Thai rice drops; Vietnam cuts export floor price
Reuters
First Posted 12:19:00 06/25/2008
BANGKOK -- (UPDATE) Vietnam lowered the minimum export price for rice on Wednesday and the Thai market dropped another three percent, signalling improving supplies in coming months and easing concerns about shortages of Asia's staple food.
A lifting of export bans by Vietnam and Cambodia are expected to give private importers and governments who had scrambled to secure supplies in recent months some breathing space and help cap food-driven inflation.
"Buyers are waiting to see the bottom level for rice prices in July when supply from the two countries peaks," a Thai exporter said, referring to supplies from Thailand and Vietnam.
The price of Thai 100 percent B grade white rice THWHB, the world's benchmark, eased to $770 per ton from last week's $795 per ton.
It is now nearly 30 percent lower than a record high quote of $1,080 per ton on April 24 that was spurred by fears of supply shortages following export curbs by producer nations India, Vietnam and Cambodia starting late last year.
For a graphic of Thai rice prices, click here.
Vietnam and Cambodia have since lifted the bans, but Hanoi has imposed a small export levy to try to slow sales.
Prices in Vietnam, which vies with India to be the world's number two exporter behind Thailand, appear to be moving in close lock-step ahead of the harvest of an unusually large "extra" June-July crop planted to cash in on the soaring prices.
Following on from its lifting of an export ban this month, Vietnam had cut its minimum price for shipments by 2.5 percent to $780 per ton from last week's $800 due to slowing export demand, the Vietnam Food Association said.
"Foreign buyers are still expecting India to lift its export ban so they are not rushing to sign deals with Vietnam yet," a trader in Ho Chi Minh City said. "And with Thai prices at about $770 per ton, Vietnam prices would have to fall further."
The Vietnam Food Association sets floor prices for rice exports to prevent exporters from selling at very low prices that would hurt farmers. Exporters failing to follow the guidance would not be able to register contracts with the association.
Vietnamese rice normally sells at a slight discount to Thai rice, and the trader said some buyers were looking to pay as little as $630 per ton.
"Buyers are holding their orders back as they expect prices to fall further next month due to increasing supply," said one Thai trader.
With the harvest about to start, paddy prices in Vietnam's Mekong delta have eased nearly four percent in the last week.
The Thai government is predicting a harvest of 7.6 million tons of paddy rice from the June-July paddy crop this year, compared with only around four million tons last year.
Vietnam is also looking at higher-than-expected output this year, allowing it to export as much as 4.5 million tons, in line with its shipments in 2007.
With such a large flood of rice expected next month and demand drying up, traders expect prices of the staple could fall to $700 a ton in Thailand, the level at which the government has pledged to step in and buy from farmers.
Rather than sell at a loss, Thai exporters or the government are likely to build up massive stockpiles of milled rice, which can last in silos for up to five years, experts say.
Malaysia bought 200,000 tons of Thai rice in May, but its Agriculture Minister said on Monday talks to buy another 300,000 tons had been put on hold since Kuala Lumpur's stocks had doubled to 180,000 tons.
Last week, the Philippines, the world's biggest buyer, also signalled it had completed its purchases for the year with a deal for 600,000 tons struck with Vietnam.
($1=16,451 dong)
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