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Vietnam has halted rice exports as domestic prices have surged to record highs after pests and bad weather reduced output, Prime Minister Nguyen Tan Dung said. The decision could open up a window of opportunity for Thailand to boost exports of the grain, traders said.
"Rice exports must be immediately halted to ensure food security and stabilise domestic market prices," Dung said in the directive sent on Sunday to government agencies and the Vietnam Food Association.
Agriculture Minister Cao Duc Phat said on Friday southern farmers had lost 800,000 tonnes of paddy worth $125 million after they cut crop areas to clean up brown grasshoppers and the rice plant virus infecting thousands of hectares of fields.
The market is expecting marginal impact from the halt as the recent price surge had slowed overseas demand. Phat said only a few deals had been signed for loading next year.
Ships, which arrived before on Sunday for loading for Cuba and Indonesia, would not be affected by the restriction, while all other deliveries must have government approval, Dung said. Typhoons and floods earlier this year damaged fields in Central Provinces, prompting the government to send in food aid. A typhoon in the South China Sea is heading to the region.
Vietnam said Typhoon Chebi, the Korean word for "a swallow", is forecast to dump rains on Vietnam's coast on Tuesday but the Central Highlands coffee belt would not be hit. Pests have been the main problem in the southern region incorporating the Mekong delta food basket, where the price of paddy surged to 30-year highs of 3,100 dong ($0.19) per kg in the past two weeks.
Traders said Vietnam could lose key buyers, the Philippines and Indonesia, if high prices and supply restrictions remain for a longer period. Thai traders said overseas buyers had covered positions for December shipments and were unlikely to return to the market until next year.
"If they continue to suspend exports until next year, that would definitely benefit Thailand's rice exports, given that new demand is expected to come in during that period," a Thai trader said, referring to the ban by Vietnam. They said new demand was expected from several markets, including Africa, which is also a key buyer of Vietnamese rice. On Monday, Thailand 25 percent broken grade stood steady at $255 a tonne, free-on-board, $10-$15 a tonne lower than Vietnam's 25 percent broken grade.

Copyright Reuters, 2006

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