'Vietnam's rising rice prices may hit deals for Manila'
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HANOI/MANILA - Rising rice prices in Vietnam may have led some Vietnamese exporters to delay or default in loading for private Philippine firms, but government deals are not affected and buyers were committed to supply the bulk of their quota, a Philippine industry official and traders said.
Delivery problems from the world's second-largest rice export nation may hurt the reputation of Vietnamese rice exporters and fuel food inflation.
But the problems are only at company-based level while exporters honored government-to-government deals with Manila, traders in Vietnam said.
"Private companies buying Vietnamese rice may have run into trouble as rice prices have risen in the past month," a Vietnamese trader at a foreign company in Ho Chi Minh City said.
"Since these problems are between companies while government deals are not hurt, there will be no impact on the bilateral trade ties," he added.
Philippine private firms are committed to supplying 455,000 tons of rice for which they have secured import rights as part of the total 660,000-ton quota, National Food Authority (NFA) administrator Angelio Banayo toldReuters.
He said a trader called his attention to price increases in Vietnam but said trading firms were not overly concerned.
"Provided it is not hefty, they will deliver," Banayo said when asked if he saw any problems with the price increases.
The Vietnamese trader said the affected volume may total 150,000 tons.
Another exporter, whose company did not deal with supplies for the Philippines, said defaults were in loading 57,300 tons during the week ending April 16, citing industry figures.
Other traders could not confirm the figure but said the risk of delays or defaults was real.
Price complexities
Vietnam's 25% broken rice, often bought by the Philippines, has risen 2.3% this week to $450 a ton, free-on-board (FOB) basis, from $440 in early March when private firms in the Philippines arrived to seek Vietnamese grain.
The Philippines, the world's top rice buyer in recent years, has planned to purchase 860,000 tons of tariff-free rice in 2011, 600,000 tons of which are allocated to private traders and 60,000 for farm cooperatives.
The NFA, the Philippine's state grain importer, is also buying 200,000 tons under government deals from Vietnam.
Last year the Philippines imported a record 2.45 million tons of rice, the bulk from Vietnam. It had planned to import 1.3 million tons this year, but then had said it wanted to limit shipments to about two-third of the volume.
Philippine buyers took Vietnamese rice in small deals of 2,000 tons to 3,000 tons each, mostly using payment via cash-against-documents (CAD) with a 30% deposit, instead of letter of credit, which is more secure given bank assurance.
Some Vietnamese exporters have now returned the deposits, saying they could not deliver the volume, the first trader said.
"In the less serious way, exporters asked to renegotiate prices, while in the most serious ones, they returned the deposit," he said.
In mid-March Vietnamese 25% broken rice dropped to as low as $400 a ton, or $40-50 a ton below quotations in the past week, that led to the problem with delays or defaults.
"That's what I also suspect because the market's up a lot so if someone has a position lower than $450, he should be careful," said a Singapore-based trader at a global commodity firm, adding he has not heard of any defaults yet.
"But if someone has bought at $460-465, there shouldn't be a problem," he said.
Last Friday the NFA said it was seeking offers from local traders to import an additional 187,000 tons of rice this year to build up reserves, on top of the 860,000 tons.
"For those exporters who have stocks, loading should be fine, while others who did not stockpile have problems buying now on domestic markets due to the price increase," a trader at a Mekong Delta-based rice export firm said.
On the domestic market, winter-spring paddy has risen to VND5.7 to 6.4 million ($273-306) a ton this week, from VND5.4 to 6.4 million in early March.
The top winter-spring crop's harvest has come to an end in the Delta and farmers have started growing the next crop, the summer-autumn crop which is their second-largest.
"Prices may only drop when supplies from the next harvest arrive in July," another trader at a foreign company in Ho Chi Minh City said.
