Rice exports likely to be lower then earlier forecast

This year is named the “golden year” for rice exporting countries, including Vietnam, according to a forecast in early 2010. However, the result shows that in the first six months, rice exports have fallen in both volume and price.

According to Vietnam Food Association, to date, Vietnam has exported over 3.5 million tonnes of rice, reaching $1.3 billion in turnover. Thus, compared to the same period of 2009, rice exports of Vietnam have gone down by five percent in volume.

The noticeable problem is that the export prices of Vietnamese rice have continuously declined since early this year. If in December 2009, price for five percent broken rice was $517 per tonne, it has fallen to $358 per tonne (down by 30.75 percent) in May; price for 25 percent broken rice in December 2009 was $466 per tonne, in May has reduced to $335 per tonne (down by 28.11 percent).

Rice prices in June have inched up slightly, but are still much lower than the beginning of the year (five percent broken rice: $373 per tonne, 25 percent broken rice: $340 per tonne).

According to Trinh Van Tien, a specialist in rice sector, the cause of this situation is due to the wrong forecast of the global rice market.
By the end of 2009, due to information on bad season in India and Indonesia and the possibility that Elnino would happen in rice-growing countries, the media cited review of the US Department of Agriculture saying that 2010 could be a year with higher demand and less supply for rice. Nevertheless, changes in the global rice market show that the situation is completely reversed compared to the forecast.

Although India lost Kharif or summer crop, but the volume of rice has not fallen much. Indonesia has been considering entering the rice export market, though the market was closed earlier. Meanwhile, Thailand and Vietnam have large stock of rice for export.

On the other hand, the deferred delivery contracts in the first six months were mostly government contracts. There have been difficulties in the contract implementations due to the delay in delivery as well as as the partners’ suspensions in arranging bidding for new contracts when there was information on the sharp rise in volume after the winter-spring crops in Thailand, Vietnam and Indonesia. Trading contracts were also difficult to carry out because of the participations of Bangladesh, Myanmar into the market, and bringing direct competition to the low and medium-quality product lines of Vietnam.

According to agricultural experts, to the end of the year, rice exports can reach the volume target, but turnover could be lower than the same period of 2009. Basis for this forecast is from the announcement of Indian Ministry of Agriculture. Rabi crops (summer-autumn) of this country is estimated higher than that of last year (14.7 million tonnes), with smaller damage figures than the forecast of the previous Kharif crop. India is possibly not in the list of rice importing countries to the end of the year.

The US Department of Agriculture also made rather optimistic forecasts on global rice production. According to the new report in June, 2010/2011 global rice volume will increase by four percent compared to 2009/2010 volume. The global rice trade is predicted to rise and reach a level of 31.4 million tonnes. Moreover, Vietnam and Thailand have large rice inventory, while the supply pressure is high, so it is more likely for export rice prices to continue falling.

According to Vietnam Food Association, some rice exporters have been seeking access to Brazilian and South American markets. If the approach is succeeded, rice exports of Vietnam to the end of the year will be improved. However, these are completely new market, the tastes of consumers in these markets are still unclear, and the possibility for success is thus not predictable. Middle East and African markets have been consuming Basmati rice mainly; Vietnam will find it hard in competing with those kinds of rice compared to Thailand, Pakistan and India.

However, experts also stressed that the world demand for food is increasing, and there still is demand for rice. Thus, with advantages of being the leading rice producer and exporter, Vietnam could fully enhance the position in the future by making good use of the advantages and opportunities.

In order to take advantage of opportunities, the agricultural sector must have plans for rice growing areas, specialising in the rice varieties that Vietnam has strengths, applying technology in harvesting, preserving and processing rice to get the good quality products, ensuring consistency in rice exports, avoiding dumping to reduce the prestige of Vietnam rice.

CafeF

Tags: Vietnam rice, Vietnam rice exports