-- Overbought market conditions will produce a corrective price pattern Tuesday

-- USDA said farmers had planted 12% of the U.S. soybean crop as of Sunday

-- USDA on Tuesday announced the sale of 110,000 metric tons of soybeans to China

Analysts expect soybeans to start 8 cents to 10 cents lower.

In overnight trade, soybeans for May delivery were down 11 3/4 cents at $14.91 1/4, and soybeans for July delivery were down 10 1/4 cents to $14.95 1/4 per bushel.

July soybean meal was down $2.50 to $433.00 a short ton, and July soybean oil was down 0.26 cent to 54.79 cents a pound.

Soybeans are expected to experience profit taking on the open today, as traders consolidate positions after settling above the $15 a bushel level for the first time since July 2008 Monday.

Overbought market conditions will produce a corrective price pattern Tuesday, analysts at advisory firm AgResource Co wrote in a morning market note.

Soybean futures have surged to their highest levels since July 2008 amid lower estimates of South American soy output and strong export demand. A solid start to the U.S. planting season, a slight pickup in country movement on the futures rally and the absence of many world traders due to the May Day holiday will promote selling interest.

U.S. Department of Agriculture reported Monday farmers had planted 12% of the U.S. soybean crop as of Sunday. The seeding pace is above the average of 5% for that time of year.

In Illinois, 13% of the crop was in the ground, above the average of 2% for that time of year. In Indiana, 28% of the crop is seeded, well above the five-year average of 4%.

Yet, the combination of strong export demand, tighter projected world supplies and the need to keep values firm in an effort to increase planted acreage in the U.S. as well as next fall in South America continues to attract investor buying on price breaks.

U.S. Department of Agriculture on Tuesday announced private exporters reported the sale of 110,000 metric tons of soybeans for delivery to China during the 2012/2013 marketing year.

Traders doubt the selling pressure will be long lived, as both soybeans and soybean meal continue to fire higher based on further cuts in this year's South American production spawning large Chinese purchases of U.S. soybeans, said Joel Karlin, analyst with California based Western Milling.

"For now the function of the soybean market is to move higher in order to ration demand and spur increased plantings in the U.S. if it is not too late and definitely next year in South America," Karlin said.

"We suspect the global oilseeds production and stocks data will come down again on next week's May USDA supply and demand reports," Karlin added.

 India's soy meal exports, in March 2012 increased by 12.6 per cent to 4,61,892 tonnes from 4,09,882 tonnes during the same period last year.

However, the soy meal shipments during the finance year 2011-12 (Apr-Mar) were 39,14,683 tonnes, slightly increased by 1.79 per cent from 38,45,736 tonnes a year ago.

During the FY 2011-12 shipments to Iran, Thailand, Japan, EU and Mozambique (Africa) registered exceptional growth. However, exports to Vietnam, Indonesia and UAE were hit due to certain trade barriers.

During the first half of current oil year (Oct-Sep), exports during Oct'11 to March 2012 were 2785831 MT as against 2997847 MT last year, a fall of 7 per cent.

Council Regulation (EU) 267/2012 of 23^rd March 2012 ("EU Regulation") replaces the existing Council Regulation (EU) 961/2010.

SNAPSHOT OF THE EU REGULATION

The EU Regulation closes off a number of perceived pre-existing loopholes:

• Revisions to the definition of "brokering services";
• The definition of "transfers of funds" now includes "non-electronic transfers"; and
• Revised rules on authorisation requests for payments to or from an "Iranian person, entity or body".

NEW MEASURES

• Any permitted dealings in crude oil contracts shipped prior to July 1^st 2012 must be notified 20 working days in advance in writing to the relevant Member State;
• Implementation of prohibitions and restrictions concerning petrochemicals, gold, precious metals, diamonds and key equipment and technology relating to the Iranian petrochemical industry; and
• Prohibition on the use of specialised financial messaging services.

RELAXED MEASURES

• Derogations concerning the freezing of the assets of the Central Bank of Iran;
• Adjustments to insurance provisions; and
• Derogations concerning payments relating to diplomatic, consular and certain international organisations.

A more detailed summary is available upon request by e mail to nigel.kushner@whalerocklegal.com.

SWIFT

The Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced it would disconnect some 30 Iranian banks from the system, including Iran's Central Bank. Without access to SWIFT, it becomes almost impossible to complete large international funds transfers. This may result in more barter deals. There are "tried and tested" alternatives. If, for instance, the Iranian Oil Ministry and a Japanese oil refinery have accounts in the same bank, then any money transfer between them would be an internal bank transaction that wouldn't require using the SWIFT system. Alternatively, China may say, 'We're going to buy Iranian oil and deposit the money in a Chinese bank.' That Chinese bank may then makes those funds available to Iran to buy product from China.

US SANCTIONS EXEMPTIONS

The U.S. has exempted Japan and 10 EU states from financial sanctions because they have reduced purchases of Iranian oil, but Iran's top customers, China and India, remain at risk of such steps.

NUCLEAR TALKS

Nuclear talks between Iran and the "Iran Six" (the five permanent members of the United Nations Security Council - the United States, Great Britain, China, Russia and France - plus Germany) are due to take place in April. If these talks are positive, we may see an easing of sanctions in due course. The pending July 1^st EU ban on crude oil imports may act as a catalyst for resolution.

OIL MARKET UPDATE

We calculate that if Iranian crude oil exports reduce by 10% during 2012 and if those buying Iranian crude win a 10-15% price reduction - then the Iranian economy could lose up to $24 billion.

Further tension with Iran will likely create a spike in the oil price which could well reach US$150 a barrel. It is estimated that such increase would, if sustained, cause a recession of 1% in the EU this year.

Industry group IATA have warned that fuel prices are hurting airlines and that an increase to US$150 a barrel could push some into bankruptcy.

India

India's Great Eastern Shipping Co Ltd is said to have faced difficulties paying Greek firm Eurotankers (which holds an account with RBS), for using one of its supertankers to ship Iranian crude. The supertanker in question is said to have delivered 93,000 tonnes of Iran Heavy crude to Mangalore Refinery and Petrochemicals Ltd at Mangalore port on February 7th 2012.

India's Essar Oil, is said to have bought oil in three Iranian vessels in February. Insurance problems for shipments is said to have forced Shipping Corporation of India to cancel an Iranian crude delivery last month.

India publicly maintains it will not seek a waiver to U.S. sanctions, and that it sees no need to reduce oil imports from Iran because that is not required under United Nations sanctions.

The Indian government, however, is said to have privately asked refiners to cut Iranian imports by at least 15%. India and Iran are considering bartering commodities and other products for crude through a rupee account with UCO Bank (UCO).

China

China slashed imports of Iranian crude oil in the first quarter. There is speculation that the Chinese will seek to renegotiate lower prices from Iran moving forward.

Saudi Arabia

Saudi Arabia is preparing to extend this year's unexpected jump in oil sales to the U.S., which have quietly risen 25 per cent to the highest level since mid 2008, according to preliminary US government data, a sizeable leap that appears at least partly related to the imminent completion of a major expansion at its joint-venture Motiva refinery in Texas.

Singapore

Iran is shipping fuel oil to Singapore using a supertanker from its own fleet as Western sanctions make it difficult for buyers to lift cargoes off Iranian coasts. Singapore-based Kuo Oil is said to have ceased renewing its term fuel-oil purchase contract with Iran. Traders expect Iran to begin regular shipments of fuel oil to Singapore where it can be sold to local or Chinese traders.

Sri Lanka

Sri Lanka is said to be planning to purchase crude from Iraq to offset the negative effect of US sanctions concerning Iran.

Malaysia

Malaysian state oil firm Petronas has said it will halt all imports of Iranian crude from April.

Japan

Japan has been granted a waiver from the U.S. sanctions after cutting its Iran oil imports by the targeted 15-22% in the second half of last year.

South Korea

South Korea is said to have cut Iran imports by 15% in January and February combined.

Taiwan

Taiwan state-run refinery CPC may halt Iran imports from July.

Sri Lanka

Sri Lanka, which relies on Iran crude for 90% of its needs, is said to have signed a deal to buy Oman crude as it works to reduce its reliance on Tehran.

South Africa

The South African government is said to be planning to have alternatives to Iranian oil in place by the end of May. South Africa relies on Iran for about 29% of its oil imports.

Smuggling - Oman

The smuggling trade to Iran from Oman is said to be thriving, delivering many goods (possibly including those prohibited by international sanctions) in unmarked speedboats across the Strait of Hormuz linking the oil-rich Gulf with the Arabian Sea. It is said that some 500 boats make the journey across the Strait daily.

Wheat

Iran has been shopping for wheat at a frantic pace, ordering a large part of its expected yearly requirement in a little over one month and paying a premium in non-dollar currencies to work around toughened sanctions.

Iran is said to have bought around 2 million tonnes of wheat last month from Russia, Germany, Canada, Brazil and Australia.

Soybean

Iran is said to be seeking to buy more agricultural commodities from India after agreeing to import soybean meal used in livestock feed. Iranian traders are said to have bought soybean meal for delivery next month.

Sugar

Indian traders have purportedly struck deals to export 60,000 tons of raw sugar to Iran for March-April delivery, in dollars, through Dubai-based middlemen. It is anticipated Iran needs to import about 324,000 tons of raw sugar by September.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Specific Questions relating to this article should be addressed directly to the author.

Iran and its leading oil buyers, China and India, are finding ways to skirt U.S. and European Union financial sanctions on the Islamic republic by agreeing to trade oil for local currencies and goods including wheat, soybean meal and consumer products.

India, the second-biggest importer of Iran’s oil, has set up a rupee account at a state-owned bank to settle as much as much as 45 percent of its bill, according to Indian officials. China, Iran’s largest oil customer, already settles some of its oil debts through barter, Mahmoud Bahmani, Iran’s central bank governor, said Feb. 28. Iran also has sought to trade oil for wheat from Pakistan and Russia, according to media reports from the two countries.

The trend is growing, sanctions specialists and U.S. officials say, and is denying the Islamic Republic hard currency to prop up the plummeting value of the rial and to fund nuclear and missile programs. Iran already is starved for dollars and euros to support the rial, and barter deals will force it to spend billions of dollars of oil revenue on goods, according to Kenneth Katzman at the Congressional Research Service, a nonpartisan government-research institute in Washington.

“Iran cannot stabilize the value of its currency with such unorthodox payment methods, and that is why its economy is collapsing,” Katzman, an Iran sanctions specialist, said in an interview. “Iran is essentially on a junk-for-oil program.”

Local Currency, Gold

The second-largest producer in the Organization of Petroleum Exporting Countries, Iran said last month it will accept payment in any local currency or gold as new sanctions make it harder for trading partners to pay in dollars and euros.

The barter trend, lawyers and trade analysts say, is exposing an unintended consequence of sanctions. Cutting Iran off from the global financial system, they say, is driving trade into informal channels and producing greater opportunities for corruption and the diversion of funds for illicit purposes.

“Payments through the financial system are easier to police, and there is less scope for corruption,” said Nigel Kushner, a London-based attorney who specializes in Iran sanctions and export controls.

While “the upside of denying Iran access to hard currency for furthering its nuclear program outweighs the downside of decreasing transparency and pushing trade underground, we could be left very much in the dark as to who is dealing with Iran,” Kushner said in an interview.

Harder to Police

“When you force trade out of established channels, you have no way to measure it” or to verify that Iran’s trading partners are abiding by global sanctions regimes, said Barbara Slavin, a senior fellow at the Atlantic Council, a Washington research group.

Iran is feeling the impact of tightened sanctions on finance, insurance, shipping and energy. The Society for Worldwide Interbank Financial Telecommunication, known as Swift, expelled Iran’s central bank and more than 20 other Iranian banks this month, making it almost impossible for Iran to complete large international funds transfers.

Exports from Iran will be cut by 600,000 to 700,000 barrels a day because of the international sanctions, Michael Lo, an analyst at BNP Paribas SA (BNP), said in an e-mailed note today. Oil prices are set for a new rally in the fourth quarter as demand outstrips growth in non-OPEC supplies, according to the bank.

The biggest winners in the rise of barter deals with Iran are India and China, the world’s fastest-growing major economies, which now are able to meet some of their burgeoning energy demands by trading rupees and yuan or agricultural and consumer goods, analysts said.

Oil for Electronics

Iran is using yuan paid into Chinese bank accounts to buy Chinese-made washing machines, refrigerators, electronic goods, toys, clothes, cosmetics and toiletries, Katzman said.

Rupee payments to Iran from India may total at least $4 billion a year and will be deposited in India’s state-run UCO Bank (UCO), which doesn’t have U.S. operations and is unlikely to be affected by the global sanctions, according to an official with knowledge of the matter who declined to be named because the information is confidential.

Payments in local currencies such as the yuan and rupee, which are not fully convertible, are less beneficial for Iran than hard currencies such as dollars, euros, and Japanese yen.

Trevor Houser, an energy analyst and partner at the Rhodium Group, a New York-based economic research firm, said paying for Iranian oil in rupees is “a pretty good deal for India, and it’s a pretty bad deal for Iran.” It limits the goods the Persian Gulf nation can buy and “deprives Iran of the hard currency they need for effective monetary policy,” he said in a telephone interview.

Soybeans stored in all positions on March 1, 2012 totaled 1.37 billion bushels, up 10 percent from March 1, 2011. Soybean stocks stored on farms are estimated at 555 million bushels, up 10 percent from a year ago. Off-farm stocks, at 817 million bushels, are up 10 percent from last March. Indicated disappearance for the December 2011 - February 2012 quarter totaled 998 million bushels, down 3 percent from the same period a year earlier.

All wheat stored in all positions on March 1, 2012 totaled 1.20 billion bushels, down 16 percent from a year ago. On-farm stocks are estimated at 217 million bushels, down 25 percent from last March. Off-farm stocks, at 983 million bushels, are down 14 percent from a year ago. The December 2011 - February 2012 indicated disappearance is 462 million bushels, down 9 percent from the same period a year earlier.

Corn acres in Iowa, the nation’s largest corn producing state, are expected to rise from 14.1 million acres in 2011 to 14.6 million acres this year.

Soybean acres will total just under 74 million acres, down 1 percent from last year and likely to give further impetus to a rally in soybean prices. Iowa’s soybean acres will drop from 9.35 million acres last year to 8.8 million acres in 2012.

Commodity traders had expected a national acreage figure of 95 million acres or more, highest since 1944. The consensus pre-report anticipation on soybean acres was around 75 million acres.

Don Roose of US Commodities in West Des Moines said the report “is positive for new crop soybeans, but negative for new crop corn,” and suggested that the December corn contract could dip below $5 per bushel.

“The corn acre number is bigger than expected,” Roose said. In 2011 American farmers planted just under 92 million acres last year.

Corn prices have dipped from $6.75 per bushel for the May contract a month ago to $6.04 this week on speculation that this year’s crop would be larger than the 2011 and 2010 crops and would rebuild depleted surplus stocks. Also, U.S. corn faces more competition from cheaper wheat out of the Black Sea.

Most concerning for farmers has been the weakness in the December futures prices,which has dipped to $5.28 per bushel, a price barely above the expected $5 per bushel cost of production this year in the face of rising costs for rents, fertilizer and diesel fuel.

Ethanol demand is thought to be vulnerable because of a 5 percent drop in gasoline demand this year.

Soybeans by contrast have prospered since Jan 1, rising 22 percent on news of a reduction in the Brazilian and Argentinian soybean crops of ten percent or more due to heat and drought.

The USDA said corn stocks in all positions on March 1, 2012 totaled 6.01 billion bushels, down 8 percent from March 1, 2011.

For the month of February2012, in India's National Commodity and Derivative Exchange (NCDEX), for March delivery, soybean rose up 6.80% to Rs 2668 per qtl from Rs 2498 per qtl and soyoil prices up 5.20% to Rs 712.75 per qtl from Rs 677.50 per qtl.

Brazil's soybean output is expected to be around 68 million tons for 2011-12, down 0.7% due to crop damage on fungal disease and dry weather.

Meanwhile, the production in South America's four main producers is expected to fall to 120.9 million tons from earlier prediction of 124.2 million tons.

India is the major export of oilmeal to South east Asian countries. During the period exports rose to 505,506 tons from 482,919 tons in the year-ago period.

For March delivery, in Inter-Continental Exchange (ICE), soybean traded up 10 4/8 cents to 1329 6/8 cents, soy oil traded up 0.34 cents to 53.26 cents and soy meal traded down 2.0 cents to 361.1 cents on 7th March.

While in NCDEX, soybean traded up 1.89% to Rs 2798 and soyoil traded up 1.11% to Rs 718.5 at 16:15 IST.

The outlook for the country’s soybean output in the crop year that started Sept. 1 was maintained at 68 million metric tons, Curitiba, Brazil-based AgRural said in an e-mailed report.

Output of the oilseed will be less than 75.3 million tons reaped in the previous harvest and 73.1 million tons estimated initially for the current crop before dry weather parched fields in southern Brazil.

Agroconsult now sees the crop, which is about half harvested, yielding 67.1 million metric tons of soybeans, compared with a previous estimate of 69.9 million tons.

By the latest forecast, the crop should fall 11% short of the prevoius year's bumper soybean output.

"The lack of rain in the south is the main reason for the losses, particularly in the states of Rio Grande do Sul and Parana where the crop has fallen by 50% and 16%, respectively," Agroconsult said in a presentation.

Agroconsult sees Brazilian soybean farmers harvesting 44.5 60-kilogram (132-pound) sacks per hectare, a 14% decline from last year's average productivity.

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