Vietnam's rice prices may fall further

Vietnam's rice prices may fall further

SINGAPORE (Dow Jones): The continued absence of Indonesian private traders from Vietnam's rice market is likely to further depress Vietnamese rice prices in the next few weeks, rice traders and industry sources said this week.

Vietnamese rice exports are also expected to shrink in August and September on the temporary absence of the Indonesian traders, they said.

Indonesian private traders were active buyers of Vietnamese rice until earlier this month, when they were forced out of the market by the rupiah's weakness against the U.S. dollar.

At 0825 GMT, the U.S. dollar was changing hands at Rp 7,590, compared with Rp 7,735 late Tuesday. It was at Rp 6,665 late July 16 and traded below Rp 7,000 in the month of July.

A slowdown in rice shipments from Vietnam to Indonesia became apparent this week, said a cargo surveyor source in Ho Chi Minh City. "In the last two weeks, there was still a lot of activity" at the ports, he said.

"Most shipments were delayed. Some were canceled, but 95 percent of the orders are still going on," he added.

Because the Indonesians aren't making fresh trades, he said Vietnam's monthly sales to Indonesia may fall by 20 percent-30 percent.

August shipments of Vietnamese rice to Indonesia could total about 200,000 metric tons while September shipments could reach about 150,000 tons, he said.

Vietnamese rice offers have fallen about US$2-$3 a ton in the last few days, with 25 percent broken rice quoted steady around US$209-$210/ton, free on board Ho Chi Minh City port, and US$208/ton, FOB Cantho port.

Offers for Vietnamese 25 percent broken rice, the grade most requested by Indonesian traders, could slide to US$205/ton in their absence, said a Ho Chi Minh City trader with an international trade house.

But the offers won't fall below US$200/ton because of the limited exports for the rest of the year, said a Vietnamese rice company official.

"We (Vietnam) have exported about 3.2 million tons (so far this year) so we still have 600,000 tons for export from October to December," he said.

Vietnam's 1999 rice exports are put at 3.8 million-3.9 million tons. It is the world's second largest rice exporter, after Thailand.

A total withdrawal of the Indonesian traders isn't expected because of the huge demand in Indonesia, rice traders said.

Also, local rice prices in Indonesia are still higher than imported rice prices, making it lucrative for Indonesian traders to bring in imported rice, they said.

According to one Ho Chi Minh City trader, there is talk that the Indonesian traders are renegotiating their commission with Bulog, Indonesia's National Logistics Agency.

In any case, the traders will return to market, perhaps in one to two months, when they can accept the rupiah at its lower level, he said.

Indonesia is the world's largest rice importer. While it forecasts its import needs in the year to March 31, 2000 at 2.0 million tons, the U.S. Department of Agriculture projects its 1999 imports at 3.7 million tons.