An increase in rice prices in Thailand caused by political developments has forced some exporters to turn to Vietnam to source grain for shipping to China, operators said, a trend that has also helped support Vietnamese prices. For now the Thai move involves only a small volume of premium rice, while a recent Indonesian purchase of 500,000 tonnes of white rice was the main factor behind the rise in the Vietnamese market.
But the development illustrates the problems the rice sector in Thailand could face if the incoming government perseveres with a plan to almost double farmgate prices to help farmers. "The price gap between Vietnamese and Thai rice is big enough and worth investing in, especially for fragrant rice, which is prized by Chinese buyers," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
Vietnamese fragrant rice was quoted at around $650-$670 per tonne on Wednesday, well below the Thai price of $1,000. Chookiat estimated around 6,000 tonnes had been bought by Thai exporters in Vietnam to be shipped direct to China. "The volume was quite low due to Vietnam's small annual fragrant rice output. However, after talking to our Vietnamese partners, they said farmers are now growing more of the fragrant variety in order to capitalise on high prices," Chookiat said.
The official Vietnam Economic Times newspaper said on Wednesday that several Thai companies had established offices in Vietnam as well as Cambodia to buy rice for exporting to overseas markets. There was no confirmation on the Thai side, with traders describing it simply as co-operation between Thai exporters and Vietnamese sellers. But Chookiat said it was possible in future that Thai exporters would establish offices in Vietnam.
Thailand's benchmark 100 percent B grade white rice was steady at $555 per tonne on Wednesday but it has jumped around 7 percent since a general election on July 3 as traders and millers have been hoarding grain, expecting to resell it to the state when the new intervention policy is implemented.
The Puea Thai Party, which will lead the new government, has said it would pay 15,000 baht ($504) per tonne for unmilled white rice, against the market price of 8,000 baht. It said it would buy fragrant rice paddy at 20,000 baht per tonne. That could push the export price for white rice to $870 per tonne and exporters fear this could hurt their markets, possibly cutting exports in half to around 5 million tonnes a year. That would leave Thailand trailing in second place in the world export ranks behind Vietnam, which exported 6.83 million tonnes in 2010. Thailand exported 9.04 million tonnes in 2010 and aims to export a record of more than 10 million tonnes this year, according to the Thai Rice Exporters Association.
VIETNAMESE PRICES FIRM Vietnam's 5 percent broken rice stood at $530 a tonne, free on board, versus last week's $515-$530. That was still well below the same grade of Thai price which was offered at $540.