Safety net
Safety net
The Viet Nam Food Association (VFA) has said it will introduce a new contract to prevent cancellations of rice export deals, something that has happened far too frequently in recent months.
According to Pham Van Bay, Deputy Chairman of VFA, both sellers (local firms) and buyers (foreign companies) have cancelled rice export contracts, but buyers have far outnumbered sellers.
Bay said the new VFA contract would give sellers legal grounds for taking buyers to court if it is breached unilaterally.
Most of the contracts that have been cancelled so far are commercial contracts signed by two companies, which are different from government-to-government contracts, said Bay.
Cancellation of rice export contracts on the sellers' side was often done by private companies that have not been allocated a quota to purchase rice for temporary storage or firms that have the quotas but are unable to access bank loans due to poor business performance and losses, Nguyen Tho Tri, deputy general director of the Viet Nam Southern Food Corporation (Vinafood2), told the Thoi Bao Kinh Te Sai Gon (Saigon Economic Times) newspaper.
However, most of the cases so far are a result of contracts signed when prices were low with a dense delivery schedule, creating high demand and pushing up domestic prices. In this situation, if exporters continued to buy rice to fulfill their contracts, they would suffer losses.
According to the association, in the first seven months, contract cancellations affected the export of nearly one million tonnes of rice, or about one-fourth of more than four million tonnes worth $1.8 billion that were shipped.
In July alone, local firms cancelled contracts for export of 180,000 tonnes of rice.
vietnamnews
