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Indonesia’s bumper purchase of 820,000 tons of Thai rice, more than four times the volume initially sought, lifted the market on Wednesday, but traders were unconvinced prices would stay high with Vietnam’s rising supply and lower imports projected from the Philippines.

The volume of rice the National Logistics Agency (Bulog) bought from Thai exporters for prompt shipment far surpassed the 170,000 tons to 200,000 tons announced earlier for the batch, traders and industry officials said.

“The deal surprised the market as it was bigger than expected and it has automatically pushed domestic milled rice higher,” one exporter said.

Firmer prices of the staple food are of concern to policy makers anxious to avoid a repeat of the riots triggered by price spikes in 2008.

“There are 650,000 tons of 15 percent broken grade and 170,000 tons of 5 percent broken grade white rice,” said one exporter who was contracted to sell rice to Bulog.

 The two grades of rice, for shipment in February and March, were sold at prices ranging between $490 and $545 per ton on a cost, insurance and freight basis, said exporters who were awarded deals.

Bulog officials declined comment when contacted by the Jakarta Globe on Wednesday.

Thai 5 percent broken-grade white rice rose to 14,600 baht ($472) per ton from last week’s 14,200 baht, traders said.

The export price for 5 percent broken-grade rose to $525 per ton from last week $520, free on board.

Fresh Indonesian demand — though still part of the 1.5 million ton rice permit issued last year — helped support overall Thai rice prices. The benchmark 100 percent B grade white rice RI-THWHB-P1 was offered at $540 per ton on Wednesday, up from last week’s $535 per ton, traders said.

Traders said they expected Bulog to buy more rice again when prices eased. Vietnam is about to harvest its major crop, which could drag prices down.

“Demand in Indonesia must be strong, as they did not wait for prices to soften in Vietnam when the harvest peaks to buy rice,” said a trader in Ho Chi Minh City.

A trader in Jakarta said Bulog had been in protracted talks with Thai and Vietnamese exporters over Indonesian import requirements to fulfill last year’s permits for shipments to come in by the end of February.

The government, which allowed Bulog to ship in rice last year because of falling stockpiles, has imposed tight rice trade rules since 2004 that bar imports of the politically sensitive food grain during the main February-June harvest to avert pressure on farmers’ prices.

It normally waits for the main harvest to end in June to assess stock levels, the progress of Bulog’s rice procurement, local rice prices, farmgate prices and official production figures before deciding in September whether to import for the following year.

Rice prices in Vietnam, which raised the minimum price of its export-grade rice this month ahead of negotiations with the Philippines, eased this week before a long holiday on a lack of buying interest, especially after Indonesia moved to secure the hefty volume from Thailand.

“Exporters did not expect the volume to turn out to be that high,” another trader in Ho Chi Minh City said.

Indicative offers for Vietnam’s 5 percent broken rice eased to between $460 and $470 per ton, free on board, against $470 last week.

The Vietnam Food Association retains an export price floor for the grade at $520.

The 25 percent broken-rice grade softened to $430 to $440 per ton against $435 last week, far below the floor of $498 per ton.

Prospects of lower production loom, though, as Vietnam’s Mekong Delta rice basket is projected to yield 21.5 million tons of paddy, or unmilled rice, in 2011, the Nhan Dan newspaper said on Wednesday, suggesting a fall of around 10 percent from last year.

The delta has lost rice fields to rapid urbanization in recent years.

 
Reuters, JG