enforce a single exchange rate, aiming to stamp out a black market where the dollar’s value has soared due to fears over new sanctions imposed by the West.

Indian traders said about 20 Iranian companies have failed to clear their dues during the past month.

“It threatens to jeopardise the trade with them, hurting both India and Iran,” Anil K. Mittal, chairman of KRBL Ltd, a leading Indian rice miller and exporter, told Reuters.

“Due to sanctions on Iran, currently banks are not involved in payments to Indian rice suppliers. The payments are direct and at times on credit, making Indian exporters vulnerable to defaults. Indian traders must avoid supplying on credit.”

Setia said India should not send any more rice to Iran on credit, adding suppliers such as those in Thailand, Vietnam and Pakistan had already stopped doing so.

However, the Thai Rice Exporters’ Association said Thailand had stopped selling rice to Iran about a decade ago.

Javed Agha, chairman of the Rice Exporters Association of Pakistan acknowledged that sanctions had made traders reluctant in both Pakistan and Iran to do deals.

“Banking if a problem between Pakistan and Iran,” he said. “There is no proper system.”

BOOSTING EXPORTS TO IRAN

New Delhi will send a delegation to Iran this month to explore boosting exports to smooth use of the restricted rupee currency, which the two sides have agreed to use to settle 45 percent of India’s $11 billion a year oil bill.

But this would give Iran large amounts of a currency which is difficult to use for international trade.

An Indian ministerial panel on food exports meets on Tuesday to review rice and sugar shipments. The issue of exports to Iran is not on the agenda, government officials said, seeking to knock down reports that the panel could discuss the possibility of boosting rice and wheat exports to Tehran.

India, is expected to produce 102.75 million tonnes of rice in the crop year to June 2012, a farm ministry forecast said last month. Basmati makes up around 5 percent of India’s total rice production.

India’s January 1 rice inventory at government warehouses was 29.8 million tonnes against a target of 11.8 million tonnes.

China, Japan, India and South Korea, which together buy about half or Iran’s 2.6 million barrels per day of crude exports, are under pressure from U.S. sanctions to cut back their purchases.

China has already cut Iran imports in the first three months of this year over a pricing dispute and a flurry of U.S. diplomats have discussed the sanctions with Asian government officials.

South Korea is paying Iran for crude in its local currency, but difficulty repatriating the funds under the weight of sanctions means won worth an estimated $5 billion has piled up South Korean banks.

(Additional reporting by Qasim Nauman in Islamabad and Apornrath Phoonphongphiphat in Bangkok; Writing by Krittivas Mukherjee; Editing by John Chalmers and Neil Fullick)

The biggest consumer of sugar, India had earlier allowed
mills to export 1 million tonnes of sugar in the year beginning
in October and the fresh exports had been on the cards for some
time.

“India started speaking about the exports since the end of
December, so the market has more or less priced in the surplus,”
said Lynette Tan, an analyst with Phillip Futures in Singapore.

Indian millers expect India to produce 26 million tonnes of
sugar in 2011/12, and say annual domestic sugar consumption
stands at around 22 million tonnes.

Raw sugar futures for March fell 0.33 cent to 24.17
cents a lb on Tuesday. London March white sugar
futures were down $2.00 or 0.3 percent to $640.50 per
tonne.

The decision came at a meeting of a ministerial panel on
food that also decided to reduce the floor price for the export
of the aromatic Basmati rice by $200 to $700 per tonne.

(Additional reporting by Lewa Pardomuan in SINGAPORE; Editing
by Krittivas Mukherjee)

While a sharply weakening rial has made forward purchases costlier, financial sanctions are making it difficult for Iranian traders to continue using an unofficial route involving middlemen based in Dubai to keep paying Indian suppliers.

The defaults, totalling about $144 million, were for shipments under term deals in October and November free-on-board Indian ports, Indian traders said. Most Indian rice exporters allow 90 days credit.

India is Iran’s top rice supplier, accounting for some 70 percent of its annual requirement of 1-1.2 million tonnes of the grain, mainly the aromatic variety called Basmati.

“It is a serious issue and we do not rule out further payment defaults by Iran,” said Vijay Setia, president of the All India Rice Exporters’ Association. “We have requested the government to step in.”

Setia said India should not send any more rice to Iran on credit, adding suppliers such as those in Thailand, Vietnam and Pakistan had already stopped doing so.

Traders and officials in Iran could not be immediately reached to comment.

The United States slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem oil revenues and persuade Iran to abandon a suspected nuclear weapons programme.

The European Union followed with a ban on Iranian oil this week that is expected to take full effect within six months.

The rice defaults could be the latest sign that those sanctions are biting, hampering staple food supplies to Tehran as Iranian importers find it increasingly difficult to settle payments.

Grain ships are docked outside Iranian ports, traders are not booking fresh cargoes and exports of staples to Iran such as maize are falling due to problems collecting payment from buyers.

The rice default is the latest snag in India-Iran trade, which is heavily skewed towards Tehran.

India is Iran’s second-largest buyer of crude and it has struggled to settle payments worth some $11 billion annually after New Delhi scrapped a long-standing mechanism in 2010 under pressure from Washington.

While New Delhi has switched to a payment conduit for its Iranian oil using a Turkish bank, Indian rice exporters have been using a loose, unofficial route involving a network of middlemen based in Dubai.

The middlemen receive payments from Iranian importers in rial and pay Indian exporters in U.S. dollars. The consignments are sent directly from India to Iran.

But Indian traders said the defaults started after the rial plunged over the past month, making previous purchases costlier for Iranian importers.

The cost of transactions also went up for the Dubai middlemen as they use U.S. dollars to pay Indian exporters.

On January 26, Iran announced an 8 percent devaluation of the rial and said it would enforce a single exchange rate, aiming to stamp out a black market where the dollar’s value has soared due to fears over new sanctions imposed by the West.

Indian traders said about 20 Iranian companies have failed to clear their dues during the past month.

“It threatens to jeopardise the trade with them, hurting both India and Iran,” Anil K. Mittal, chairman of KRBL Ltd, a leading Indian rice miller and exporter, told Reuters.

“Due to sanctions on Iran, currently banks are not involved in payments to Indian rice suppliers. The payments are direct and at times on credit, making Indian exporters vulnerable to defaults. Indian traders must avoid supplying on credit.”

BOOSTING EXPORTS TO IRAN

The defaults could also put a question mark on the willingness of any Indian traders to take part in plans by India to step up exports in a range of goods, including farm products such as wheat and rice, to settle part of its oil dues to Iran.

New Delhi will send a delegation to Iran this month to explore boosting exports to smooth use of the restricted rupee currency, which the two sides have agreed to use to settle 45 percent of India’s $11 billion a year oil bill.

But this would give Iran large amounts of a currency which is difficult to use for international trade.

An Indian ministerial panel on food exports meets on Tuesday to review rice and sugar shipments. The issue of exports to Iran is not on the agenda, government officials said, seeking to knock down reports that the panel could discuss the possibility of boosting rice and wheat exports to Tehran.

India, is expected to produce 102.75 million tonnes of rice in the crop year to June 2012, a farm ministry forecast said last month. Basmati makes up around 5 percent of India’s total rice production.

India’s January 1 rice inventory at government warehouses was 29.8 million tonnes against a target of 11.8 million tonnes.

(Writing by Krittivas Mukherjee; Editing by John Chalmers and Neil Fullick)

While a sharply weakening rial has made forward purchases costlier, financial sanctions are making it difficult for Iranian traders to continue using an unofficial route involving middlemen based in Dubai to keep paying Indian suppliers.

The defaults, totaling about $144 million, were for shipments under term deals in October and November free-on-board Indian ports, Indian traders said. Most Indian rice exporters allow 90 days credit.

India is Iran’s top rice supplier, accounting for some 70 percent of its annual requirement of 1-1.2 million tonnes of the grain, mainly the aromatic variety called Basmati.

“It is a serious issue and we do not rule out further payment defaults by Iran,” said Vijay Setia, president of the All India Rice Exporters’ Association. “We have requested the government to step in.”

Setia said India should not send any more rice to Iran on credit, adding suppliers such as those in Thailand, Vietnam and Pakistan had already stopped doing so.

Traders and officials in Iran could not be immediately reached to comment.

The United States slapped fresh sanctions on Tehran from the start of this year, targeting financial institutions that deal with the central bank, hoping to stem oil revenues and persuade Iran to abandon a suspected nuclear weapons program.

The European Union followed with a ban on Iranian oil this week that is expected to take full effect within six months.

The rice defaults could be the latest sign that those sanctions are biting, hampering staple food supplies to Tehran as Iranian importers find it increasingly difficult to settle payments.

Grain ships are docked outside Iranian ports, traders are not booking fresh cargoes and exports of staples to Iran such as maize are falling due to problems collecting payment from buyers.

The rice default is the latest snag in India-Iran trade, which is heavily skewed towards Tehran.

India is Iran’s second-largest buyer of crude and it has struggled to settle payments worth some $11 billion annually after New Delhi scrapped a long-standing mechanism in 2010 under pressure from Washington.

While New Delhi has switched to a payment conduit for its Iranian oil using a Turkish bank, Indian rice exporters have been using a loose, unofficial route involving a network of middlemen based in Dubai.

The middlemen receive payments from Iranian importers in rial and pay Indian exporters in U.S. dollars. The consignments are sent directly from India to Iran.

But Indian traders said the defaults started after the rial plunged over the past month, making previous purchases costlier for Iranian importers.

The cost of transactions also went up for the Dubai middlemen as they use U.S. dollars to pay Indian exporters.

On January 26, Iran announced an 8 percent devaluation of the rial and said it would enforce a single exchange rate, aiming to stamp out a black market where the dollar’s value has soared due to fears over new sanctions imposed by the West.

Indian traders said about 20 Iranian companies have failed to clear their dues during the past month.

“It threatens to jeopardize the trade with them, hurting both India and Iran,” Anil K. Mittal, chairman of KRBL Ltd, a leading Indian rice miller and exporter, told Reuters.

“Due to sanctions on Iran, currently banks are not involved in payments to Indian rice suppliers. The payments are direct and at times on credit, making Indian exporters vulnerable to defaults. Indian traders must avoid supplying on credit.”

BOOSTING EXPORTS TO IRAN

The defaults could also put a question mark on the willingness of any Indian traders to take part in plans by India to step up exports in a range of goods, including farm products such as wheat and rice, to settle part of its oil dues to Iran.

New Delhi will send a delegation to Iran this month to explore boosting exports to smooth use of the restricted rupee currency, which the two sides have agreed to use to settle 45 percent of India’s $11 billion a year oil bill.

But this would give Iran large amounts of a currency which is difficult to use for international trade.

An Indian ministerial panel on food exports meets on Tuesday to review rice and sugar shipments. The issue of exports to Iran is not on the agenda, government officials said, seeking to knock down reports that the panel could discuss the possibility of boosting rice and wheat exports to Tehran.

India, is expected to produce 102.75 million tonnes of rice in the crop year to June 2012, a farm ministry forecast said last month. Basmati makes up around 5 percent of India’s total rice production.

India’s January 1 rice inventory at government warehouses was 29.8 million tonnes against a target of 11.8 million tonnes.

($1 = 48.93 rupees)

(Writing by Krittivas Mukherjee; Editing by John Chalmers and Neil Fullick)

While a sharply weakening rial has made forward purchases
costlier, financial sanctions are making it difficult for
Iranian traders to continue using an unofficial route involving
middlemen based in Dubai to keep paying Indian suppliers.

The defaults, totalling about $144 million, were for
shipments under term deals in October and November free-on-board
Indian ports, Indian traders said. Most Indian rice exporters
allow 90 days credit.

India is Iran’s top rice supplier, accounting for
some 70 percent of its annual requirement of 1-1.2 million
tonnes of the grain, mainly the aromatic variety called Basmati.

“It is a serious issue and we do not rule out further
payment defaults by Iran,” said Vijay Setia, president of the
All India Rice Exporters’ Association. “We have requested the
government to step in.”

Setia said India should not send any more rice to Iran on
credit, adding suppliers such as those in Thailand, Vietnam and
Pakistan had already stopped doing so.

Traders and officials in Iran could not be immediately
reached to comment.

The United States slapped fresh sanctions on Tehran from the
start of this year, targeting financial institutions that deal
with the central bank, hoping to stem oil revenues and persuade
Iran to abandon a suspected nuclear weapons programme.

The European Union followed with a ban on Iranian oil this
week that is expected to take full effect within six months.

The rice defaults could be the latest sign that those
sanctions are biting, hampering staple food supplies to Tehran
as Iranian importers find it increasingly difficult to settle
payments.

Grain ships are docked outside Iranian ports, traders are
not booking fresh cargoes and exports of staples to Iran such as
maize are falling due to problems collecting payment from
buyers.

The rice default is the latest snag in India-Iran trade,
which is heavily skewed towards Tehran.

India is Iran’s second-largest buyer of crude and it has
struggled to settle payments worth some $11 billion annually
after New Delhi scrapped a long-standing mechanism in 2010 under
pressure from Washington.

While New Delhi has switched to a payment conduit for its
Iranian oil using a Turkish bank, Indian rice exporters have
been using a loose, unofficial route involving a network of
middlemen based in Dubai.

The middlemen receive payments from Iranian importers in
rial and pay Indian exporters in U.S. dollars. The consignments
are sent directly from India to Iran.

But Indian traders said the defaults started after the rial
plunged over the past month, making previous purchases costlier
for Iranian importers.

The cost of transactions also went up for the Dubai
middlemen as they use U.S. dollars to pay Indian exporters.

On Jan. 26, Iran announced an 8 percent devaluation of the
rial and said it would enforce a single exchange rate, aiming to
stamp out a black market where the dollar’s value has soared due
to fears over new sanctions imposed by the West.

Indian traders said about 20 Iranian companies have failed
to clear their dues during the past month.

“It threatens to jeopardise the trade with them, hurting
both India and Iran,” Anil K. Mittal, chairman of KRBL Ltd, a
leading Indian rice miller and exporter, told Reuters.

“Due to sanctions on Iran, currently banks are not involved
in payments to Indian rice suppliers. The payments are direct
and at times on credit, making Indian exporters vulnerable to
defaults. Indian traders must avoid supplying on credit.”

BOOSTING EXPORTS TO IRAN

The defaults could also put a question mark on the
willingness of any Indian traders to take part in plans by India
to step up exports in a range of goods, including farm products
such as wheat and rice, to settle part of its oil dues to Iran.

New Delhi will send a delegation to Iran this month to
explore boosting exports to smooth use of the restricted rupee
currency, which the two sides have agreed to use to settle 45
percent of India’s $11 billion a year oil bill.

But this would give Iran large amounts of a currency which
is difficult to use for international trade.

An Indian ministerial panel on food exports meets on Tuesday
to review rice and sugar shipments. The issue of exports to Iran
is not on the agenda, government officials said, seeking to
knock down reports that the panel could discuss the possibility
of boosting rice and wheat exports to Tehran.

India, is expected to produce 102.75 million tonnes of rice
in the crop year to June 2012, a farm ministry forecast said
last month. Basmati makes up around 5 percent of India’s total
rice production.

India’s Jan. 1 rice inventory at government warehouses was
29.8 million tonnes against a target of 11.8 million tonnes.
($1 = 48.93 rupees)

(Writing by Krittivas Mukherjee; Editing by John Chalmers and
Neil Fullick)

The expected drop in rapeseed production reflects a likely
decline in output in Rajasthan, the north Indian state that
produces about half of the country’s output.

Lower plantings in the state have reduced India’s total
rapeseed acreage by 10.5 percent to 6.5 million hectares in 2012
from previous year, federal farm ministry data shows.

“Rapeseed area missed target on dry weather conditions that
prevailed during start of the planting season in October,” D.S.
Yadav, a director in Rajasthan’s farm ministry, said on
Wednesday.

Traders said Indian rapeseed production could shrink by 26
percent to 5.7 million tonnes this year. Rapeseed output in
Rajasthan could fall by 16 percent to 2.7 million tonnes from
last year, they said.

“Lower rapeseed output will increase edible oil imports by
about 500,000 tonnes this year,” said Deepak Kanda, president of
the Shri Ganganagar Oil Millers Association in Rajasthan.

Rapeseed, India’s main winter oilseed crop, is planted in
October. A farm official told Reuters in November that output in
Rajasthan was unlikely to rise in 2012 due to dry conditions and
a preference by farmers to plant chickpeas.

Relatively high temperatures during the maturity stage also
reduced prospects for the highest oil-content oilseed crop.

“Absence of winter rains kept temperature on a higher side,
retarding maturity of the rapeseed crop,” said S.K. Sharma, a
former official of the state’s farm department.

Lower rapeseed production will boost edible oil imports as
the spending power of the country’s one billion-plus people
grows. India already imports half of its annual cooking oil
needs, mainly palm oil, from Malaysia, Indonesia, along with a
small quantity of soyoil from Brazil and Argentina.

India’s consumption of vegetable oils, around 95 percent of
which are edible oils, could rise to 18.5 million tonnes in
2011/12 ending September from 18.1 million tonnes in 2010/11,
Hamburg-based oilseeds analysts Oil World has forecast.

Vegetable oil imports fell last year after a gap of five
years due to higher local oilseed supplies, but a growing
population and higher incomes could send demand soaring next
year, Oil World said.

India imported 8.4 million tonnes of edible oils in 2010/11,
down 4.5 percent from the previous year.

If imports rise in 2011/12 because of lower rapeseed output,
that could push up Malaysia’s benchmark palm oil futures prices
, which fell 17.5 percent in 2011.

(Editing by Ted Kerr)

Indian grain exports have recently been plagued by quality
issues, with both China and Vietnam rejecting cargoes.

Despite these setbacks, analysts said the situation in South
America will ensure India boosts sales within Asia,
which consumes at least 40 percent of corn traded in the
world and a quarter of global soymeal, especially if prices
remain low.

Any exports from India are likely to relieve global corn and
soy prices, which have climbed for two straight weeks,
largely due to the South American drought.

“The South American crop is suffering whereas India has a
clear advantage in terms of supplies and shorter voyage to
destination markets in Asia,” said analyst Ker Chung Yang at
Phillip Futures in Singapore.

“We see higher exports of Indian soymeal and corn into
Southeast Asia and other markets.”

India accounts for just 8 percent of the global soymeal
trade and annually sells some 2-3 million tonnes of
corn, a fraction of the more than 90 million tonnes traded
globally.

The corn crop in Argentina and Brazil, which together
account for nearly 30 percent of global exports, was scorched by
weeks of hot, dry weather which now threatens to shrink the
soybean crop in the world’s biggest producing region.

The reduced supply comes as Russia is widely expected to
curb exports of wheat, a move likely to boost demand for corn as
wheat is used as a substitute in animal feed.

“What we are hearing is that the situation in Argentina is
potentially worse than what the market has priced in at this
point of time,” said Adam Davis, a senior commodity analyst at
Merricks Capital in Melbourne.

U.S. corn jumped almost 5 percent last week, while
soymeal gained 3.3 percent on the week, on concerns over
supplies from South America.

SCORCHED EARTH

Rains have fallen over some parts of Argentina and
Brazil in the last few days but analysts and officials say it
may be too little, too late, especially for the corn crop.

In its first estimate for the season, the Buenos Aries
Grains Exchange last week forecast Argentina’s soy production to
fall 6 percent to 46.2 million tones in 2011/12. It also
projected a corn harvest of up to 22 million tonnes, short of
initial expectations for a record 26 million tonnes.

Brazil, which produced a record 75.3 million tonnes of
soybeans last season, expects to harvest 71.5 million tonnes
this year, according to the agriculture ministry.

The lower forecasts have boosted South American grain
prices, and analysts said that is where Indian exporters have an
advantage. A bumper harvest also means India will play a more
important role for a longer time on the global market.

“There are good stocks with farmers who have been bringing
in soybeans gradually, plus the crop itself was quite large,”
said Atul Chaturvedi, chief executive at India’s leading farm
goods exporter Adani Wilmar.

“India will continue to be a relevant exporter for the
coming eight to nine months and that’s a pretty big change.”

Traders forecast India’s soymeal exports to jump to as high
as 5 million tonnes compared to the 4 million tonnes shipped in
2011, while corn exports are likely to be around 3.5 million
tonnes, up from 2.8 million tonnes last year.

Indian soymeal is quoted at around $390 a tonne, including
cost and freight, to Southeast Asia, a $20 gain from a month
ago. But it is still cheaper than South American cargoes being
valued at around $410 a tonne.

Indian corn, which largely finds its way to Indonesia,
Vietnam and Malaysia, is quoted at around $270 a tonne, around
$15-$20 per tonne cheaper than South American cargoes.

“Indian corn and soymeal have to be at a discount to South
America to attract buyers,” said a Singapore-based trader who
has direct feed grains sales to Asia.

Japan is India’s biggest soymeal customer followed by
Vietnam, and their imports are likely to grow as South American
grain prices rise.

Vietnam, which annually takes close to 2.5 million tonnes of
soymeal, is expected to seek some 300,000 tonnes for March and
April shipment. Indonesia and Thailand are also expected to buy
larger soymeal volumes from India in the months ahead.

Vietnam is also open for at least 50,000 tonnes of corn for
March delivery and 75,000 tonnes of corn for April, and analysts
some of this demand will be met by India.

The demand for Indian grain is clear, but the quality of the
exports is often patchy. This has led Vietnam to reject several
corn cargoes last year and prompted China to halt imports of
oilmeals after they tested positive for a hazardous chemical.

Indian exporters have tried to address these issues, but
with corn and soymeal in short supply, exports are unlikely to
be hit by quality concerns.

“The Chinese ban is temporary and will halt shipments meant
for immediate delivery. India’s place as a major supplier of
oilmeals will not be hit in medium to long run as supplies will
continue to be competitive,” said S. Raghuraman, a senior
analyst with consulting firm Agriwatch.

(Reporting by Naveen Thukral, Editing by Miral Fahmy)