In July and August 2013, the prices of the domestic IR 50404 jumped from VND6,500 per kilo to VND7,200 per kilo, while the finished white rice also increased sharply from VND7,600 to VND8,200 per kilo.

The exporters have cancelled the export contracts due to the domestic rice price hike plus the low offered export price. But they are ready to pay the compensation for the damages due to the cancellation of contracts.

They offered $50-70 less per ton than the prices offered by India and Thailand.

Actual report revealing the number of contracts cancelled were not disclosed. However, according to the Vietnam Food Association VFA, 938,000 tons of rice contracted had been canceled by the end of July, including 180,000 tons in July.

However, the contract cancelation has not helped domestic enterprises. The world’s prices, which were low at the time of cancelation, have been decreasing continuously.

 Thai and Indian rice prices have been forced down sharply. Their 5 percent broken rice prices are now just $20-50 per ton higher than the Vietnamese rice. Especially, the domestic prices have also tumbled to the price levels seen at the end of June, about VND 6,500 per kilo for IR 50404.

 Some Vietnamese exporters have said they now offer the export prices at $380 and $350 per ton for 5 percent and 25 percent broken rice, respectively, lower than the $400 per ton level offered in July. However, despite the lower prices, it is very difficult to obtain new orders.

 Domestic prices decrease rapidly

 The low exports have led to the domestic prices decreasing rapidly in August. In Vietnam.

 Acoording to the VFA, on August 1-22 Vietnam could export 288,000 tons of rice only which is about 70% down than the export in july of 576,000 tons last year

Regarding the domestic prices, Duong Van Men, a rice trader in Lap Vo district in Dong Thap province said IR 50404 fresh rice is now traded at VND4,300 per kilo, down by VND500 per kilo from the price in mid-July.

 As such, the rice material price has decreased by VND700 per kilo. Export companies in Mekong Delta now purchase rice at VND 6,700 per kilo of IR 50404 and VND6,800 per kilo of long grain rice.

 In the latest news, VFA has asked the government to extend the time for export enterprises to enjoy the preferential bank loan interest rates within the program on storing 1 million tons of the summer – autumn crop by one month, to October 15, 2013 instead of September 15 as previously planned.