WASHINGTON, April 5, 2016 -- Iraq has a new way of doing things when it comes to buying rice, and U.S. suppliers think it just might work out to their advantage, according to the USA Rice Federation.
The recent move by the Iraq Grain Board and the country’s Ministry of Trade to jettison its open tender system in favor of a “closed, direct negotiation” between Iraqi government officials and foreign sellers was at first viewed with much skepticism, USA Rice spokesman Mike Klein said Wednesday, but the group now thinks the new system might actually work out better.
“Our first reaction was, ‘Uh oh, they’re taking it out of the public eye. This could be a problem,’” Klein said. But upon further consideration, USA Rice believes the new system may offer a better forum for exporters to negotiate sales instead of simply sending in a static bid, he said.
There is still a risk, though, that the U.S. could be excluded.
“The advantage that we see is that you get the Iraqi government reaching out to the companies, saying, ‘Do you want a piece of this business?’” Klein told Agri-Pulse. “They can eliminate the companies that we see as fly-by night. We hope that they’ll only go to credible businesses that make good on the orders.”
The rice industry may see very soon just how well U.S. sellers do under the new, secretive business model because Iraq has just announced it is looking to buy 30,000 tons. It’s unclear if U.S. exporters are in talks for this latest request, but Klein said, “U.S. companies are anxious to participate when the Ministry is looking to buy rice.”
Iraqi tenders have been problematic for U.S. sellers in recent years, creating a history of complaints that U.S. rice was losing out despite offering more competitive bids.
U.S. rice ties with Iraq, which buys about 1.5 million tons of the grain per year, deteriorated in late 2014 after the country shunned U.S. bids in favor of more expensive rice from Brazil and Uruguay. That got the attention of then-Sen. Mary Landrieu from Louisiana who asked U.S. Ambassador to Iraq Stuart Jones to get involved. Jones met with Iraqi trade and agriculture ministers, according to accounts from rice industry officials, and shortly afterwards Iraq bought 120,000 tons of U.S. rice.
But it hasn’t been smooth sailing since then. The U.S. was cut out of several major tenders in the beginning of the year, prompting USA Rice to hire a consultant in Baghdad to work directly with the Iraqi Grain Board and Ministry of Trade. The State Department also became more involved.
U.S. rice industry representatives celebrated each victory since, like a 60,000-ton sale to Iraq in July.
USA Rice representatives followed up the 60,000-ton sale with a visit to meet with the Iraqi trade minister and Ron Verdonk, USDA’s minister counselor for Iraq, to try to hash out different tender procedures in an effort to put U.S. bids on a more even footing with other countries.
But victories were short-lived.
The “fly-by-night” exporters mentioned by Klein have been a particular pain in recent months, he said, offering up extremely cheap rice that doesn’t meet tender specifications and causes Iraq to scrap or restart the tenders.
The result has been chaos in Iraq’s rice-buying process. The confusion peaked last October when the country announced that it bought 30,000 tons of U.S.-origin rice out of an 80,000-ton tender. The problem was that the allegedly U.S.-origin rice came from an India-based company and was priced well below what was being offered for rice that would be shipped direct from the U.S., according to a USA Rice account. Iraq ended up canceling the 30,000-ton “U.S.-origin” purchase from the Indian company.
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