Rice export prices go down, exporters lose contracts

Myanmar plans to export 500,000 tons of low quality rice this year. Thailand, Pakistan and India are pushing up the sale of inventory rice. All those factors have put a hard pressure on Vietnam’s rice export prices.

MRIA, the rice association, has informed that the government of Myanmar has removed the ban on rice export. This means that from May, the world market would have 500,000 tons of rice supply from Myanmar, which have the prices more competitive than any other exporters. Forecasts say that low income countries in Africa, Iraq and the Philippines would seek rice sources from Myanmar instead of buying rice from Vietnam, Thailand or Pakistan like they did in the first months of the year.

Fewer opportunities for rice exports

Right after Myanmar released the decision to resume export, the rice prices on the world market have dropped considerably. The price of Thai 25 percent broken rice has decreased by five percent to 440 dollars per ton, while the price of Vietnam’s rice to 430-435 dollars per ton, and Pakistani rice to 450 dollars

Huynh Cong Thanh, Director of the HCM City Food Company, admitted that the company is facing difficulties in seeking new contracts, because the export prices have been decreasing. Not only low quality rice, but five percent broken rice, priced at 470-475 dollars per ton, and also discovered it’s hard to find buyers, even though the price has decreased by 10 dollars per ton in comparison with April.

Since the beginning of the year, the policy on lowering sale prices to reduce stocks by Thailand, has also caused difficulties to Vietnam. Saigon Tiep Thi has quoted its source as saying that “in the first quarter of 2011, Thai businesses have beaten Vietnamese exporters to obtain the contracts on exporting rice in Indonesian and Filipino markets.”

“They (Thai businessmen) have lowered the sale prices to the deepest low in order to obtain contracts. Meanwhile, the domestic rice prices in Vietnam are relatively high; therefore, Vietnamese exporters cannot lower the offered prices any more. As such, we have lost contracts,” director of an export company said.

Domestic prices going down

On May 19, the winter-spring rice in Mekong Delta dropped to the deepest low since the beginning of the crop at 5700-5800 dong per kilo. The price of brown rice has dropped by 400-500 dong per kilo to 7800-7800 dong per kilo. Some small merchants, who collect rice from farmers to sell to exporters, said many export companies have halted purchasing rice from them over the last week.

“The lending interest rates are overly high, while we still cannot sign new contracts. Therefore, we have to reconsider the rice collection,” a director of an export company said

According to the Vietnam Food Association, four million tons of rice has been contracted, while the exports by mid May 2011 had reached 2.746 million tons, worth 1.3 billion dollars. Farmers in Mekong Delta have finished harvesting the winter-spring crop and they are preparing for the summer-autumn crop. The decreasing domestic and export rice prices will surely cause difficulties for farmers.

Commenting about the rice export markets in the time to come, Pham Quang Dieu, an expert from Agromonitor, a forecasting and analyzing company, said in the first quarter of the year, farmers held the power of the market. However, it is very likely that in the second and third quarters, the power will be transferred to enterprises.

Dieu has also predicted that exporters may meet big difficulties in the last months of the year, since many countries have been pushing up the export.

What will happen after May, when the export cannot go smoothly, and the rice supply is profuse? The prices will go down, but it will be not enterprises, but farmers, who will be the biggest sufferers.

Meanwhile, Thoi bao Kinh te Saigon has quoted its sources as saying that “only some exporters are implementing the contracts signed with the Philippines. However, the volume of rice the exporters need is not big enough to help stabilize the domestic prices.” – VIR

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