GENEVA: U.S. agribusiness giant Cargill plans to continue grain shipments to Iran, its vice chairman said on Wednesday, despite signs the Islamic Republic is struggling to process payments as trade sanctions bite.
"Like all the international companies, we do business there, but you have to be very careful," Paul Conway told Reuters in an interview.
The United States and the European Union have pressed Tehran to scrap its nuclear programme in part by imposing trade sanctions and targetting payments by its central bank. The moves have led some shipping firms to divert cargoes away from Iran and some banks to stop financing trade there in recent weeks.
But Conway said shipments were still possible.
"It's standard methods, in terms of finding banks that will open LCs (letters of credit) and pay you in currencies other than the dollar. Yen, or euros or whatever."
Iran imports around 4.5 million tonnes of grain a year, including about 3.5 million tonnes of corn, which is mainly used in animal feed.
Trading with Iran is "somewhat piecemeal", depending on availability, pricing and the logistics of shipping, and the grain might come from a variety of countries, Conway said.
"It might be Germany, it might be Brazil, it might be Ukraine. We don't have a specific plan," he said.
"There's a terribly complicated licensing system, depending on where the origin comes from, but it is very difficult because of the payment. and that leads to difficulties in the logistics."
He said Cargill rarely pulls out of a country and cited Syria, currently in a state of near civil war, as a country where the company planned to stay for the long term.
SYRIA NATIONAL SUGAR
Cargill is a minority shareholder in Syria National Sugar Co, which owns a 1 million tonne per year sugar refinery 25 km (15 miles) south of Homs, the main flashpoint of violence in the country over the past year.
According to Syria National Sugar Chairman Mohamad Najib Assaf, the refinery, one of three in Syria, has suspended operations because of the security situation.
But Cargill and the other minority owners dispute that, saying operations stopped after they brought legal action against Assaf for trying to push them out of the company.
"I would hope that sense prevails and the dispute can be resolved quickly so that it (the refinery) can start up," Conway said. The plant used to refine around 2,500 tonnes of sugar a day.
"The challenge will be for the business to get access to raw materials to run when it's in this legal (situation). Being in a legal dispute like this with the plant unable to run is not good for anybody."
Although Syria is obviously a dangerous place to go at the moment, there are no plans to pull out, he said.
"What's going on in Syria is an incredible shame, but you have to look at the longer term. If you take Egypt or Libya, food shipments continued to those countries through the crisis. We are talking food here, and people have to eat, whether you're talking Iranian or Iraqi or Egyptian or Libyan or Syrian."
Following a disappointing fourth quarter for Cargill, Conway was more upbeat about 2012 prospects, pointing to signs that the fundamentals were once again returning to the fore of each commodity market.
"2012 has started with a much more benign and positive environment. The big problem in 2011 was that all asset classes became correlated and that had nothing to do over quite extended periods of time with the underlying commodity," he said.
"It was a market place where it was very difficult to trade the commodity. You had to trade the macro. The macro environment was extremely erratic so like many people we took risk off the table because in those conditions it was very difficult to trade your convictions."
Cargill trimmed its trading operations and reported slumps in the last three quarters after taking a beating from sugar losses and volatility in financial markets.
"I think the macro worries have gone away. Whether the underlying problems have gone away is an entirely different issue.
"But the world does seem pretty optimistic that between liquidity ECB has provided, the continued long term low interest rates that the U.S. is willing to give, the political focus - which is not just austerity, it's growth - those things will sort out the macro problem. We hope they're right," he said.
In the longer term, Conway pointed to carbon and ethanol as commodities with the potential to become big global markets over the next ten years. "If you are talking about large, global commodity trades that didn't exist before, carbon has the potential to be massive," he said.
"With the expiry of the U.S. tariff at the end of last year, we can certainly see ethanol becoming more of a global commodity," he sai d.