Vietnam to stockpile one million tonnes of rice to prevent price falls

Vietnam's government has allowed rice exporters to stockpile an equivalent 1 million tonnes of milled rice for three months to help prevent prices falling during the peak of the harvest. Member companies of the Vietnam Food Association, the industry body, will be able to buy rice, equivalent to 2 million tonnes of unhusked grain, between March 15 and April 30 and keep it in stock until June 15, Prime Minister Nguyen Tan Dung said.
Companies buying under this stockpiling scheme will get interest-free loans from banks, he said in a directive signed on Friday and seen by Reuters. The stockpile, which targets about a fifth of the winter-spring crop output, is aimed at arresting falling prices in the Mekong Delta, where the harvest will peak from March 15. Paddy prices have fallen on ample supplies while export demand remains thin. The winter-spring paddy, most of which is used for export, has dropped to 5,000-6,300 dong (24-30 US cents) per kg in the past three weeks from 5,300-6,300 dong in mid-February.
The Vietnam Food Association has said the stockpile was to help prevent rice prices falling below 5,000 dong per kg. The stockpile could help stir buying demand, because foreign buyers have been waiting for Vietnamese prices to ease, traders said. "Exporters could also take opportunity of the interest-free loans to sell at lower prices," a trader in Ho Chi Minh City said, adding that the floor for export prices has also been cut.
Traders said the food association has lowered the floor for the 25 percent broken rice to $400 a tonne, free-on-board, from $425 last month. It also imposed a floor for the 5 percent broken rice at $425 a tonne, after having allowed exporters to decide their prices on their own since February 8.
Given the weak buying demand, indicative export prices earlier this week fell to $405-$410 a tonne of 5 percent broken rice, from $$410-$420 last Wednesday, and the 25 percent broken rice also eased to $360 a tonne from $385 last week. Vietnam's rice exports are forecast to fall to 6.6 million tonnes in 2012, down 7 percent from last year, the Agriculture Ministry said on Tuesday, citing weak buying demand in importing nations.