UPDATE 1-Iranian importers buy 50,000 T feed wheat - trade
* Trade finance freeze hurting food imports
* Tehran stockpiling food to avoid unrest (Adds further comment, detail, background)
By Jonathan Saul and Michael Hogan
LONDON/HAMBURG, April 13 (Reuters) - Private importers in Iran have bought about 50,000 tonnes of feed wheat this week despite payments problems caused by Western sanctions on the Islamic Republic, trade sources said on Friday.
Food shipments are not targeted under Western sanctions aimed at Iran's disputed nuclear programme, but financial measures have frozen Iranian firms out of much of the global banking system, hindering grain buying.
Iranian farmers face a shortage of feed for their huge livestock flocks as private-sector grain importers have been unable to arrange large-scale payments, traders said earlier this week.
Nevertheless, private buyers picked up two feed wheat consignments of 25,000 tonnes for prompt shipment this week.
"The deal has been wrapped up, and it looks like it is being done in two shipments to break up the purchases," a European trade source said.
The origin of the grain was unclear, but it was thought likely to be shipped via a Black Sea port.
"We may be seeing some attempts to bundle shipments using advance payments," another trade source said. "The Iranian private feed importers have a large requirement, and unless their government steps in they will be facing problems."
The government, which bought more than 2 million tonnes of bread-quality wheat recently, is now poised to start buying hundreds of thousands of tonnes of feed grain, because trade financing problems have meant private buyers have been unable to conclude large deals, traders said.
"Some buyers are seeking purchases by paying in advance or other currencies, and private buying is taking place," another European trader said. "I think the volumes being bought of feed grains are still way below Iran's requirements."
Traders said they expected Iran's government feed agency SLAL to step into international markets and start buying feed grain in the same way that state food agency GTC moved earlier this year to secure bread wheat supplies.
Iran has a large livestock farming sector and requires massive imports of meat and other foodstuffs to meet the needs of its population. According to data from the United Nations' Food and Agriculture Organisation, Iran in 2010 produced 1.6 million tonnes of chicken meat, 6.3 million tonnes of cow milk and a combined 0.91 million tonnes of beef, lamb and goat meat.
Sanctions are worsening an economic crisis that has caused rising prices, shortages of some goods and a collapse of the local currency, while other countries in the Middle East are experiencing political and social unrest.
"(Iranian President Mahmoud) Ahmadinejad may be the first to suffer from any disruption to food supply," said Alan Fraser, Middle East analyst with security firm AKE. "The regime clearly envisages tougher times ahead, and its major priority will be to dampen any forms of dissent."
Iran has aimed to sidestep the banking freeze by using other financing mechanisms, including routing deals through Turkish banks and making payments in non-dollar currencies such as roubles.
A Swiss bank owned by India's Hinduja Group said this week it was continuing food trade finance with Iran despite the sanctions.
"While the current sanctions could really bite, there has been a reluctance to take the steps that would make it so. Part of this is prudent concern about not pushing too far, too quickly partners whose aid is needed on other fronts such as Turkey, which is critical to any resolution of the Syrian crisis," said J. Peter Pham, a director with U.S. think-tank the Atlantic Council.
Israel, widely believed to be the Middle East's only nuclear power, and the United States, its main ally, have both held out the prospect of military action against Iran if sanctions do not work. Iran has said it is enriching uranium for peaceful purposes.
Officials from Iran and the six major powers arrived in Istanbul ahead of Saturday's bid to restart stalled diplomacy following months of soaring tension. (Reporting by Jonathan Saul and Michael Hogan, editing by Jane Baird)
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