Next Vietnamese Rice Crop To Be Stockpiled

A fifth of Vietnam?s main winter-spring rice crop will be stockpiled during peak harvest in the next two weeks to halt a sharp drop in local prices and shipments abroad by the No 2 exporter of the grain.

The Vietnam Food Association has urged its members, mainly exporters, to buy 1 million tons of milled rice, equivalent to 2.2 million tons of unhusked grain, from a winter-spring harvest forecast at a near record 11.02 million tons, and keep it off the export and local markets for at least two months.

Exporters are expected to ask banks to fund the purchases and storage though they may also need government help as a credit growth target of 25 percent this year, after 37.7 percent last year, will make it difficult to find finance, trade sources said.

?In a week at the earliest rice companies could start buying as they first need to talk to banks on funding,? a trader at a foreign company in Ho Chi Minh City said.

?By the time purchases start, supply will be ample as the harvest peaks, so prices will not rise much and the risk is that prices may even soften if there is no buying demand.?

Another trader said industry officials could meet the government early next week to finalize funding details.

An official with the food association said an export price floor at $440 a ton, free-on-board for 5 percent broken rice and $420 a ton for the 25 percent broken rice remained unchanged.

He declined to say for how long the industry body would keep the floor, but added companies that sell rice below thex specified level will be banned from the export business, as rice exporters are required to register contracts with the association to get loading permits.

But some traders yesterday said the plan to enforce an export floor price to shore up prices could backfire.

?The floor of $440 is already high and if Vietnam does not lower prices, buyers could source from other countries,? a trader said, citing alternative suppliers such as Thailand, Pakistan, Burma and Argentina.

The current crop, the biggest of Vietnam?s annual three, is a key part of export aims of 5.5 million to 6.2 million tons this year, compared to a record 6 million tons last year when the winter-spring harvest produced a record 10.4 million tons.

The stockpile decision was reached at an industry meeting in Ho Chi Minh City on Wednesday and confirmed with industry and government officials yesterday, as export prices have dropped around 8 percent this week from before the weeklong Tet holiday on a lack of demand during the harvest.
Last year, the country?s exporters placed nearly 1.5 million tons of rice in warehouse stockpiles apart from ordinary purchases and food association members bought nearly 1 million tons in August and September.

Top exporter Vinafood 2 held an additional 500,000 tons between last November and Jan 20.

The grain was not for domestic market sales and traders said quality has now worsened while buying demand remains thin.

On Wednesday, exporters in Thailand said they feared buyers may default on contracts already in place after prices fell for the fourth-straight week and were considering stockpile plans as well.

Sourced = The Cambodia Daily