High Prices Still Arouse Concern

Vietnamese rice traders and exporters are looking to Thailand because the Thai Government raised the purchasing price to 15,000 baht (about US$487) for a tonne of ordinary rice and 20,000 baht (nearly US$650) for a tonne of fragrant rice. Hence, its export prices may reach from US$750 to US$800 a tonne onwards and this will stir up the world rice market. The Vietnam Food Association (VFA) recommended its member companies only sign contracts when they have enough stock. Importantly, they were advised not to sign new contracts at this sensitive time because rice prices are forecast to stay high from now to 2012.

 

The current development is benefiting rice farmers. In the winter-spring and summer-autumn crops, farmers in the Mekong Delta enjoyed very high rates of return on rice cultivation. The profit margin reached 80 percent, well above 30 percent rate expected by the Government. However, this fanned concerns about rising prices on the domestic market when export prices climb. There are a lot of reasons behind high rice prices, including ongoing flooding in the Mekong Delta, many storms accompanied by heavy rains in the central region, and the last time of this rice crop. This threatens the supply because exportation still keeps up with the plan, expected to top 7 million tonnes this year.

 

Moreover, local media quoted incorrect information from foreign sources saying that Indonesia had purchased more rice from Vietnam after it cancelled deals with Thailand. Although no deal between Indonesia and Vietnam has been reached, domestic rice immediately gained in price. Unhusked rice in the Mekong Delta climbed to VND7,100 from VND6,850 per kilo. Mr Pham Van Bay, VFA Vice Chairman, said, Vietnamese companies are now stockpiling some 1.5 million tonnes of rice, enough to deal with any change in the domestic market and supplement exports planned for 2012. Vietnam is determined to avoid a recurrence of rice fever as in 2008.

 

The incorrect information has pushed up rice prices in the domestic market and directly affected consumers, particularly the poor in cities. Mr Huynh Cong Thanh said the price may climb to a certain extent in the coming time, but it is totally controllable. In the past week, prices of unhusked rice in the Mekong Delta and HCM City fluctuated. Unhusked rice prices gained VND500 a kilo, while 5 percent broken rice gained VND500 - 800 per kilo in selling prices to VND12,000 - 12,500 per kilo, exclusive of VAT. As many as 55 retail stores, including Foodcomart, are selling rice at VND11,500 per kilo, including VAT.

 

To reassure consumers, the VFA has revealed a plan to stabilise domestic rice prices. Right now, its member companies will weigh up their inventories in relation with domestic demand to draw up new export plans. Rice exporters are responsible for providing rice in their localities if the local markets are volatile and their selling prices will be 10 - 15 percent lower than the market rates. In HCM City alone, two VFA-member companies, namely Foodsaco and Vinh Phat Company, take on the task of stabilising rice prices. They are committed to selling at 10 percent lower than the market rate. Foodsaco is storing some 6,000 tonnes in its warehouse in the Satake factory, Binh Chanh district, not to mention its warehouses in Long An and Tien Giang provinces which are also ready to cater for the market.

 

Southern Food Corporation (Vinafood 2) said HCM City is the largest market in Vietnam and this is usually the place where price fevers occur. Thus, this market will receive priority attention. All member companies affiliated to Vinafood 2 in the city will have to take part in the process of stabilising market prices. In addition, two food companies in Tien Giang and Long An provinces can also add to the supply for the city if necessary.