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3 December 2009
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Philippine tenders push rice prices up

Rice prices in jumped as much as 10 percent this week, when the first of three big tenders was held for the Philippines, but traders doubted they would return to the record highs seen in 2008, Reuters reported.

In Vietnam, the world's second biggest exporter, five per cent white rice rose 10 percent to $530-$550 per tonne, up from last week's $500 per tonne, exporters said.

The 25 percent broken grade, which will be supplied to the Philippines under the tender for 600,000 tonnes held on December 1, jumped four per cent to $480 per tonne from $460 last week.

The Philippines, the world's biggest rice buyer, said on yesterday it may award only 500,000 to 520,000 tonnes under the first tender, 300,000 tonnes of which could go to Vietnam's Vinafood 2 and the rest to Thai suppliers.

"Prices will continue to rise when Vinafood 2 allocates loading among subsidiaries," said a trader in Ho Chi Minh City. Thai exporters complain that their rice, although of superior quality, has lost market share to lower-priced Vietnamese grain. Thai prices are kept relatively high by government intervention, aimed at supporting farmers.

Thai firms were also worried by the devaluation of the Vietnamese dong last week, which has made Vietnamese prices even more attractive.

"Vietnamese prices, which are around $70 per tonne cheaper than ours, will be much more cheaper and that will definitely affect Thai exports," said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.

Thailand is the world's biggest rice exporter. Its prices were also pushed up this week by the Manila tender. Its benchmark 100 percent rice was at US$606 per tonne, up seven percent from last week's $565, traders said.

The lower-quality 25 percent broken white rice rose 8.5 percent to $510 per tonne from last week's $470. "Prices may rise further after the coming tenders," a trader said.

The Philippines will hold two more tenders on December 8 and 15, aiming to buy 600,000 tonnes in each to boost supplies after storms hit its output.

Although Asian rice prices were expected to go higher this month, traders doubted the demand from the Philippines would push them anywhere near the record high of $1,080 a tonne seen in April 2008. "There could be a psychological effect only," said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.

He said prices may have jumped sharply this week as local millers took advantage of the news about the Philippine tender, but traders wanted to see the results of the tenders to get a better idea of price trends.

In general, despite shortages in India and the Philippines, the market did not have the same worries about food security that caused prices to soar in 2008. Last year oil rose to a record high and that encouraged farmers to shift from food crops to biofuel crops.

"Looking at the key factors, I don't expect prices to surge that high as oil prices are unlikely to jump to $147 like last year," one Thai exporter said.



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