Vietnamese rice prices extend gains

Vietnamese rice prices rose further on Wednesday on loading demand from major buyers but Thai prices kept falling on thin demand as buyers switched to cheaper rice from Vietnam, traders said. Export quotations for 5 percent broken rice increased to $455-$460 a tonne on Wednesday, free-on-board basis, from $455 a week ago. The 25 percent broken rice also rose to between $410-$415 a tonne, from $410 last week.
The purchase of 200,000 tonnes of rice from the Philippines and Bangladesh each were likely to support Vietnamese prices for weeks, preventing them from falling despite rising output, traders said. However, exporters were in no rush to buy from domestic mills to deliver, expecting to start buying when prices were lower.
"Domestic prices are too high, so buyers are waiting for prices to ease," a trader in Ho Chi Minh City said, adding, "In the next 10 days if there is no new deal, prices may ease." Unlike Vietnam, export prices of Thai rice fell further on weak demand with most buyers on the sidelines waiting to buy when prices dip, while some switched to Vietnam rice due to competitive lower prices.
Benchmark 100 percent B grade white rice fell to $480 per tonne on Wednesday, down from last week's $490 per tonne. "Prices are expected to fall further as demand is very thin," said a Bangkok-based trader.
ERODING MARKET SHARES? Higher production costs will prevent Vietnamese rice export prices from dropping significantly this year and rising prices could help narrow the gap between Vietnamese and Thai rice prices, an executive at the country's top parboiled rice export firm said. But narrowing the price gap may not be enough to help support Thai exporters to recoup market share lost to Vietnam.
"The gap is narrow but it's still there, showing that Vietnamese prices are more attractive compared to Thai prices," said Kiattisak Kallayasirivat of Novel Agritrade. The price of Thai 5 percent broken grade white rice was at $465 per tonne, well above Vietnamese prices of around $455 per tonne, traders said.
However, Thai exporters are now bracing for more losses in market share in premium grades to Vietnam in the near future. "We used to be proud of being the world's sole supplier of premium grade white rice, but we need to bear in mind that it's not only us but also Vietnam which can offer this at fairly low prices," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
Vietnamese offer prices for premium grade fragrant rice was around $600 per tonne, well below the same grade of Thai which was around $920 per tonne. As a result traditional buyers of Thai fragrant rice mostly for being served in restaurants has shifted to Vietnam, Chookiat said. Vietnamese fragrant rice exports to Hong Kong jumped to 85,000 tonnes in 2010, from 200 tonnes in 2008, when Vietnam produce very few of premium grade rice.