Asian rice prices rise due to Thai hoarding, Indonesian demand

Thai rice prices continued to rise this week because of hoarding related to a huge increase in the intervention price promised by the new government, while prices in Vietnam were supported by another big Indonesian order, exporters said on Wednesday.
Benchmark 100 percent B grade Thai white rice was offered at $615 per tonne on Wednesday, up 2.5 percent from last week's $600. The price stood at $543 a tonne in January before falling to $494 in May when demand was thin. It has jumped since the election campaign in June, when Puea Thai Party, which now leads the government, said it would push up prices to help farmers.
Farmers and other operators have hoarded rice, expecting to be able to sell at a big profit when the state intervention price goes up from the new crop in November. "It's very hard to buy rice in any size for loading for exports, and domestic prices have risen even higher due to hoarding," one exporter said.
Domestic milled rice was at 16,500 baht ($552) per tonne, up 10 percent from last week's 15,000 baht. The government has said it will buy unmilled rice from farmers at 15,000 baht per tonne, roughly double the market price of around 8,000 baht.
Traders say the export price for benchmark rice could go as high as $850-$870 a tonne when the new buying price comes in. The price of 5 percent broken grade Thai white rice rose in line with the benchmark grade to $595 per tonne on Wednesday from last week's $555. Earlier this year it traded in a range of $490-$540 per tonne.
The current price is back above the equivalent Vietnamese 5 percent broken grade, which was offered at $570-$580 per tonne this week. Exceptionally, the Thai price fell below Vietnamese quotes earlier in August. Normally it is around $50 higher.
The Vietnamese price has risen to a three-year high in the past few weeks due to loading demand, from Indonesia in particular, plus hoarding on expectation that prices will be dragged higher by developments in Thailand. As a result, Thai traders say, some Vietnamese exporters have defaulted on deals rather than pay up to get grain for shipment. Vietnamese traders are keeping quiet about any problems.
Bangkok-based international trading firms say they have been in talks to sell rice to buyers whose deals have fallen through. "But this week's rise in prices has disappointed the buyers and made them reluctant to switch to Thailand," a Bangkok-based trader said.
Vietnam's top rice exporter, Vinafood 2, signed a contract on August 18 to sell 300,000 tonnes of 15 percent broken rice at around $550 a tonne, free on board, to Indonesia, after a larger deal last month, a state-run Vietnamese newspaper and a trader said on Tuesday. The price for its 5 percent broken rice of $570-$580 a tonne was up from $545-$560 last week. The 25-percent broken rice rose to $530-$540 from $500-$520.
Farmers in the Mekong Delta have harvested more than half of their summer-autumn crop, the second of three crops a year, and have started planting for the third. "The additional rice supplies from the third crop shouldn't have any impact on rice prices, which are likely to remain strong thanks to upcoming loading demand, especially after the deal signed with Indonesia," a trader in Ho Chi Minh City said. The coming third crop is expected to produce 3 million tonnes of paddy, helping to raise the Mekong Delta's output this year by around 3 percent from 2010 to 21.7 million tonnes.