INTERVIEW-Iraq's Etihad Food Ind negotiating long-term raw sugar deals

BABIL, Iraq, May 29 (Reuters) - Iraq's Etihad Food Industries is still negotiating with international trading houses for long-term raw sugar contracts, at a time when it is selling less to the ministry of trade, its main domestic customer, a senior company official said.

Etihad's supplies to Iraq's ministry of trade have been hit by budget constraints caused by lower oil prices, said the company's commercial director Haidar Al Noumany.

"They don't buy regularly because there is a lack (of funds) in their general budget because of a decrease in the price of oil," said Noumany.

The trade ministry spokeswoman could not be reached for comment.

Around 60 percent of Etihad's sugar sales inside Iraq go to the trade ministry for the country's food rationing program, the Public Distribution System.

Iraq's trade ministry is charged with distributing vital commodities such as wheat, rice and sugar within the country, a major OPEC producer whose producer whose economy has been hammered by war and lower crude oil prices.

Last year the ministry bought 56 percent of its total demand for sugar, compared to about 80 percent in the past.

Etihad, owned by three Iraqi businessmen, was making up for the shortfall by selling refined sugar to the private market such as manufacturers of soft drinks and sweets.

At the same time, the company is looking to diversify its supply chains, issuing its first tender in March for 66,000 tonnes of crude edible oil from Singapore's Wilmar to be refined for products such as sunflower oil and soybean, said Noumany.

Etihad, whose sugar refinery dominates the Iraqi market, is still in negotiations with international trade houses for long-term raw sugar importing contracts after its current deal with Alvean runs out in November.

Noumany said the negotiations include Alvean but several options were open.

"We will sign contracts to meet half of our demand and the rest of the quantity will be open for tenders. A total of 1.1 million tonnes," said Noumany.

In terms of sugar exports, Etihad expects to sell about 70,000 tonnes in 2017 to the Kurds in northern Syria as well as neighboring countries, said Noumany. He declined to name them.

The refinery plans to add capacity of 3,000 tonnes per day for the Iraqi market, raising the total to 5,000-6,000 tonnes, said Noumany.

Sitting beside his desk at the sprawling refinery's slick administration building, Noumany said a vegetable oil refinery came onstream on March 25 and now has a capacity of 2,000 tonnes per day with plans in place to double that.

The ministry of trade is meant to be the main customer.

"Until now we don't have an official contract with them because they don't have sufficient funds," said Noumany.

(Editing by Maha El Dahan and David Evans)