Hiking rice export prices might endanger the domestic market

Vietnam’s rice export prices have jumped by around 60 per cent in the year to date. In the face of ongoing upward trend, the VFA has encouraged firms to continue export contracts but warned them of hoarding sufficient rice volumes before inking export deals.

VFA argued if Thai rice export prices at around $750-800 per tonne currently prove beyond  the scope of importers, leading to stalled transactions, the Thai government would downwardly revise prices.

Reality shows that scores of firms inked low-pricing export contracts earlier, they then bought rice at higher costs to fulfill contracts, putting their backs to the wall.

“Up to 400,000 tonnes of rice in export contracts were cancelled in 2011’s third quarter and early October alone,” said VFA’s deputy chairman Pham Van Bay.

 “Rice export prices may be soaring, partly propelled by Thai market situation and losing crops in many countries. However, it is unlikely for the world demand to hike sharply until the year’s end since there is no new movements from the part of our key importers Indonesia and the Philippines,” according to a Northern Food Corporation executive.

Indonesia might import more rice from Vietnam from February 2012. At that time the Thai government may wrap its high rice price purchases. Meanwhile, the Philippines may import Vietnamese rice later in the year, but not in a big quantity.

Besides, hiking rice export price at the onset of the flooding season brings concern of a price fever in the domestic market.

In fact, material rice currently fetches VND9,500 per kilogramme in the Mekong Delta, up VND400 per kg against September. The staple price in key markets such as Hanoi and Ho Chi Minh City also rose slightly in past weeks.

Ministry of Agriculture and Rural Development (MARD) Plantation Department head Nguyen Tri Ngoc said Vietnam’s paddy rice output could amount to 41.5 million tonnes in 2011, sufficient to meet local and export demands.

VFA’s deputy chairman Pham Van Bay confirmed rice volumes would fully feed local demand and export orders as there was around 1.5 million tonnes rice in store and farmers are about to harvest the third rice crop.

“If a price fever occurs, VFA will instruct its member firms to sell rice 15 per cent lower than market rates to restore market order,” said Bay.