Vietnam: Rice stockpile planned ahead of domestic price decrease

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25 February 2010

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Vietnamese rice exporters will buy 1 million tonnes of milled rice in the coming weeks as a stockpile to help halt a sharp drop in domestic prices, reported VNBusinessNews.com.

The stockpile volume is equivalent to 2 million tonnes of unhusked grain, or a fifth of the expected output of the main winter-spring crop.

The Vietnam Food Association told members, mainly rice exporters, to stockpile the rice over the next two months, the Ho Chi Minh City Communist Youth League-run Tuoi Tre newspaper reported.

The stockpile decision was reached at an industry meeting in Ho Chi Minh City on Wednesday, as export prices have dropped around 8 percent this week from levels seen before the week-long Tet holiday on a lack of demand during harvest, traders said.

On Wednesday exporters also said top rice exporters Thailand and Vietnam looked set to intervene to stabilise the market as exporters fear buyers may default on contracts after prices fell for the fourth-straight week.

The association also kept unchanged a floor for export price at $440 a tonne, free-on-board basis, for the 5 percent broken rice, citing expected higher demand for the grain this year over 2009, Tuoi Tre reported.

Companies selling rice below the floor will be banned from the export business, the report said.

Exporters have to clear their contracts with the association to get loading permission.

Traders said on Wednesday the $440 floor was too high, which only prevented buyers from seeking new contracts and thus further hurt prices while the harvesting of Vietnam's biggest rice crop, winter-spring, will peak in two weeks.

It was not immediately clear how rice companies could finance the purchase for stockpiles as banks have limited fresh loans this year to meet a government credit growth target of 25 percent after an annual jump of 37.7 percent in 2009.

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