MUMBAI: Iran is set to emerge as the top buyer of soymeal from India for a second straight year, taking nearly a third of supplies from Asia's biggest exporter, as the country replaces soybean imports disrupted by Western sanctions, trade sources said.
Iran stepped up soymeal purchases earlier this year because economic sanctions targeting its disputed nuclear programme hit soybean imports from Argentina and Brazil, they said. Soybeans are crushed to produce vegetable oils and meal for animal feed.
Western sanctions do not cover food shipments but Iranian importers can struggle to obtain letters of credit to finance purchases or to get international money transfers.
India, Iran's second-largest buyer of crude oil, now pays Tehran only in rupees for its oil through an India-based account. In turn, Iranian importers pay Indian suppliers in rupees for food purchases.
Iran's requirement for non-genetically modified soymeal and freight advantages will also help Tehran become India's biggest buyer again, said B.V. Mehta, executive director of the Solvent Extractors' Association of India, an industry body with more than 850 members.
Soymeal shipments to Iran are expected to rise about 15 percent to 1 million tonnes in the year to March 2014 from the previous year, Mehta said.
In the financial year to March 2013, Tehran was the top importer of Indian soymeal with purchases of 870,776 tonnes. Iran annually consumes 2.0-2.5 million tonnes.
India is currently exporting soymeal to Iran at around $520-$540 per tonne, free on board, down from around $620 per tonne offered two months ago, traders said.
India supplies soymeal in small parcels for clients in Tehran who need quick deliveries. Also, freight advantages over rival suppliers, especially from Argentina, give India an edge.
Indian exporters to Iran still complain of payment delays, with letters of credit taking around 1-1/2 months to obtain against a week normally.