Vietnam secures a deal to ship 300,000 tonnes of rice to Malaysia

Vietnam has secured a contract to export 300,000 tonnes of rice to Malaysia in 2012, part of its plan to keep export volumes steady and retain its market share amid competition from cheaper Indian and Pakistani grain. Vietnam targets exports of 7 million tonnes of rice in 2012, similar to the record high volume expected this year, a state-run newspaper quoted a government minister on Tuesday as saying.
Exporters have bought just 700,000 tonnes for stocking, down from between 1.5 million and 2 million tonnes in their usual stock in prior years due to slowing sales, Deputy Industry and Trade Minister Diep Kinh Tan was quoted as saying by the Agriculture Ministry-run Vietnam Agriculture newpaper. Vinafood 2, Vietnam's largest rice exporter, has secured a contract to ship 300,000 tonnes of 5 percent broken rice to Malaysia, state-run Voice of Vietnam radio said on Tuesday.
The Ho Chi Minh City-based Vinafood 2, or the Vietnam Southern Food Corp, sold the rice at a good price and will start loading from March 2012, the radio said in its morning news bulletin, without giving further details. "Prices of Vietnamese rice could hold steady between now and Tet thanks to the deal, but if there is no further (foreign) demand, prices may drop again as farmers will have to unload their stock for cash," a Ho Chi Minh City-based trader said. He was referring to Vietnam's biggest festival to mark the Lunar New Year, which arrives on January 23, 2012.
The contract is crucial at this time as it can help boost prices after the 5 percent broken rice, Vietnam's best quality grain among its export grades, dropped to its lowest in more than four months last week due to thin demand. The deal would be worth nearly $150 million, based on a free-on-board (FOB) price of $490-$495 a tonne on Tuesday, a fall from $520-$550 last week.
Loading for Malaysia would coincide with the harvesting time of the winter-spring crop in the Mekong Delta food basket, which is Vietnam's biggest among its three rice crops annually. The crop's paddy output is projected to rise 3.8 percent from this year to 11 million tonnes. Most of its grain is used for export. Vietnam is the world's second-largest rice exporter after Thailand. Thailand, where export prices have risen since July because of a government intervention, is expected to see its market share drop by about half next year as its prices are too high compared to grains sourced from Vietnam and India.
Thai 5-percent broken white rice stood at $595 per tonne, FOB, compared with India's offer of $450-$470 a tonne. Domestic prices in Vietnam fell during the first 10 days of this month, after a Vinafood 2 executive said exporters needed to cut prices to attract buyers and avoid a drop in domestic prices when the largest rice crop is harvested early next year.
"Exporters are lowering offer prices not because they want to export more but because of rising pressure (of supply) ahead of the next harvest," the trader in Ho Chi Minh City said. Due to thin loading demand, buying agents who sell rice to exporters have stopped their domestic purchase, causing domestic price falls in the past 10 days, traders said. Rice grade 1, used to process the 5-percent broken grain, fell to 7,800-8,050 dong (37-38 US cents) per kg in the Mekong Delta late last week from 9,450-9,600 dong on November 30, a drop of around 14 percent.
But prices recovered slightly this week, edging up to 8,050-8,200 dong per kg on Tuesday. Malaysia is Vietnam's fourth-largest rice buyer after Indonesia, the Philippines and Cuba so far this year. It has taken delivery of around 400,000 tonnes from Vietnam in the first 10 months of this year, up from around 300,000 tonnes in the same period last year, Vietnam's Agriculture Ministry data show.