WASHINGTON Iran has made a rare purchase of U.S. wheat as it tries to build its food stockpiles amid tougher sanctions imposed by the United States and Europe.
The U.S. Agriculture Department reported on Thursday that Iran bought 120,000 tons of U.S. wheat -- enough to fill two large cargo ships.
While not illegal, the deal caught traders by surprise as tensions mount between the West and Iran on concerns the Islamic Republic was intent on developing a nuclear weapon.
"It shocked me," said Jerod Leman, a broker with Wellington Commodities Corp. "With everything going on over there with their nuclear problems, I am surprised we sold them anything."
In the last month, Iran has bought or tried to buy nearly 3 million tons of wheat as Tehran fears sanctions will eventually disrupt food imports and bread shortages could cause food riots.
Iran has asked to import a million tons of wheat from Pakistan in a barter deal and also approached India.
"It's a sign that they really need wheat," said a trader from Louis Dreyfus.
FIRST SALE TO IRAN SINCE 2009
Iran last purchased U.S. wheat in 2009 but Thursday's sale would be the largest U.S. wheat sale to the country since August 2008, a year when severe drought halved the country's domestic crop and triggered record imports, according to USDA data.
Any sale of grain to Iran requires Treasury Department approval, said USDA spokeswoman Sally Klusaritz.
It was not immediately clear who made the sale or whether the Treasury Department approved the deal before it was announced by USDA. It was also not clear how the deal would be financed as sanctions by the West have hampered Iran's ability to pay for key imports.
The hard red winter wheat was sold for delivery by May 31, USDA said. That variety of wheat for export from the U.S. Gulf Coast costs more than $300 per ton, before freight costs to the Middle East add another $75 per ton, according to Reuters and industry data.
The wheat is worth at least $46 million and probably much more due to the risk premiums companies normally charge Iran.
News of the sale helped wheat futures on the Chicago Board of Trade erase early losses and head higher by midday.
The United States has imposed sanctions targeting Iran's oil trade and central bank payments to put pressure on Tehran to end its nuclear ambitions. Iran maintains the program is for peaceful purposes.
The sanctions are squeezing Iran's oil exports even before they go into effect in June, a U.S. advisory body said in a report released on Wednesday.
Cargill, the U.S. agribusiness giant, said in early February that it was still shipping grain to Iran despite signs Iran was struggling to process payments.
By law, exporters must report promptly to USDA the sale of 100,000 tons or more of a commodity to the same destination in one day. Sales of smaller amounts are reported on a weekly basis.