Hanoi, Aug 22 - Vietnam has raised the reference price for its top rice export grade by 8.3 percent to help boost domestic prices and sell newly harvested grain, but traders said actual trading prices were far below the level.
The Vietnam Food Association raised the reference quotation for the 5 percent broken rice to $650 a tonne, on a free-on-board basis, from $600 a tonne previously, an association official said.
The price hike by the association, which oversees Vietnam's rice production and exports, is aimed at supporting a government paddy buying scheme to help Mekong Delta farmers sell all their newly harvested summer-autumn rice.
The association also set reference prices for the 10-percent broken variety at $630 a tonne, $600 a tonne for the 15-percent broken grade and $580 a tonne for the 25 percent broken variety.
Quotations for the 25 percent broken rice, Vietnam's most popular export grain, have been absent in the past month because most of the grain has been sold to the Philippines, the world's largest grain buyer so far this year.
The new reference price brings the Vietnamese top export grade close to Thai 5-percent broken grain, which was quoted this week at $680 a tonne, on a free-on-board basis <RICE/ASIA1>.
Rice export companies are expected to buy around 700,000 tonnes of paddy this month in the Delta. The central bank also ordered state-run banks to prepare funds for the purchase.
"The reference price is not a floor so exporters can bring their contracts to the association and we can review terms and time of shipment before approval," said Nguyen Thi Nguyet, General Secretary of the food association.
She declined to say by how much lower contracted prices can be accepted.
Traders said the variety has been traded at $550 a tonne on the market, but contracts were with only a small quantity of up to 2,000 tonnes each, partly because exporters still needed to secure the association's approval on the selling price before loading.
"Trade is in limbo because if the market follows the association's guide, it means no trading," a dealer with a foreign company in Ho Chi Minh City said.
"If they deal at the market term, meaning prices are much lower than the reference price, it is difficult for exporters to get approval so only small deals have been reached," he said.
Traders said the 25-percent broken rice was being traded at $520 a tonne, free-on-board, compared with the association's guide of $580 a tonne. Paddy prices have risen more than 3 percent in the past week to 4,600-4,800 dong ($0.28-$0.29) per kg this week in the Mekong Delta, thanks to the government purchasing plan.
The Mekong Delta produces more than half of Vietnam's paddy output but supplies more 90 percent of the grain for trading. ($1=16,495 dong)