Indonesia's state purchasing agency Bulog has once again secured a successful rice procurement, buying 320,000 metric tons (MT) at $563 per MT CNF in its latest tender on July 31. The tender results have raised eyebrows in the rice market, with winning prices coming in below many market expectations.
Vietnam emerged as the biggest winner, securing seven lots totaling 185,000 MT. Myanmar followed closely, winning five lots amounting to 135,000 MT. Notably, two of Myanmar's lots were secured through a Vietnamese company, highlighting the complex nature of international rice trade.
The tender saw familiar names among the winning exporters, including Vietnam's Mekong Food, which won two lots with Myanmar rice. A new participant, An Vi from Vietnam, also managed to secure one lot.
Thailand and Pakistan, despite their significant presence in the rice market, were unable to win any lots due to higher price offerings. The lowest bids from Thai and Pakistani sellers came in at $584.50 and $588 per MT CNF respectively, well above the winning price.
Market reactions to the tender results have been mixed. Vietnamese white rice prices saw a sharp increase following the announcement, while Thai prices eased. Myanmar's prices remained steady but flexible, suggesting a lower FOB price to accommodate the $563 per MT CNF sales.
The tender results have left many in the industry puzzled, as the winning prices seem to defy current market indications. Some sources suggest that exporters may be using cost-based calculations, potentially facing challenges if they need to cover these sales without existing stocks.
Shipping costs and logistics also play a crucial role in the pricing equation. Breakbulk freight rates from Pakistan to major Indonesian ports were reported at $48/MT for August shipments, compared to $30-$40/MT from Ho Chi Minh City, giving Vietnamese exporters a significant advantage.
Looking ahead, the focus shifts to the delivery of these sales and how Indonesian ports will manage the incoming shipments. Demurrage and congestion have been ongoing concerns in recent months.
This tender is part of Indonesia's broader import strategy for 2024, with a quota set at 3.6 million MT. To date, Indonesia has purchased nearly 2 million MT through six tenders, utilizing just over half of its quota. However, there have been reports of Indonesia buying upto 5 million MT this year to safeguard food security concerns due to the concerns over rainfall.
The aggressive buying by Indonesia comes amidst concerns over domestic production, with El Niño-related dry conditions delaying harvests and potentially tightening global rice supplies.
As the market digests these tender results, traders and analysts will be closely watching for any shifts in regional rice prices and export strategies in the coming weeks.
