Asia Rice: Weak demand pushes prices down further

Thursday, 29 December 2011 01:12 -     - {{hitsCtrl.values.hits}}

BANGKOK (Reuters): Asian rice prices dropped further this week due to thin demand ahead of the year-end holidays, but intervention by the Thai government and Vietnam’s industry association was likely to limit the falls, traders said on Wednesday.

The price of Thailand’s benchmark 100 percent B grade white rice <RI-THWHB-P1> dropped to $580 per tonne from last week’s $590, they said.

That was well below this year’s high of $650 per tonne in mid-October, when the Thai government launched an intervention scheme to push up prices and support the millions of poor people in rural areas that helped it win power in July. “Some millers offered us grain at lower prices so we can quote cheaper prices, too, in order to attract buyers. But demand is still very thin as most buyers are already well stocked,” said a Bangkok-based exporter.

Millers, some of whom faced a liquidity crunch after being affected by severe floods and falling demand, have lowered their price for milled rice to about 16,500 baht ($520) per tonne from 18,000 baht last week.

But prices were unlikely to fall much further over the next few weeks as the government is accelerating its buying scheme.

It started buying paddy rice from farmers at 15,000 baht per tonne on Oct. 7 and is believed to have bought around 3.5 million tonnes so far.

Traders and exporters are worried that the high intervention price, if it keeps export prices high, could depress exports next year, some even forecasting that shipments could be halved from this year’s level to around 5 million tonnes.

If that happened, Vietnam could overtake Thailand to become the world’s biggest rice exporter. Vietnam is expected to export a record 7.19 million tonnes this year, but it may also struggle next because of cheaper grain available from India.

Vietnamese export prices have also eased slightly over the past week, traders said, and there was barely any trade after the Vietnam Food Association set minimum export prices.

Quotations for Vietnam’s 5 percent broken rice fell to $465 a tonne, free on board (FOB), from $470-$475 last week.

The 25 percent broken rice stood at $420-$430 a tonne, traders said. “Foreign companies are out of the market and will return only in the second week of next month,” a trader in Ho Chi Minh City said.

Last week the Vietnam Food Association set floor prices for exporters in order to avoid a drop in prices that could undermine a deal for 300,000 tonnes to be shipped to Malaysia next year.

The floor price for 5 percent broken grade white rice was set at $500 per tonne and the price for 25 percent broken at $470, according to the association. The current offers from traders are merely indicative, since exporters are not allowed to export at lower prices.

One Indian trader who deals in Vietnamese  rice said the indicative levels were comparable to prices in India of $430-$470 per tonne.

“So I don’t expect to see Vietnamese prices drop much lower than this level as their offers are now close to Indian rice,” he said.