Hanoi. Vietnam’s top rice exporter Vinafood 2 has sealed a new contract to sell 300,000 metric tons of the grain to Indonesia following a larger deal last month, a state-run newspaper said, which could lift prices further and might lead to more defaults on other contracts.
When contacted, Sutarto Alimoeso, Chief Executive Officer of Indonesia’s state procurement agency Bulog, said it has yet to import any more rice beyond the deal for 500,000 tons signed last month.
“Yes, we have received an offer from Vinafood 2 for 300,000 tons, but we have not decided yet since we are still evaluating the situation both in domestic and international market including stock, supply and price,” he told Reuters.
Rice prices in Vietnam started rising in late June on demand from Indonesia, Bangladesh and Africa to a level above Thai prices for the first time in years. That had forced exporters to default on deals of around 200,000 tonnes, Thai traders said last week.
Vinafood 2 signed the new contract on Aug. 18 at around $550 a ton, free-on-board (FOB) basis, and met only half of the 600,000 tons sought by Indonesia, the Vietnam Economic Times and a Vietnamese trader said.
The newspaper said loading will start after Indonesia gets all the 500,000 tons delivered by end-October.
Traders said Vinafood 2 wanted to avoid the risk of a price surge that could push exporters into losses due to rising domestic prices.
Vietnam has been struggling to tame inflation, which remains among the worst in the world at more than 22 percent in July. Food prices account for nearly 10 percent of the price basket used by Vietnam to calculate inflation.
“Vietnam does not want to risk signing for all the volume asked by Indonesia as it wants to make sure prices won’t surge,” saida trader at an European firm in Ho Chi Minh City. He added that the purchase was for 15-percent broken rice. Summer-autumn rice grade 2, used to process the 15-percent and 25-percent broken rice, has risen 13 percent in the past month to between 9,150 and 9,380 dong (43.9-45 US cents) per kg in the Mekong Delta food basket on Tuesday.
Rising prices in recent weeks have already made it difficult for exporters to secure rice from domestic markets, leading to delays and defaults, while buyers have taken a step back to avoid risks, he said.
“The market is now frozen, African buyers cannot accept high Vietnamese prices,” the trader said, but gave no estimates on the latest volume affected by delays or defaults.
Another trader in Ho Chi Minh City, Vietnam’s largest grain trading market, confirmed the problems with loading but said it was difficult to estimate the total volume affected. In late July, Vinafood 2 sold 500,000 tons of 15 percent broken rice to Indonesia for deliveries between August and October, part of Indonesia’s efforts to boost its stockpiles and calm food prices during the Ramadan fasting month and Idul Fitri celebrations.