Will Vietnamese farmers benefit from new Thai rice pricing policy?

In principle, Vietnamese farmers will get benefits from the new Thai policy under which the government will buy rice at 15,000 baht (500 dollars) per ton from farmers. However, the benefits remain unclear, though the domestic price has increased slightly.

How will the rice price be like?

While some experts believe that the rice price will be increasing in the last months of the year, the Vietnam Food Association (VFA) has affirmed that the rice price would be stable, while no sharp rise would occur.

VFA’s Chair Truong Thanh Phong, has said that domestic companies have assured that no rice fever or supply shortage would occur in the upcoming months.

Phong can make such a statement because the total rice export volume VFA’s member companies have signed with foreign partners has reached 7 million tons already, which is equal to the total export volume planned for 2011.

VFA said that by the end of August, Vietnam had signed the contracts on exporting 6.4 million tons or rice. Meanwhile, in September alone, Vietnam obtained the contract on exporting 400,000 tons of 15 percent broken rice to Indonesia.

This is just the figure for making public, while the actual figure, according to analysts may exceed seven million tons.

The rice export contracts were mostly the ones signed in the period from mid September and earlier, which means that the export price was about 580 dollars per ton or lower.

When Thoi bao Kinh te Saigon reporters informed the information to domestic rice traders in Ba Dac wholesale market area in Cai Be district of Tien Giang province, and the enterprises in Cai Lay district of the same province, the traders said it is now understandable why VFA once again lowered the export price earlier this September.

“This is a trick played by VFA’s member companies to force the purchase prices down to collect rice for export,” one of the trader said.

If so, the scenario drafted by VFA will come contrary to the predictions by foreign and domestic experts that the rice price in Asia, including Vietnam, would reach the three-year highest peak.

While VFA’s leaders have stated that there will be no price fever, some analysts believe that the domestic rice price would keep rising towards the end of the year.

The analysts say that once the new Thai Prime Minister, Yingluck Shinawatra, fulfills her commitments to purchase rice from farmers at the price of 15,000 baht per ton, this will make the regional rice export price increase. If so, the Vietnam’s rice export price would increase, which would also push the domestic prices up.

It may happen that when the Thai rice gets more expensive, Thai speculators would purchase rice from Vietnam and Cambodia to sell domestically. This means that Vietnamese rice will be on the high demand, which will make the prices up.

Domestic prices increasing, but slightly

The information that Thai government will buy rice at high prices from farmers and that Thailand and Vietnam plan to sit together to discuss the rice pricing strategy–has made Vietnamese dealers firmly believe that the domestic prices will escalate.

However, the domestic market has not witnessed any significant rice price increases. Especially, farmers sometimes have to accept to sell rice at low prices.

Farmers in Tien Giang, Long An, Tra VInh, Dong Thap and An Giang, the biggest rice granaries in Vietnam, said that the price has increased by 100 dong per kilo in comparison with September 20. Long grain rice, such as OM 5451, OM 4218, OM 1490, for example, has increased by 50-100 dong per kilo. However, IR 50404 price remains unchanged at 5900 dong per kilo.

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