It’s hazardous to sign big rice export contracts now: VFA

The bad weather and natural calamities around the globe combined with the unpredictable rice stocks are the main factors that affect the rice market and rice export prices in the first months of 2011. This year is predicted to be a difficult year for Vietnamese rice exporters.

In an interview given to Thoi Bao Kinh Te Saigon several days ago, Truong Thanh Phong, Chair of the Vietnam Food Association (VFA), said that as everything remains unpredictable, and that it would be risky to sign big export contracts at this moment.

What are your assessments about the rice exports in the first months of 2011?

VFA believes that both the rice output and consumption in the globe in 2010-2011 will increase. However, as the weather and climate are unpredictable, it is necessary to keep a close watch over the weather performance in order to apply suitable export policies.

The rice inventory volume in export countries should also be a matter of concern. For example, the stocks in some countries such as India and China have been increasing, but the stocks in other regions have been decreasing, thus leading to the imbalance between supply and demand.

Meanwhile, many unexpected things have occurred in the second half of 2010, thus affecting the yearly rice export. Indonesia, for example, did not import rice for two consecutive years,2008 and 2009, but then in 2010, the country unexpectedly had a demand for importing rice. To date, the country has imported 1.5 million tons of rice from Vietnam. Similarly, Bangladesh imported 400,000 tons of rice in total in 2010, far higher than the level expected in early 2010. The two markets alone are expected to import 700,000 tons of rice from the Southern Food Corporation Vinafood 2 this year.

As for the Philippines, due to some political changes and the changes with the national food agency Vietnam should be cautious when planning the export volume to the market, Since the biggest export markets of Vietnam, which import rice under the agreements signed by the governments, mostly use low quality rice, these products will continue leading the rice exports this year.

Until now, VFA has just signed export contracts for the first two months of the year, while it still has not fixed contracts for a longer term. Especially, Vietnamese enterprises will deliver 600,000 tons of rice in January and February under the contracts signed in 2010. I think that Vietnamese enterprises will have many opportunities to export rice this year, but they should not be negligent when signing big export contracts now because there are still latent big risks in international market and it is still necessary to keep a close watch over the market.

How about the rice prices this year?

VFA has announced the floor prices for export contracts for January 2011 at $520 per ton for five percent broken rice, and $490 per tone for 25 percent broken rice.

In the domestic market, the winter-spring rice price must not be lower than 5000 dong per kilogram. VFA will intervene in the market by collecting rice from farmers if farmers sell rice slowly. I asked localities to focus on taking care for the winter-spring crop in order to be able to harvest soon with high quality products. Some localities have done this and rice can be sold for good prices.

I personally think that rice prices in the domestic market will not drop considerably.

Vietnam has to open its rice market this year, meaning that domestic enterprises may have big difficulties when they have to compete with foreign enterprises. What do you think will happen in the time to come?

In 2011, if food processing and export companies do not thoroughly calculate their risks, they will surely encounter big difficulties. When Vietnam opens the rice market, many Vietnamese enterprises may be swallowed or become the subsidiaries of foreign enterprises.

In the past, in order to protect local production, Vietnam stipulated that foreign enterprises that want to do business in Vietnam have to set up joint ventures with domestic enterprises. However, this will change in 2011, when Vietnam has to open its rice market under WTO commitments. If considering capital and market capability, small Vietnamese enterprises are clearly inferior to foreign enterprises. Only big enterprises with high capabilities can survive the competition. In 2010, Vietnam had 264 rice export companies, but only 30 of them were professional exporters, while the others were just small enterprises, which only made small trade deals.

According to the Ministry of Agriculture and Rural Development, in 2010, Vietnam exported 6.88 million tons of rice, reaping the export turnover of $3.23 billion, an increase of 15.4 percent in export volume and 21.2 percent in export turnover in comparison with 2009.- Thoi bao Kinh te Saigon

Tags: Vietnam rice, Vietnam rice exports