Indonesia surprises with 820,000T Thai rice import, lifts prices -UPDATE 3

* Market surprised by bigger-than-expected purchase

* Indonesia may buy more

* Prices supported for now, set to ease with Vietnam harvest (Adds comments from Bulog source and Philippine official)

By Apornrath Phoonphongphiphat and Ho Binh Minh

BANGKOK/HANOI, Jan 26 (Reuters) - Indonesia's bumper purchase of 820,000 tonnes of Thai rice, nearly five times the volume sought, lifted the market on Wednesday but traders were unconvinced prices would stay high, thanks to Vietnam's rising supply and lower imports projected from the Philippines.

The amount Indonesia's state buying agency Bulog bought from Thai exporters for prompt shipment far surpassed the 170,000 tonnes of 15 percent broken Thai rice announced earlier for the batch, a source with Bulog and traders said.

"The deal surprised the market as it was bigger than expected and it has automatically pushed domestic milled rice higher," one exporter said.

Firmer prices of the main staple in Asia are of concern to policy makers anxious to avoid a repeat of the riots triggered by price spikes in 2008.

"There are 650,000 tonnes of 15 percent broken grade and 170,000 tonnes of 5 percent broken grade white rice," said one exporter who has contracted to sell rice to Bulog.

The two grades of rice, for shipment in February and March, were sold at prices ranging between $490 and $545 per tonne on a cost, insurance and freight basis (CIF), exporters who were awarded deals said.

Thai 5 percent broken-grade white rice rose to 14,600 baht ($472) per tonne from last week's 14,200 baht, traders said.

The export price for 5 percent broken-grade rose to $525 per tonne from last week $520, free on board (FOB), they said.

It was not immediately clear whether the 820,000 tonnes bought were part of the permit to import 1.5 million tonnes of rice for shipments until end-February.

"We received an overall offer of 900,000 tonnes," said the Bulog source.

Indonesia has secured a total of 1.33 million tonnes from Thailand and Vietnam for delivery until next month, Trade Minister Mari Pangestu said at the end of December.

PRICES FIRM FOR NOW

Indonesian demand helped support overall Thai rice prices. The benchmark 100 percent B grade white rice <RI-THWHB-P1> was being offered at $540 per tonne on Wednesday, up from last week's $535 per tonne, traders said.

Traders said they expected Bulog to buy more rice again when prices eased, as Vietnam is about to harvest its major crop, which could drag prices down.

"Demand in Indonesia must be strong, as they did not wait for prices to soften in Vietnam when the current harvest peaks, to buy rice," said a trader in Ho Chi Minh City.

A trader in Jakarta said Bulog had been in protracted talks with Thai and Vietnamese exporters over Indonesian import requirements to fulfill its permit requirements.

The government, which allowed Bulog to ship in rice last year because of falling stockpiles, has imposed tight rice trade rules since 2004 that bar imports of the politically sensitive food grain during the main February-June harvest to avert pressure on farmers' prices.

The government normally waits for the main harvest to end in June to assess stock levels, the progress of Bulog's rice procurement, local rice prices, farmgate prices, and official production figures before deciding in September whether to import for the following year.

Rice prices in Vietnam, which raised the minimum price of its export-grade rice this month ahead of negotiations with the Philippines, eased this week before a long holiday on a lack of buying interest, especially after Indonesia moved to secure the hefty volume from Thailand, traders said.

"Exporters did not expect the volume to turn out to be that high," another trader in Ho Chi Minh City said.

Indicative offers for Vietnam's 5 percent broken rice eased to between $460 and $470 a tonne, free on board, against $470 last week, while the Vietnam Food Association retains an export price floor for the grade at $520 .

The 25 percent broken-rice grade softened to $430-$440 a tonne against $435 last week and far below the floor of $498 per tonne.

Officials of the Vietnam Food Association, which leads the strategy on raising prices, could not be reached for comment.

"This purchase will make people in the association rethink their pricing," a Vietnamese trader at a foreign firm in Ho Chi Minh City said, adding that Vietnam might have to lower the export floor prices.

"The floor is designed for the (potential) deal with the Philippines."

He said Vietnam focused too much on selling to the Philippines but Manila had been quiet on its demand, while Bulog went ahead to buy Thai rice, making the situation more difficult for Vietnamese rice industry officials to react.

But prospects of lower production loom, as Vietnam's Mekong Delta rice basket is projected to yield 21.5 million tonnes of paddy, or unmilled rice, in 2011, the Communist Party-run Nhan Dan newspaper reported on Wednesday.

The delta has been losing rice fields to rapid urbanisation in recent years. The regional government had planned to export 5.5 million tonnes of milled rice this year, down slightly from 5.6 million shipped in 2010.

Philippine Agriculture Secretary Proceso Alcala said the National Food Authority (NFA) council, the panel that approves buying plans for the world's top rice importer, may firm up the 2011 import volume in two to three weeks. The government recently estimated purchases may be around a third to half of last year's volumes, or 800,000 to 1.2 million tonnes.

"We are not in a hurry to buy. As of last week, we have 47 days of stocks at NFA," said Alcala. The NFA is required to maintain a 30-day buffer stock during lean months from July to September.

"We can assure that (domestic) rice prices will remain stable. Also, based on our field monitoring, the standing crops are all in good condition." ($1=30.94 Baht) (Additional reporting by Fitri Wulandari in JAKARTA and Erik dela Cruz in MANILA; Editing by Ramthan Hussain and Clarence Fernandez)

(Source: http://www.forexyard.com/en/news/Indonesia-surprises-with-820-000T-Thai-rice-import-lifts-prices-2011-01-26T105140Z-UPDATE-3)