VietNamNet Bridge – The Vietnam Food Association (VFA) and the Ministry of Industry and Trade have told the Northern and Southern Food Corporations (Vinafood 1 and Vinafood 2) to re-negotiate their contracts with the National Food Agency of the Philippines to export 800,000 tons of rice, a member of the VFA was quoted as saying in Thoi Bao Kinh Te Saigon.

Rice companies, however, are not hopeful about the outcome.

Lam Anh Tuan, director of Thinh Phat Company Ltd, said that it would be very difficult to persuade NFA to adjust the delivery requirements set in the contract to facilitate Vietnamese exporters.

The VFA and MOIT told Vinafood 1 and Vinafood 2 to re-negotiate with NFA after many rice exporters in the Mekong River Delta refused to implement rice export contracts authorized by Vinafood 1 and Vinafood 2. Exporters said they were certain they would incur losses under such contracts.

The Tien Giang-based Viet Hung Company Ltd, for example, “quit the game” because of two reasons: the overly low bid that Vinafood 1 & 2 made to the Philippines to win the contract, and the strict requirements in the contract.

“Under the contract, after rice is delivered to NFA, exporters could be fined $3 per every ton of rice which has a proportion of broken rice higher than one percent than agreed to in the contract,” Tuan said.

The fine would be $6 per ton if the broken rice proportion is 2 percent higher, and $30 per ton if the broken rice ratio were higher than 10 percent.

Tuan said he was still waiting for the outcome of the new negotiations before making a decision on authorizing new export contracts.

Meanwhile, the domestic 2014 summer-autumn rice supply has increased in the Mekong River Delta, which has caused prices to fall.

A merchant collecting rice from farmers in An Giang said fresh IR 50404 was selling at VND4,200 per kilo late last week. The price fell further by VND150 per kilo from earlier last week.

Meanwhile, IR 50404 material rice was bought by export companies at VND6,600 per kilo.

Vinafood 1 and Vinafood 2 have been severely criticized for offering overly low bids in an effort to obtain the contract with the Philippines.

Analysts believe that Vietnam made a major mistake when analyzing the situation, which then led to the wrong decision.

Tuan of Thinh Phat pointed out that Thailand was the major rival of Vietnam in the bid for the rice export contract because it was nearer to the Philippines than India and Pakistan, which allows savings on transportation costs.

However, Tuan said Thailand should not have been considered a threat to Vietnam. NFA said that the Philippines would only accept rice harvested no earlier than four months ago. Thailand stopped collecting rice in February 2014.

“This means that Thailand only had rice harvested in 2012 and 2014, and that Vietnam was the only seller in the market,” Tuan said.

VNN/TBKTSG