Vietnam prices stable due to African rice demand

Vietnam has been contracted to sell around 100 000 tonnes of 25% broken rice to several African nations so far in June, helping to keep prices stable at the start of a harvest in the Mekong Delta, traders said on Wednesday.

Broken rice, which doesn’t cook well, is usually taken out during the milling process to provide rice of a higher quality. Buying rice with a higher percentage of broken rice is cheaper.

The volume of 100 000 tonnes is small compared with around 1.5-million tonnes Africa buys annually from Vietnam, the world’s second-largest exporter of the grain after Thailand, but the deals and have halted a price fall in earlier market expectation.

“The harvest is now under way, but prices remain stable thanks to these deals,” a trader with a foreign company in Ho Chi Minh City said, noting that buyers had earlier expected prices to soften when the summer-autumn crop harvest starts.

He said three foreign trading firms have signed contracts in the past two weeks to buy the 25% broken rice for shipment from next month and in August. The contracted price was at the same level as market offers this week, he added.

Vietnam’s 25% broken variety stood this week at $430 a tonne, free-on-board (FOB) basis, against $420 to $435 last week, even though farmers have been harvesting the summer-autumn crop, the second-largest in the Mekong Delta food basket.

The 5% broken rice widened to $460 to $470 a tonne, FOB basis, from $460 to $465 last Wednesday.

Stepping up the search for buyers

Traders said they could not know which African nation will be the destination of the grain until ships arrive for loading.

The ongoing harvest, which produces mainly the low quality 15% and 25% broken grades, is due to peak from July.

The three deals, including at least one for an European trading firm, are company-based, which involve foreign trading firms buying from Vietnamese exporters for resale to Africa, while an African buyer has also arrived to seek more rice directly from Vietnam this month.

A delegation from Sierra Leone has held talks with Vinafood 2, Vietnam’s top rice exporter, to import 50 000 tonnes of the grain, a government statement said, as the south-east Asian country seeks to boost rice shipment to Africa.

“Vinafood 2 is stepping up its search for buyers as it will have to find the destination for the summer-autumn rice,” a rice exporter at a state-run firm in Ho Chi Minh City said.

Vinafood 2 and other rice export firms are due to start a buying scheme between July 15 and August 30 to stockpile one million tonnes of milled summer-autumn rice for three months, a typical move to support domestic prices at the harvest peak.

The summer-autumn crop is the second highest yielding after the winter-spring season. But unlike grain from the other crop which mostly goes to exports, summer-autumn rice is used for both domestic consumption and exports due to lower quality. -Reuters

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