Indo's rice import buy rattles market

Indonesia's bumper purchase of 820,000 tons of Thai rice, more than four times the volume initially sought, lifted the market on Wednesday, but traders were unconvinced prices would stay high with Vietnam's rising supply and lower imports projected from the Philippines.

The volume of rice the National Logistics Agency (Bulog) bought from Thai exporters for prompt shipment far surpassed the 170,000 tons to 200,000 tons announced earlier for the batch, traders and industry officials said.

"The deal surprised the market as it was bigger than expected and it has automatically pushed domestic milled rice higher," one exporter said.

Firmer prices of the staple food are of concern to policy makers anxious to avoid a repeat of the riots triggered by price spikes in 2008.

"There are 650,000 tons of 15 percent broken grade and 170,000 tons of 5 percent broken grade white rice," said one exporter who was contracted to sell rice to Bulog.

The two grades of rice, for shipment in February and March, were sold at prices ranging between $490 and $545 per ton on a cost, insurance and freight basis, said exporters who were awarded deals.

Thai 5 percent broken-grade white rice rose to 14,600 baht ($472) per ton from last week's 14,200 baht, traders said.

The export price for 5 percent broken-grade rose to $525 per ton from last week $520, free on board.

Fresh Indonesian demand - though still part of the 1.5 million ton rice permit issued last year - helped support overall Thai rice prices. The benchmark 100 percent B grade white rice RI-THWHB-P1 was offered at $540 per ton on Wednesday, up from last week's $535 per ton, traders said.

Prospects of lower production loom, though, as Vietnam's Mekong Delta rice basket is projected to yield 21.5 million tons of paddy, or unmilled rice, in 2011, the Nhan Dan newspaper said on Wednesday, suggesting a fall of around 10 percent from last year.

The delta has lost rice fields to rapid urbanization in recent years.