Iraq eyes more wheat purchases for '10

Iraq, one of the world's largest grain importers, intends to continue buying wheat for 2010 to take advantage of lower prices and has secured a $500 million loan to cover grain purchases, the state Grain Board said.

Decades of war, sanctions and strife have decimated Iraq's farm sector, which has gone from being an important grain producer to one of the world's largest importers of wheat and rice needed to feed a huge public food ration programme.

'We have bought 300,000 tonnes (of wheat) to cover the need for January and February 2010,' Hassan Ibrahim, acting director of the board, told Reuters in an interview late on Tuesday.

'There was a fall in wheat prices in United States, Australia and other exporting countries, and for that reason we have used this opportunity and bought grains.'

Annual wheat consumption in Iraq is typically around 4.5 million tonnes while rice consumption hovers around 1 million tonnes, according to government statistics.

Earlier this month, the board purchased 200,000 tonnes of wheat from US supplier ADM at around $203 per tonne free-on-board (FOB), trade sources said.

Ibrahim said another 100,000 tonnes were purchased at the same tender from a European firm at $259.85 per tonne at cost, insurance and freight (CIF).

The purchases come amid questions about how the government, which relies on oil exports as virtually its sole source of revenue, would finance its grain imports as it grapples with a steep drop in oil prices from last year's record highs.

Ibrahim said the board secured a $500 million loan from the Finance Ministry's Trade Bank of Iraq (TBI) to cover purchases until a supplementary budget is passed by fractious lawmakers.

'We've struck a deal with the TBI and got a $500 million loan, and as a result we've paid all the money (owed) and once parliament settles the budget issue we'll pay back the money (to TBI),' he said without elaborating on the loan's terms.

On Monday, traders said a rice exporting joint venture between Vietnam and Iraq had won a tender to supply 60,000 tonnes of rice.

Ibrahim said Iraq had purchased a total of 115,000 tonnes of rice for that tender - 60,000 from the Iraq-Vietnam joint venture at $422 per tonne at FOB, 30,000 tonnes from a US company at $544.5 per tonne at CIF and 25,000 tonnes from a Pakistani firm at $460 per tonne at FOB.

Ibrahim said he expected local production of raw rice to fall 47 per cent in 2009 to 120,000 tonnes compared with the previous year. He said local production of rice only covers 40 days of consumption and wheat only 3.5 months.

In the past year, the majority Muslim nation has become less dependent on US grain - a main supplier since the US-led invasion in 2003 - and has diversified to grains from cheaper origins ever since the plunge in oil prices.