Vietnam is expected to be the main rice supplier to Indonesia this year because of competitive prices and proximity between the countries, traders said on Wednesday. Indonesia, the world's third-largest rice grower, plans to import up to 2 million tonnes of rice this year to ensure food security.
Indonesian state procurement body Bulog signed an agreement in January to buy rice from Myanmar, but that covered a relatively small 200,000 tonnes a year. "At this moment, I see only Vietnam that is likely to sell as its prices are the most interesting," said Kiattisak Kalayasirivat of Novel Agritrade. Last year, Bulog imported rice from Thailand, Vietnam and India, in a combination of commercial and government-to-government deals.
Traders said Indonesia was likely to turn to Vietnam this year because its prices were cheaper than Indian rice. Vietnamese 5 percent broken grade white rice was offered at $430 per tonne this week, well below the same grade from India at $450 a tonne. Vietnamese 25 percent broken grain also fell to $375-$380 a tonne, from $405-$420 a week ago.
The Vietnam Food Association early this month cut the floor price to $420 a tonne for 25 percent broken rice. "Vietnam has plenty of rice to sell and its prices could drop lower if it wanted to compete with India at a time that supply is about to peak," another Bangkok-based trader said. Vietnam has started to harvest its winter-spring crop, which is expected to produce 11 million tonnes of paddy. Production is expected to peak in March.
Vietnamese traders said rice prices in Vietnam were falling due to thin demand at a time that supply was rising. They said Indonesia's demand to import 2 million tonnes of rice has yet to have any impact on prices, but the purchase could lift Vietnamese exporters' sentiment, reduce part of the forecast stockpiles among growing nations and support prices.
"Supplies will become plentiful in March, so prices could ease and buyers are still waiting for such a price fall," another trader in Ho Chi Minh City said. Unlike Vietnam, Thai rice prices are at high levels following government intervention, which has backfired on Thai exports. Prices of benchmark 100 percent B grade white rice were at $535 per tonne, slightly down from last week's $550 a tonne.
"Although demand was very thin, but prices did not fall that much as the intervention remains," said another Bangkok-based trader. The government has extended its intervention programme, which was due to end on February 29, to the end of June to cover the second crop, which was expected to produce around 11 million tonnes of paddy.
The intervention pegged Thai prices at uncompetitive high levels and forced buyers to switch to Vietnam and India, resulting in a sharp drop in exports. Thailand has sold 722,000 tonnes of rice so far this year, half of the 1.525 million tonnes in the same period last year. Since the intervention started on October 7, the government has bought 6.57 million tonnes of paddy so far, according to the Ministry of Commerce's data.