An official at the VFA said the increased orders have been boosting its southern neighbour’s export prices and narrowing the spread between high and low quality varieties pushing Vietnam’s prices too high for other markets.
Just last week Vietnam was forced to revise downwards an initial offer on a Philippine buy tender to win a supply contract along with Thailand for deliveries of 25% broken rice over the period November 2015-March 2016.
The contract was for 450,000 metric tons of 25% broken rice at a price of US$460.60 per metric ton, 23% lower than the ceiling price. The balance of 300,000 metric tons was supplied by Thailand at the same price.
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Indonesia has been negotiating with Vietnam to purchase 1.5 million metric tons of 5% and 15% broken rice and it has been widely reported Vietnam may share the bidding with Thai traders.
"China has just stepped up buying of all kinds of Vietnamese rice," a trader at a foreign business in Ho Chi Minh City said recently.
In a sign of the upward pressure put on the Southeast Asian nation's rice export market, Vietnam has raised its price floor for 25% broken rice by around 3% to US$340 a metric ton, free-on-board (FOB).
"Even before the price increase, Vietnam had difficulties finding rice buyers, so the price hike will just make it even more difficult to locate buyers," the trader said.
Vietnam's rice exports in the eight months January-August were down year-on-year having shipped just 3.818 million metric tons of rice valued at US$1.591 billion (FOB) and US$1.641 billion (CIF),
Still, China's purchases of rice from Vietnam were up about 40% year-on-year in August, with the top buyer's purchase over the first eight months of the year accounting for nearly 30% of Vietnam's exports.
China's purchases - along with the five-month supply contract to the Philippines for 450,000 tonnes of rice - have not only lifted prices, but have also narrowed the gap between 25% broken rice and higher quality 5% broken to as little as US$3-US$5 per metric ton from around US$20.
On the back of the lowered expectations for the year, the VFA has dropped its export target to 6.1-6.3 million metric tons, 700,000-500,000 metric tons less than last year.
The VFA official warned that despite the decline in rice exports, there is not much stockpiled because the central region had a poor crop.
Nearly 1.4 million metric tons on order have not been delivered to customers, nearly 800,000 metric tons of which belong to Chinese customers.
The VFA official expressed concern that many of these contracts are unlikely to be fulfilled.
