The demand from China, coupled with an industry-led stockpiling campaign, is keeping a floor under Vietnamese paddy prices even as the harvest of the major crop is peaking in the Mekong Delta food basket.
Vietnamese exporters have sold about 500,000 tons of rice to China so far this year, with nearly half that volume already shipped, Vietnam Food Association Chairman Truong Thanh Phong told the farm ministry-run Vietnam Agriculture newspaper.
"The number of contracts of rice sold to China has been increasing quickly," an official of Vietnam Food Association told Reuters, confirming the media report.
China has been buying rice from Pakistan and Vietnam in recent months to keep a lid on domestic rice prices which have climbed on the back of government support to paddy farmers, traders said.
"There is no problem with domestic supply. I think the estimated large imports could be due to cheap prices," said an analyst with a Chinese official think-tank.
A Singapore-based rice trader added: "It is not clear how much China is going to buy as it started very quietly and it is going to end very quietly."
Chinese domestic milled rice was quoted at about 3,900 yuan ($619) per ton in Guangxi, bordering Vietnam, compared with $430 per ton for Vietnamese rice, according to the China National Grain and Oils Information Centre.
The price differential has led to about 400,000 tons of Vietnamese rice sold across the border to China via largely unregulated trades, the Vietnamese food association said.
Vietnam could overtake Thailand as rice exporter
Last year, China imported 309,000 tons of rice from Vietnam, almost 150 percent more than the 124,500 tons bought in 2010, customs data shows. Exporters must register contracts with the food association to obtain shipping permits.
The forecast demand by China represents nearly 14 percent of the record 7.2 million tons Vietnam aims to export this year. If Vietnam does sell that much rice, it will overtake Thailand to become the world's largest rice exporter in 2012.
Thailand, which has been the world's biggest exporter for three decades, looks set to see exports fall sharply to 7 million tons at most due to high prices caused by government intervention to support millions of poor farmers.
Vietnamese 5 percent broken rice prices have risen to around $435 a ton, up from around $405 a ton few weeks ago, thanks to fresh demand from China as well as a government-sponsored stockpiling plan aimed to keep in stock 2 million tons of paddy for three months ending June 15.
"The prices are not likely to spike as there is a lot of rice in the world but it is certainly supporting the market," said a Bangkok-based trader. "We are looking at another $20 increase in Vietnamese prices."
On Monday, prices for Vietnam's winter-spring rice grade 1, used for processing the 5-percent broken variety for export, rose to 7,050-7,280 dong (33.8-34.9 US cents) per kg, up 3 percent from March 8, the day before the stockpiling plan.
The US Department of Agriculture has estimated China's milled rice production in 2011/12 at 140.5 million tons, up from 137 million tons a year ago.
China harvested a record 200.78 million tons of paddy in 2011, up 2.6 percent from 2010, according to official data.
The data also showed 2011 rice imports were 578,383 tons imported while exports stood at 515,497 tons.