Economic sanctions leveled against Iran in an effort to stop its nuclear program have forced Tehran to find alternative financing methods to buy imports and pay for necessary food items.
Iran bought 200,000 tons of soft wheat on the world market recently using yen-based contracts, as opposed to the dollar and euro denominated financing blocked by the sanctions. While most of the goods are coming from Australian sources, traders report that U.S. wheat could account for part of the volume.
This purchase comes after Iran experienced a fall in maize supplies from Ukraine after Tehran ran into sanction-related payment problems. The dearth of maize forced animal feed makers to use wheat instead, reducing the amount available for food and forcing Iran to turn to the world market.
"The Iranians have just purchased about 200,000 tons of wheat from multi-national trading houses," one European trader said. "There is market talk of up to 400,000 tons."
In the past, Iran has worked around sanctions by booking business through countries like the UAE. However, since the UAE is no longer allowing sanction-breaking finance, Iran has been forced to explore other options.
Iranian Trade Secretary Rahul Khullar suggested that one private buyer was looking to buy large quantities from India, and the vice chairman of U.S. agricultural behemoth Cargill told Reuters that, even with the sanctions, shipments to Iran were still possible via non-dollar currencies.
With just weeks to go before their presidential election, Iranian officials have also begun considering bartering in order to feed their people. "Grain deals are being paid for in gold bullion and barter deals involving oil are being offered," one trader said. "Some of the major trading houses are involved."
Details on how these exchanges would work are still unclear because of how fast the situation is developing.
One trader also suggested that Iran may reactivate a project for preferential supplies between Iran and Kazakhstan that would bring 2 million tons of wheat to Tehran. This deal would make even more sense if Iran went through with its plans to block the Strait of Hormuz.
"One of the closest (supply) sources is Kazakhstan because the Iranians have solid links with this country but also because the two governments are centralized and deals can be made between states," said Michel Ferret, head of the markets division at French farm office FranceAgriMer.