Vietnam hikes rice prices as Indonesia buys more

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Vietnam raised its rice export floor prices by nearly 14 percent, partly to meet possible demand from Indonesia, which more than doubled its grain imports and is seeking more to replenish stocks.

Indonesia's state procurement agency Bulog bought 230,000 tons of Thai 5 percent broken rice for shipment until next February"”100,000 tons via a tender and 130,000 tons through direct negotiations, Bulog chief Sutarto Alimoeso said on Friday.

Another industry source said the agency plans to buy up to 400,000 tons of premium rice in total until February including the volumes they have committed to.

Bulog aims to buy 1 million tons of overseas rice by the end of this year, down from 1.3 million tons bought in 2007, which were deemed sufficient for its stockpile for 2008-2009.

All imported rice should be delivered to Indonesia by mid-February before the main rice harvest starts. The government, which has allowed Bulog to import rice this year due to falling stockpiles, has applied tight rice trade rules since 2004, in which imports of the politically sensitive food grain are not allowed during the main February-June harvest to avoid pressure on farmers' prices.

Alimoeso declined to give price details but a trader in Ho Chi Minh City said the agency bought Thai rice at $570 a ton on a cost-insurance-freight (CIF) basis, equivalent to $530 or $540 a ton, free-on-board (FOB) Vietnam port basis.

In contrast, the price of Thai 100 pct B grade in early October was $495 a ton, FOB Bangkok.

"We buy the rice directly from supplier and not via trading houses," Alimoeso told Reuters, adding it will award the contract within the next few days.

In anticipation of the strong demand from Indonesia, the Vietnam Food Association raised the floor for 5 percent broken rice price by 13.7 percent to $540 a ton. It also increased the minimum price for 25 percent broken rice to $480 a ton, FOB basis, from $445 in place since Nov. 12.

The new floors were applied as of Friday for deals with shipment during December, the association said in a statement.

"The new floors are in place to intercept new demand from Indonesia," a Vietnamese trader in Ho Chi Minh City said.

In November traders in major exporter Vietnam had said Indonesia was looking to import 300,000 tons from the Indochinese country for delivery in March and April 2011, after signing deals to buy 250,000 tons of Vietnamese rice for loading by January.

Vietnam is confident it will have sold out all of its next rice crop, given demand in the Philippines, Indonesia and Malaysia, General Secretary Huynh Minh Hue of the food association was quoted this week as saying.

"Even though countries have not opened tenders, I can confirm export contracts for all the rice from the 2011 winter-spring crop, of around 3 million tons, are now basically in place," Hue told the Wednesday edition of the Saigon Tiep Thi newspaper.

Along with the Philippines, Indonesia is one of the largest buyers of Vietnamese rice. Vinafood 2, Vietnam's top rice exporter, is assigned to handle demand from Indonesia.

"The new (floor) prices are aimed at raising Vietnamese rice export revenues while limiting domestic sales," another trader in Ho Chi Minh City said, adding that Vietnam has sufficient rice to meet domestic consumption.

His comment followed an estimate by a government official who said earlier this week that year-end stocks kept by exporters could halve to 500,000 tons.

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