“Falling commercial demand slowed our exports this quarter,” said Truong Thanh Phong, chairman of the Ho Chi Minh City-based Vietnam Food Association. “Foreign buyers expect that our prices will drop further but we expect orders will start to pick up from May.”

Vietnam, the world’s second-biggest rice shipper after Thailand, exported a record 6 million metric tons last year and plans to ship a similar amount this year, said Phong.

“Demand for rice from buyer countries was low and they also wanted to wait and see what the output levels were in producing countries,” said Nguyen Hieu Tam, head of rice research at Vietnam Market Analysis and Forecast Joint-Stock Co., a Hanoi-based research company for agricultural products. “Some African buyers also had financial difficulties in buying our rice,” she said today.

El Nino, caused by a warming of the equatorial Pacific Ocean, may slow production in major rice producers including India and Indonesia, helping boost exports from Vietnam, which produced a bumper winter-spring harvest, Tam said by phone.

Thailand’s rough rice harvest may decline 15 percent in the year that began Oct. 1 because of dry weather caused by the El Nino weather phenomenon, the country’s Office of Agricultural Economics said on Jan. 13.

Rice Stockpiling

The Vietnam Food Association’s Phong forecast in November that prices would surge 50 percent to about $800 a ton by the end of the second quarter next year on increasing demand and unfavorable weather conditions. The country’s average export price from Jan. 1 to Feb. 28 was $473 a ton, according to the association’s Web site.

Rice futures traded in Chicago have dropped 12 percent this year, compared with a 22 percent slump in the same period last year. The most-active contract gained 0.3 percent to $13.13 per 100 pounds at 12:20 p.m. in Singapore. The price climbed to record $25.07 in April 2008.

The Vietnam Food Association is asking its 30 member companies to buy 1 million tons from farmers for stockpiling after prices dropped in the Mekong Delta, according to a report on the group’s Web site. The Mekong Delta is Vietnam’s main rice producing region.

More than 300,000 tons have been bought under this plan, Tuoi Tre newspaper reported today, citing Pham Van Bay, the group’s vice chairman.

Foreign Warehouses

The Southeast Asian nation also plans to start construction of a rice processing plant and warehouse in Cambodia by the end of the second quarter to support exports, according to Nguyen Tho Tri, deputy director of the Vietnam Southern Food Corp, which also has a stake in the project.

Another stockpiling warehouse will be built in the Philippines this year, he said, declining to give further details.

The Vietnamese government is trying to boost exports to help meet an economic growth target of 6.5 percent this year, from 5.3 percent last year. Rice was the country’s fifth-biggest foreign exchange earner this year as of the end of February.

By Van Nguyen - Bloomberg - March 8, 2010