It’s not easy for Vietnam to export rice at high prices

Rice exporters say they are facing considerable challenges in 2011 because loyal rice importers have changed the way they purchase rice and input expenses have soared.

The new trick of the Philippines

The biggest change in exporting rice in the first months of the year is that the Philippines, a partner who purchases 1/3 of Vietnam’s rice output, has changed how it imports rice. The country has decided to purchase rice under commercial contracts instead of inviting concentrated bids. With a plan to import 1.5-1.7 million tons of rice this year, the Philippine Government has assigned businessmen to seek rice from Thailand and Vietnam and other countries, hoping to purchase rice at the lower prices.

In fact, at the end of January and beginning of February 2011, after allowing businessmen to seek 163,000 tons from China, Thailand, India and Australia, the Philippine Government assigned an additional “quota” of 660,000 tons to businessmen to target the Vietnamese market. In late 2009 Vietnam obtained contracts to sell 1.5 million tons of rice to the Philippines in 2010 in the form of concentrated contracts (contracts carried out under the agreements signed at Government level) at the average prices of $600-660 per ton for 15-25 percent broken rice. Meanwhile, thus far in 2011, no consignment of rice has been sold to the Philippines.

Experts say that the purpose of the Philippine Government is very clear: they want businessmen to negotiate import contracts first and set up low price levels. After that, if they invite bids to look for rice exporters, they will use the previously established low price levels as the floor prices. This practice may lead that Vietnamese enterprises to compete with each other and offer lower prices, thus making the market unstable.

In the first two months of the year Vietnam exported nearly 1.2 million tons of rice worth over $600 million, an increase of 63 percent in quantity and 50 percent in quality in comparison with the same period of 2010. Figures show decreases in the average export prices in the first two months of 2011 in comparison with the same period in 2010.

In order to deal with the new circumstances, the Vietnam Food Association VFA has assigned six enterprises to negotiate the sale of rice to Filipino businessmen. The enterprises will later join forces with other enterprises to fulfill export contracts. The solution is aimed to help prevent clients from scrambling which in turn will lead to the export price decreases.

Saigon Tiep Thi has quoted its sources as saying that VFA has set up minimum prices for negotiations with Filipino business men at $440 per ton for 25 percent broken rice and $450-460 per ton for 15 percent broken rice. However, if the price levels are fixed, they will still be $60-100 per ton lower than the prices at which the Philippines purchased rice from Vietnam in late 2010 under concentrated contracts.

A director told Saigon Tiep Thi on February 27 that the rice used to make 25 percent broken rice is priced at over 8000 dong per kilo, and the prices for deliveries at the broadside should be $450 per ton already. Therefore, though Filipino businessmen are hunting for rice, they cannot purchase rice because they are only offering low prices.

Exporters told not to be too worried

Vietnam is now harvesting three millions tons of winter-spring crop, and it still has more than one million tons of stocks. However, Huynh Cong Thanh, Director of the HCM City Food Company said: “We should not be too worried”.

The Philippines will have to purchase rice, because their stocks are too low. The Government of Bangladesh has decided to import food urgently and is going to purchase one million tons of rice in one or two months. Malaysia is also seeking to purchase more rice from Vietnam and Thailand to ensure a sufficient supply. It is expected that from March on, European businessmen will flock to Vietnam to buy rice to sell to Africa.

Le Tuan, Director of Imex Cuu Long said that his company and other companies are not hurrying to sign export contracts at this moment because they fears the prices will go up in some months.- Saigon tiep thi

Tags: Vietnam rice, Vietnam rice exports, Vietnam rice exports 2011