The Iraqi government passed a deficit budget on Nov. 12, creating the possibility that the Ministry of Trade (MoT) will announce international rice and wheat tenders.
According to a source close to the tenders, the Dinar 26 trillion ($22 billion) budget includes provisions for international rice and wheat tenders following an unusually large gap since its previous tenders. An Iraqi source who is also close to the tenders hinted during the week ending Nov. 13 that the MoT was moving toward announcing at least a rice tender.
The MoT last purchased rice via an international tender in September 2019, when it bought 120,000 mt of South American rice. It last held a wheat tender in February 2019, buying 400,000 mt of US and Canadian wheat. However, subsequent political upheaval has hindered further sales. Protests beginning in October 2019 led to the resignation of Prime Minister Adil Abdul-Madhi earlier this year, with the political makeup of the MoT also changing as a result.
Despite indications that the ministry is leaning toward holding a global origin tender, for several months the US rice industry has been expecting that Iraq would request for offers of US rice through the two countries' Memorandum of Understanding.
Although the US industry helped the Iraqi government secure $400 million in financial backing for a rice purchase under the MoU earlier this year, sources have reported persistent silence from Iraq in recent weeks. Confusion and bureaucracy on the Iraqi side regarding how the financing could be utilized have been a contributing factor, according to the first source close to the tenders, in addition to the political upheaval.
The MoT could not be reached for comment Nov. 16.
US sources also expected that the MoT could purchase bulk rice in addition to or instead of bagged rice through an MoU sale. If borne out, a sale of US rice could more greatly benefit Arkansas rice mills which are unable to supply bagged rice, with Gulf Coast rice mills primarily benefiting from past sales to Iraq. The MoT last purchased US rice through the MoU in July 2019, buying 60,000 mt.
The possibility that Iraq could enter the market for US rice stabilized a softening US milled long grain market in the week ending Nov. 13, with S&P Global Platts assessment of US #2, 4% broken white rice at $600/mt FOB Lake Charles. However, senior industry sources were unsure if Iraq would make this move and were aware that the passing of the budget also pointed toward a global origin tender.
If Iraq does announce a global origin rice tender, it is unclear where they will buy from aside from the US. While the MoT typically purchases South American rice in tenders, South American supply will be extremely tight until harvesting begins in Q1 2021 due to unusually strong Brazilian demand. Participants in the region have noted that it would be difficult to supply more than one 30,000 mt shipment for prompt delivery.
While the MoT also purchases rice through its MoU with the Vietnamese government, tight supply in Vietnam until Q1 2021 is also likely to rule out a private MoU sale.
Price-competitive rice from other Asian origins will likely be offered in a global origin tender. However, the MoT typically avoids purchasing Asian rice in these tenders due to quality issues. The MoT last purchased Asian rice in a tender (under a contract that was executed) in July 2016 when it bought 80,000 mt of Indian rice. Due to loading during the monsoon, much of this rice was damaged by the time it arrived in Iraq.
