Indian basmati rice prices have risen 20% since the end of November, based on hopes that Iran will resume rice imports during the July-November harvest season, following a ban last year.
Yet there was bad news for Indian rice exporters at the start of February, when Iran imposed a ceiling on import prices.
The new restrictions will prevent Indian exporters from selling shipments beyond rates of US$850 per tonne, which is well below the usual landed cost of US$950 per tonne. This could hamper exports of rice from India if the ban is eventually lifted.
According to Mintec, the commodities analyst, Indian rice exports to Iran have surged after a rupee settlement mechanism was approved in April 2012 to avoid sanctions from America and European Union for exporting to a banned country.
As a result, Iranian rice stocks have remain high after it imported 1.4m tonnes of the cereal from India in 2013/14. Imports subsequently dropped to 0.9m tonnes in 2014/15 and 0.7m tonnes in 2015/16.