Javier Blas in London and Roel Landingin in Manila
FT Syndication Service
The world's second-largest exporter of rice has dashed hopes of a significant reduction in prices of the grain in the short term when Vietnam imposed a minimum export price of $800 a tonne for new contracts.
The minimum export price came as Hanoi lifted Wednesday a ban on the signing of new export contracts that was imposed earlier this year. However, it said that it would only allow limited sales and reiterated a limit of 3.5m tonnes of exports for the first nine months of the year.
Vietnam this year cut its 2008 export target from 4.0m tonnes to about 3.5m tonnes. Last year it sold about 4.5m tonnes of rice.
Rice traders said that the Vietnamese floor price would become a de facto global floor price, thwarting hopes of rice costs falling back to pre-crisis levels. The price of rice surged last month to a record high of $1,100 a tonne, up from $300 a year ago.
Thai medium-quality rice, the global benchmark, traded last Wednesday at about $800 a tonne, traders said.
However, they noted that the Philippines last Wednesday signed a contract to import 600,000 tonnes of Vietnamese rice at $940 a tonne, a sign that, in a tight market, very large shipments command premium prices.
Patrick Walmsley, of Jackson Son & Co, the London-based traders, said that rice prices were showing no signs of weakness.
"The rice market will remain tight until October or November, when a fresh harvest will arrive from the Far East countries," he said.
The surge in rice prices has added fuel to the fire of food inflation and triggered food riots in a number of low income countries. Rice is a staple for about 3.0bn people in Asia, the Middle East, West Africa and central America.
The Philippines purchase considerably eases the pressure on the world's biggest rice importer to secure supplies of the staple ahead of the lean season from July to September. Manila had wanted to import 2.1m tonnes of rice but had signed contracts for only 1.7m tonnes before the deal with Vietnam.
Arthur Yap, the agriculture secretary, said: "We have been able to secure a good deal with Vietnam and saw this as a good opportunity to expand our stockpile, especially in light of the recent uptick in global rice prices."
Traders said that the high price paid in the government-to-government deal showed that rice importing countries needed to secure enough supplies.
Other large exporters, including India, China and Egypt, have restricted or banned rice exports. However, Cambodia, the world's eighth-largest rice exporter, this month relaxed restrictions on overseas sales of the grain.
