Summer-autumn rice grade 1, used for processing the 5 percent broken rice, rose 4.7 percent to 8,850-9,050 dong (43-44 US cents) per kg in the Mekong Delta on Monday from 8,500-8,600 dong on July 30, traders said.

Rice grade 2 -- used to make the 15 and 25 percent broken varieties -- has risen 4.3 percent to 8,700-8,950 dong per kg.

Vietnam sold a record 1 million tonnes of rice last month, state media said in weekend reports, citing data released at a Vietnam Food Association (VFA) meeting. The deals included 500,000 tonnes sold to Indonesia.

Vinafood 1 has a contract to load 200,000 tonnes for Cuba among other deals but it has been facing strong competition in buying rice, a Vinafood 1 official was quoted as saying by the Thanh Nien newspaper at the meeting on Friday.

Vinafood 1, the second-largest exporter after Vinafood 2, has been assigned by the government to handle rice demand from Cuba and the Middle East, including Iraq.

"It has been tense buying rice because of high export demand while many companies have also taken the opportunity to buy for speculation, so rice is becoming scarce," Deputy Chairman Pham Van Bay of the food association was quoted as saying.

PLENTY TO EAT

The government has asked the association to boost rice exports to meet rising demand but has also told it at the same time to avoid causing domestic food prices to rise, Thanh Nien said in its Saturday edition.

The association's chairman, Truong Thanh Phong, told the meeting that there was plenty of rice in stock for domestic consumption in and around Ho Chi Minh City.

"The market in coming months will see many major contracts and demand will remain high until early next year, so the VFA advises members to be cautious on sales," Phong said in the newspaper report, without elaborating on future deals.

At the meeting the food association rejected reports that Chinese and Thai traders had arrived to buy Vietnamese rice, Tuoi Tre newspaper said.

Agriculture Minister Cao Duc Phat said last week that China had stopped buying rice from Vietnam from April after some purchases in the first quarter.

But traders said Vietnam had been exporting rice in border trade to China, which official statistics do not cover.

High prices at home had forced some Thai exporters to buy Vietnamese rice to meet commitments to China, Thai exporters said last week.

Vietnam, aiming for record sales of up to 7.4 million tonnes of rice this year, is expected to ship 6 million tonnes in the first nine months, up 13.2 percent from a year ago, a state-run newspaper reported.

Vietnam is the world's second-largest rice exporter after Thailand.

Copyright Reuters, 2010