Iraqi rice purchasing ramps up via private negotiations

The Iraqi government has purchased via a private company a total of 160,000 mt of US and Thai rice in recent days, according to multiple sources close to the trades.

The Iraqi company, confirmed to S&P Global Platts by the Iraqi Ministry of Trade as Al-Owais, has been concluding sales at a rapid pace since the ministry divested the responsibility for rice procurement to it in June. In the second half of June, Al-Owais purchased 60,000 mt of Uruguayan rice at a reported price of approximately $560/mt FOB. The two 30,000 mt shipments have already left Montevideo Port for Iraq, according to a major Uruguayan exporter.

The US industry was initially concerned that this development would threaten the advantageous position it held in selling rice to Iraq due to the two governments' memorandum of understanding, which encouraged the Iraqi government to buy US rice. However, a separate MOU was negotiated between Al-Owais and industry body USA Rice, which one source referred to as a "mirror of the old" MOU.

Following the MOU agreement, sales of 80,000 mt of white rice in bulk from Arkansas via ADM and 40,000 mt of white rice in bags from Louisiana via Supreme Rice were reported in late July. Sources have confirmed that milling for the Arkansas order has already begun, with both orders scheduled to arrive in Umm Qasr Port, Iraq, in October-November. One mill involved in the Arkansas sale reported the domestic sale price at approximately $540/mt CIF NOLA.

However, sources have repeatedly cautioned that no Letters of Credit have been received yet, despite the deals being agreed in principal one to two weeks ago. A source close to the trades said at least one of the LCs was "not even close," which has made some mills in the US South nervous. One such mill said: "Heaven forbid the Iraq deal falls apart...I don't even want to think what effect that could/would have on everything right here at harvest time."

In a separate development, 40,000 mt of Thai white rice has been sold to Al-Owais via ADM, according to two sources close to the trade. The sale was concluded in recent days and -- if executed -- would represent the first shipment of Thai rice to the Iraqi government in recent years. Milling for the order is expected to begin Aug. 6, although LC issues also remain for this sale.

The total of 220,000 mt of rice sold to Iraq from three origins in less than a month-and-a-half marks a remarkable turnaround from recent years. A total of 120,000 mt of Pakistani and Uruguayan rice was purchased in tenders held by the Ministry of Trade in early 2021. However, before these tenders, Iraq had not held a rice tender since September 2019, with plunging oil prices hindering its ability to procure rice in 2020.