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Vietnam May Free Rice Stockpiles to Cool Prices

Vietnam, the world’s second-largest rice exporter, may release grain held in government stockpiles to cool the local market after a surge in export demand helped to drive domestic prices to a record.

“We are ready and will immediately sell the national rice stockpile, which is more than 1 million tons, to cool domestic rice prices if there is any sign of food-price fever,” Diep Kinh Tan, deputy minister of agriculture and rural development, said by phone yesterday. The ministry hadn’t seen signs that such a move is necessary yet, he said.

Thailand, the biggest shipper and Vietnam’s main rival, is bringing back a policy of buying rice from farmers at above- market prices to boost rural incomes, pushing Thai export rates to the highest level since February 2010. Costlier rice, staple for half the world, boosts food costs and helps fan inflation even amid signs that global economic growth may be faltering.

“In the last two weeks, we’ve seen a 10 percent increase in prices in Vietnam, compared to say 2 percent or 3 percent elsewhere,” said Darren Cooper, London-based senior economist at the International Grains Council. Given the developments in Thailand, as well an export ban on some Indian rice grades, “everybody’s been looking at Vietnam as the obvious supplier.”

Rough-rice on the Chicago Board of Trade, which traded at $17.12 per 100 pounds at 8:23 a.m. in Singapore, has rallied 55 percent in the past year, beating wheat and soybeans. The price of 100 percent grade-B Thai rice, the export benchmark, was $582 per metric ton on Aug. 17, 22 percent higher than a year ago.

Food Crisis

India, the second-biggest grower, banned private companies from exporting non-basmati rice in April 2008 to bolster local supplies amid a global food crisis. The country may consider allowing extra exports, Food Minister K.V. Thomas said Aug. 17.

Worldwide food costs reached an all-time high in February and remained within 2 percent of that peak in June, according to a 55-item gauge from the Food & Agriculture Organization. Global food prices remain close to their peak and low stockpiles may contribute to higher prices, the World Bank said on Aug. 15.

Vietnamese domestic unmilled rice was 7,100 dong (34 cents) to 7,200 dong per kilogram this week, a record, according to Cao Thi Ngoc Hoa, deputy head of Vietnam Southern Food Corp., one of the country’s two biggest state-owned food companies. Prices were about 6,500 dong in the week to July 28, according to data on the website of the Vietnam Food Association’s, or VFA.

“Some companies signed more forward contracts this year on anticipation that domestic prices would fall, which usually happens when the harvest begins,” Hoa said by phone on Aug. 17. “Prices didn’t drop, they rose instead, so those companies had to buy in a hurry and that pushed up prices even more.”

Chinese Demand

Demand for Vietnamese rice has increased in traditional and new markets this year, the VFA said on July 15. China has started buying from Vietnam after bad weather hurt its crop, Deputy Agriculture Minister Tan said the same day.

Vietnam, which exported a record 6.75 million tons last year, according to the VFA, is targeting 7.4 million tons of exports this year, and will try to ship more given good crops and prices, Tan told Bloomberg last month. Exports in the first seven months of 2011 were estimated at 4.7 million tons, 9 percent higher than a year earlier, according to figures from the General Statistics Office in Hanoi released on July 22.

The country has so far signed contracts to export about 6.3 million tons in 2011, Huynh Minh Hue, the VFA’s general- secretary, said Aug. 17. About 1.5 million tons of that total have yet to be shipped, which may sustain high prices, he said.

Increased Output

Prices have risen even as the country expects production to be higher this year than in 2010. Output of unmilled rice may increase 4 percent to 41.6 million tons, according to an Aug. 16 statement on the Vietnamese government website that cited a Ministry of Agriculture and Rural Development forecast.

“Prices are so high because export demand exceeded available supply,” the VFA’s Hue said in an e-mailed response to Bloomberg questions. Prices may remain “firm” until the first quarter of 2012, depending on Thai rates and whether India resumes exports, he said.

Vietnamese exporters delayed shipments after prices climbed, according to Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, prompting African, Indonesian and Philippine buyers to switch purchases to Thailand. Thai exporters may receive orders for as much as 100,000 tons as a result, Chookiat said by telephone from Bangkok yesterday.

As of Aug. 15, Vietnamese 5-percent broken rice for export was $568 a ton, compared to $549 a ton for Thai 5-percent broken rice, according to International Grains Council data. At the start of the month, the Vietnamese grade was priced at a $22 discount. Thai grades typically trade at a $20 to $40 premium to their Vietnamese equivalents.

To contact the reporters on this story: Nick Heath in Hanoi at; Nguyen Dieu Tu Uyen in Hanoi at

To contact the editor responsible for this story: James Poole at

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