Vietnamese paddy prices jumped around 12 percent in the past week after the government ordered state-owned rice traders to buy up to 660,000 tonnes within one month, traders said. Wednesday's paddy prices of 4,800 dong to 4,900 dong (29 US cent) per kg are still lower than the floor price the Finance Ministry intended to impose at 5,000 dong per kg.
Officials said the floor would guarantee a profit of around 40 percent for farmers, given their production cost for the summer-autumn grain stood at 3,300-3,500 dong per kg. Export demand has weakened as the government kept the floor export price unchanged at $600 per tonne, free-on-board, for the 5 percent broken grade, far from buyers' bids of $530-$550 a tonne, traders in Ho Chi Minh City said.
"We have not seen any deals with prices at $600 per tonne signed in the past week and most offers to purchase were much lower, some even at $500 or $530 a tonne," a trader at a foreign firm said. Traders expected the Vietnam Food Association to cut the floor price to $550 a tonne so as to support sales this month and avoid a glut as Mekong Delta-based warehouses were near full at the peak of the summer-autumn crop harvest.
In An Giang, the Delta's top growing province, the three biggest trading houses have begun buying paddy as part of the government's purchase programme aimed at stocking a combined 110,000 tonnes by September 15, An Giang-based trader said.
He said his company raised offers this week to between 4,800 dong and 6,550 dong per kg of paddy, depending on the grain quality, from 4,300 dong per kg last week. "One major problem for us is the high interest rate on bank loans even though the government has offered its best rates, but at around 19 percent per year they are still too high," the trader said.
Last week the central bank requested several state-run banks and partly private Vietcombank to offer their prime rates to domestic rice trading firms to facilitate the paddy purchase. On Wednesday the central bank said it had allowed state-run BIDV to raise loan limits to Vinafood 2, Vietnam's largest rice exporter, to 2.5 trillion dong ($151 million), with a prime interest rate of 19.5 percent for 3-month loans.
Vietnam shipped 66,622 tonnes of rice last week for a total revenue of $54.2 million, the Vietnam Food Association said in a weekly report. The country has exported 2.77 million tonnes of the grain so far this year with revenues of $1.6 billion.