December 21, 2011
Trading executives said Tuesday (Dec 20) that because of quality concerns Vietnam has rejected a cargo of Indian corn and resold the grain to another Southeast Asian buyer.
The shipment was rejected earlier this month at Hai Phong port because the destructive pest trogoderma granarium was detected, according to a Ho Chi Minh City-based executive at a grain trader.
He added that since October at least seven corn shipments from India have had to be refumigated before clearance at Hai Phong port. These shipments totalled 45,000 tonnes.
Traders in India confirmed the rejection of one shipment. They added other shipments were accepted only after refumigation. Nevertheless, they contested these shipments had been properly fumigated in India and that pests could not survive this process.
A possibility, they suggested, is that the shipments were infested at the Vietnamese port. They asserted other importers including Malaysia and Indonesia haven't complained about quality.
If pests are detected in shipments to Vietnam they must be quarantined and refumigated on a case-by-case basis before quality clearance. This results in delays, according to another trader in Vietnam.
Delays to several recent shipments have forced feed millers to buy corn from Argentina and also substitute it with cheaper Australian feed wheat.
Indian corn shipments faced similar problems in Vietnam a year ago. Some of them were resold to Indonesian buyers.
Exporters in India contend that complaints about quality give Vietnamese buyers the chance to cancel costlier contracts at a time when global prices have declined sharply.
The rejected cargo was purchased several weeks ago at around US$310/tonne C&F, while Indian corn is now being offered to Vietnam at around US$270/tonne.
"It makes sense to wash out costlier deals and then buy again at lower levels," said a grains exporter in Mumbai. However, buyers in Vietnam say quality issues were being faced even before the latest fall in prices.
Vietnamese feed millers are now seeking other suppliers and have purchased their first corn from Argentina in almost four months.
Traders said a 20,000-tonne Argentinean corn shipment was purchased at US$289/tonne, basis cost and freight for shipment to Hai Phong port in February.
Buyers are also taking Australian feed-grade wheat on a delivered basis at around US$260/tonne, Ho Chi Minh City and US$263/tonne, Hai Phong port.
Wheat and corn are direct substitutes as animal feed ingredients but scope for such swaps is more apt for pork than poultry. Pork dominates Vietnam's meat industry.