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Thai Rice Faces `Intense' Vietnam Price Competition, U.S. Says By Jason Folkmanis

   8/19/2008

Aug. 14 (Bloomberg) -- Vietnam's return to the rice-export market is pushing down prices, stoking competition and helping ease concerns about a potential global shortage of the staple, the U.S. government said. Vietnam's 5 percent broken-grain, its top-quality brand, is being quoted as low as $575 per ton, 23 percent down from $743 in July, according to a report this week from the U.S. Department of Agriculture. Thailand's 100B variety, which competes with Vietnam's 5 percent, is at $738 per ton, down from $756 in July and $789 in June, the U.S. said. ``Global trading prices continue to drop,'' the U.S. Agriculture Department said. ``Thailand's exporters are facing intense competition from lower-priced rice from Vietnam.'' Thailand is the world's biggest rice exporter. Vietnam was third in exports last year after Thailand and India, and will move up to second this year, based on U.S. projections. Rice prices surged earlier this year to record highs amid concerns over supply, as countries including Vietnam restricted exports. Vietnamese rice is now reaching the market, buoying a ``shift in global perceptions on the availability of exportable supplies,'' said a separate report this week from the U.S. Foreign Agricultural Service. ``The market climate has certainly changed,'' the U.S. report said, noting that recent exports by Vietnam and Thailand have ``dispelled the notion of short supplies.'' `Ample Supplies' ``The prospects for ample exportable supplies, the continued drop in oil prices, and the strengthening of the dollar are other factors that could further soften global prices,'' the report said. The United Nations, which hosted a conference in May to address what it described as ``a global food crisis,'' said in a report this week that world production of rice paddy, or unprocessed rice, is expected to rise by 1.5 percent this year, driven in part by a ``sizable gain'' in Vietnam's winter/spring crop compared with a year ago. ``The abundant new 2007 paddy crops, together with good prospects for the 2008 paddy season, are easing the global rice market situation,'' the UN's Food and Agriculture Organization said in its Rice Market Monitor. In Vietnam, ``current estimates point to an excellent first crop,'' the Food and Agriculture Organization said. Rice Prices Vietnamese farmers currently hold about 4 million tons of unsold rice paddy, the Vietnam News reported Aug. 12. Rice prices in provinces in the southern Mekong Delta have declined by as much as a third since June, hurting farmers who borrowed to pay for materials such as fertilizer, the report said. The trend toward lower rice prices may help ease Vietnam's inflation rate, which was a year-on-year 27 percent in July, the highest since at least 1992. The inflation rate will probably surpass 30 percent this month, according to HSBC Holdings Plc. ``The largest contributing factor to inflation in 2008 has been the price of rice,'' wrote Pham Do Chi, chief economist at Vinacapital Investment Management Ltd., in a note released last week. ``After a good harvest, food prices are expected to stabilize.'' To contact the reporter on this story: Jason Folkmanis in Ho Chi Minh City at folkmanis@bloomberg.net

MARD
8/19/2008

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