Ministry sets method for calculating export rice price

The Ministry of Finance has asked rice exporters to apply new methods to calculate the rice price for export contracts as from August 8 in order to help balance benefits for both farmers and traders.

The Ministry of Finance has asked rice exporters to apply new methods to calculate the rice price for export contracts as from August 8 in order to help balance benefits for both farmers and traders, a task previously mandated to the Vietnam Food Association (VFA).

The floor price under the new method will be calculated by adding to the average prime cost for each type of rice the expected profit and payable taxes under Vietnam’s prevalent laws, the ministry said in a circular issued on June 17.

A factor for reference in setting the floor price is the current global market price.

The ministry has entrusted VFA, which clubs together more than 80 leading rice exporters, to take the key role in establishing the floor price and submit it as well as report it to the Ministry of Finance and Ministry of Industry and Trade.

According to the circular, coded 89/2011/TT-BTC, the association before the harvest of each rice crop must announce the approved price floor as the basis for rice traders to do transactions. The floor price at any given time must ensure “an acceptable profit” for farmers.

The circular is an important document guiding the implementation of Decree 109 issued by the Government on rice trading that will take effect in October this year.

Prior to this circular, VFA took charge of establishing the floor export price on a monthly basis as guidance for rice traders to negotiate prices with foreign buyers. The association suddenly stopped announcing the floor price in March.

The country in the year’s first half has exported nearly four million tons of rice, earning nearly US$2 billion, according the agriculture ministry. The rice price in the first five months of this year averaged out at US$492 per ton, down by a slight 5% over the same period last year.

Local rice traders this year to date, however, have signed contracts to export five million tons of rice, said Pham Van Bay, vice chairman of VFA.

Bay told assembled reporters on the sidelines of a fisheries exhibition in HCMC on Tuesday that the association had plans to start stocking one million tons of rice from early July, equivalent to two million tons of paddy. The plan is aimed to buoy up the rice price in the Mekong Delta, which has been sliding over recent weeks.

According to VFA, the paddy price in the Mekong Delta as of last weekend hovered around VND5,500-VND5,800 a kilo, while the price of rice was between VND8,650 and VND9,250 a kilo – SGT

Tags: Vietnam rice, Vietnam rice exports, Vietnam rice exports 2011