Philippines bags Hanoi rice deal, seeks Thailand supply

By Erik dela Cruz, Reuters

Posted at Mar 23 2011 05:46 PM | Updated as of Mar 24 2011 03:40 PM

Deal with Vietnam covers 200,000T at $480/ton C&F

MANILA, Philippines - The Philippines on Wednesday agreed to import 200,000 tons of rice from Vietnam, a deal expected to push up prices in the world's second-largest exporter of the grain, but still below rival Thailand.

The Philippines state grains agency is seeking to bring in this year's rice imports before the lean harvest season starts in July. It is also in talks for a similar deal with Thailand, the world's top exporter.

But traders in Thailand said they were unlikely to supply a big portion of Manila's rice needs with Thai prices well above those in Vietnam.

"The Philippines is Vietnam's top buyer," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

"Vietnam will do all means to retain the market share. And with these prices I don't think Thailand could compete in this market."

The Philippines may be buying now as well, traders said, because rice prices globally have lagged sharp gains made by wheat, corn and soy earlier in the year as nations from Asia to Africa looked to build grain stockpiles to tamp domestic food inflation.

Manila's deal with Vietnam for 25% broken new crop rice was priced at $480 a ton, below a government budget of $550 per ton, cost and freight. But the price, translating to $440-$450 a ton on free-on-board (FOB) basis, is above current levels in Vietnam.

On Wednesday, offers for the 25% broken rice, often bought by the Philippines, rose to $410-$415 a ton, FOB, Saigon Port, before the news on the government deal, from $400-$405 a ton a week ago.

In Thailand's case, the price of Thai 15% broken grade white rice, which the Philippines usually buys from its Southeast Asian neighbour, was offered at $475-480 per ton FOB, above Vietnamese prices.

Manila's existing rice supply agreement with Vietnam covers an annual supply of up to 1.5 million tons. The deal was extended to 2013.

Vietnamese prices seen rising

"We feel very strongly that we had a very good price for the 200,000 tonnes," Angelito Banayo, administrator of the National Food Authority (NFA), told reporters, adding the shipment was payable 270 days after arrival between April and June.

"The Philippines got the best deal compared with other countries in the Southeast Asian region," he said.

Vietnamese rice prices are expected to rise further in coming weeks, with the market likely to target the price at which the Philippines forged the deal with Hanoi, traders said.

"Production costs are rising in Vietnam so farmers will look for every opportunity to raise prices," a trader at a foreign company in Ho Chi Minh City said.

Anticipating the price rise, the Vietnam Food Association has decided to raise by 2.2% the minimum export price for the 25% broken grade to $470 a ton, free-on-board, effective March 24.

Also supporting Vietnam rice prices is steady demand from China, which may have bought around 70,000 tons since mid-January for commercial and reserve purposes, traders said.

Rice prices have so far kept well below the peak hit during the 2008 food crisis, but rising food costs have triggered rate hikes in most Asian countries as authorities seek to manage inflation.

Private sector imports

The National Food Authority is holding a tender for private sector rights to import 600,000 tons this year and may announce a final import volume later on Wednesday.

The volume is part of the total 860,000 tons the Philippines, the world's biggest rice buyer before huge import cuts planned this year, is set to buy to boost buffer stocks.

Ahead of Wednesday's tender, several private firms from the Philippines bought 25% broken rice from Vietnam at $420 a ton, FOB basis, at least 5% below the price of the Manila-Hanoi rice deal, traders said.

"Philippine private companies came and bought rice before the tender," another trader in Ho Chi Minh City said.

Thai rice traders said they were likely to provide only a small volume to Manila this year due to uncompetitive prices.

"I think Thailand may sell around 50,000 tons at best this year (to Manila)," a Bangkok-based trader said.

The benchmark 100% B grade white rice was at $495 a ton, down from last week's $500 per ton due to thin demand.

NFA's Banayo said the Philippines, was in talks with Thailand and Cambodia for a rice supply deal, with Bangkok offering 1 million tons of annual supply for three years.

Banayo said the government was unlikely to import more than the 1.3 million-ton ceiling set for this year, slightly more than half of its record imports of 2.45 million tons in 2010.