Asian rice: likely intervention scheme forces Thai prices up

Thailand's main export grade of rice was offered by up to 11 percent higher this week as operators held on to the grain ahead of a government intervention scheme, while thin stocks and higher production costs lifted Vietnamese prices, traders said.
The 100 percent B grade Thai white rice was offered at between $620 and $660 a tonne, free on board (FOB), compared with $595 last week, exporters said. The grade hit $640 a tonne early this month, the highest in nearly three years. Thailand's new government has promised to support farmers by buying their paddy at 15,000 baht ($485) per tonne from October 7 to February 29, 2012.
Exporters say that could lift the export price as high as $870 a tonne. That prospect has already pushed up prices elsewhere in the region and economists worry that it could reignite consumer price inflation. One exporter said operators were anticipating a rise in Thai prices next month. "Millers don't want to sell right now. They'd rather wait for the government scheme. It should be clearer after October 7," he said. "The price is quite high now. Some countries have already stopped buying from Thailand," the exporter said.
Two other exporters put the benchmark grade at $620-$625 a tonne. "The domestic price is higher because the intervention scheme is about to start. People are stocking up on it, which pushes the price higher," one exporter said. "Another reason might be flooding, and people trying to stock rice because of that," he added.
Heavy rain has hit parts of Thailand since mid-July, including big rice-growing areas. At least 166 people have died in flooding as of Tuesday and some rice farmers were reported to be harvesting early, which could lead to lower yields. Thailand, the world's biggest rice exporter, is expected to start harvesting its main crop from early October, slightly earlier than usual, with paddy output forecast to rise to 25.1 million tonnes from 24 million last year.
FLOODS RAISE COSTS In Vietnam, the world's second-largest exporter, prices rose around 3 percent this week due to loading demand, higher production costs and low stocks after the end of the summer-autumn harvest, the Mekong Delta's second-biggest. Vietnam's 5 percent broken rice rose to $560-$570 a tonne, FOB basis, from $545-$550 a tonne last Wednesday. The 25 percent broken rice rose to $510-$515 a tonne, FOB, from $500 a week ago.
"Supplies are limited and floods are rising, pushing up the cost of drying, so export prices are higher," a trader in Ho Chi Minh City said, referring to seasonal floods in the Mekong Delta. Demand to load a combined 500,000 tonnes for Malaysia and Indonesia contributed to higher prices, he said.
Indonesia's state procurement agency, Bulog, has bought 400,000 tonnes of Vietnam's 15 percent broken rice at $580 a tonne on a cost-freight basis in a government deal for October-December shipment, US traders have said. Bulog has also issued a tender to purchase at least 100,000 tonnes from Vietnamese or Thai exporters, traders said.
The status of a proposed government-to-government deal for 300,000 tonnes of Thai rice for Indonesia was unclear. Thai officials say this was only a memorandum of understanding with Bulog reached under the outgoing Thai government in August and that a deal was never formally signed.
Indonesian officials were in Bangkok on Wednesday to discuss the arrangement. Several dyke sections have broken under high Mekong Delta flood currents and a few thousand hectares of a minor crop have been submerged, state-run Vietnam Television said on Wedne Reuters Traders said the damage was not significant and that this grain was used mostly for domestic consumption.
Vietnam is forecast to produce a record 42 million tonnes of paddy this year, up around 5 percent from 2010, the Agriculture Ministry said. The country is on track to export a record volume of at least 7 million tonnes of rice this year. Exporters have signed deals to ship more than 6.8 million tonnes to date, a state-run newspaper said on Tuesday, citing Vietnam Food Association data. They have shipped around 6 million tonnes so far.