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Iraq trade deal pleases rice industry

Fresh off the plane from their trip to the Middle East, rice industry officials deemed their recent trade summit with Iraq's Grain Board a success.

“We're going to get this market back,” says Stuart Proctor Jr., president and chief executive officer of USA Rice Federation. “We have two new best friends in the rice industry, the director general of the ministry of trade from Iraq and the director general of the Iraqi Grain Board.”

Fourteen years after the United States' government issued a trade embargo, trade is resuming between the United States and Iraq. That's why the USDA officials thought the time was right to send a U.S. delegation to meet with the Iraqis, and re-establish a trade relationship between the two countries.

Increasing rice exports to Iraq is the USA Rice Federation's No. 1 priority in 2004, Proctor says. “Iraq is our former No. 1 export market. The Iraqis used to buy 500,000 metric tons of rice from us each year back in the 1980s before the U.S. government imposed an embargo in 1990. The point of this trip was to get that market back, and give us an opportunity to provide some technical information on trading our products,” he says.

Proctor says USDA officials quickly pulled the meeting together, putting Iraqi officials on military airplanes and flying them from Iraq to Amman, Jordan to meet with the delegation of about 10 rice millers, exporters and traders.

The USA Rice Federation delegation had the specific, technical information about grades and trading specifications, delivery time periods and delivery destinations that Iraq wanted, he says. During the meeting's two and one-half days, rice officials went to work informing and educating the Iraqis through both informal meetings and discussions, as well as a formal presentation.

Bias towards U.S.

“One million metric tons of rice are imported annually into Iraq,” Proctor says. “We haven't done business there for 14 years, and during that time they have been buying rice almost exclusively from Vietnam and Taiwan. Iraqi officials remember the high quality U.S. rice shipped to them back in the 1980s, and they have a bias. They want to do business with us, so it was a very positive environment for us to operate.”

During his opening comments at the start of the recent summit, Iraq's Minister of Trade Director General Ahmad Al-Mukhtar said the Iraqi people have good memories of past purchases of high-quality U.S. rice.

During the recent meeting, rice officials learned that the Iraqis are very interested in building their buffer stocks, or on-hand inventory, of rice, and they want to do it very quickly. The Iraqis decided that they will issue a larger tender of rice through the Ministry of Trade within the next week, according to Proctor.

That's a change from the way Iraq has been buying food for the last few months. Up to this point, Iraq has purchased commodities through the World Food Programme.

Proctor calls the change “very positive,” saying U.S. exporters found it difficult to work with the World Food Programme tender, because it was difficult to get registered with that program, and exporters didn't fully understand the specifications written in to that program. At least for an initial trial run, Iraq will purchase commodities such as rice directly from U.S. exporters.

Price as obstacle

“We are hopeful that we are going to get a least a part of that tender, but we have a huge obstacle to overcome and that obstacle is our price. Right now, there is a 75 percent premium for U.S. rice over the price of our competitors,” Proctor says. “We're about $150 a ton more expensive.”

To counter that obstacle, USA Rice Federation members argued the need for Iraq to build their stocks immediately which should put the United States at the top of their list of potential suppliers. “We emphasized the reliability and quality of U.S. grown rice,” says Proctor. “We are a reliable supplier. We ship on whatever date when we say we will, and deliver a high quality product that will meet Iraq's specifications to their port of choice on the specified date.”

However, he says, because of the price premium, the amount of U.S. rice Iraq will buy is limited. “If we get any part of that tender, it will mean that this delegation was a total success. If we had not gone on this mission, we never would have had a chance of Iraq buying any rice from the United States with that premium.”

Over the long term, Proctor says, the trade summit built a base for future trade between the two countries. “We have begun to re-establish our trading relationship by providing Iraq with the technical information it needs, and in the long term we are going to get back into this market,” he says. “Our short term objective is to increase sales immediately, which we should be able to accomplish, especially since the premium will decrease presumably as we go into the production season and our price gets back in line with world market price. Our long-term objective is to build a relationship and provide the foundation for future sales.”

“The USA Rice team absolutely maximized the opportunity to increase rice sales in the short term and re-establish a long-term working relationship that will enable Iraq to become a major importer of U.S. rice,” says delegation member Lee Adams.

According to Proctor, The USA Rice Federation has invited the Iraqi Grain Board to send a delegation to the United States to tour the rice producing areas and processing facilities here. “We hope to get them over here this spring,” he says.

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