Uncertainty surrounding rice exports

The Vietnamese Government has stressed the need to ensure farmers receive 30 percent of the profits from their rice produce. It is difficult to reach this target if there is no an effective solution for rice producers and exporters in Vietnam.

Despite having exported more than 3 million tonnes of rice in the first half of this year, meeting 50 percent of the yearly plan, Vietnam’s rice exports have dropped by 12 percent in volume and approximately 30 percent in value compared to the same period last year.

The reduction is attributable to poor market forecasting and snags in fulfilling contracts for exports.

Fall in volume and value

Looking back at the forecasts earlier, it was supposed to be a “Golden” year for rice exporting countries including Vietnam. However, the country’s rice exports not lived up to expectations.

The price of Vietnamese rice for export has fallen constantly from the start of this year. The price of five percent broken price dropped to US$385/ tonne in May 2010 from US$517/tonne in December last year while the price of 25 percent broken rice fell to US$335/ tonne from US$466/tonne in the same period. Despite being a little higher in June, the prices have remained much lower than those recorded earlier this year.

Nguyen Van Tien, an expert from the Information Centre for Agriculture and Rural Development under the Ministry of Agriculture and Rural Development (MARD) attributed the sharp fall in price to misleading forecasts. Later last year, before the failure of crops in India and Indonesia and inclement weather in rice growing countries, the media quoted the US Department of Agriculture as saying that rice supplies will be lower than demand in 2010.

However, things went the other way round in the first half of this year with India’s rice output falling far lower than expected and Indonesia considering the possibility of joining the ranks of rice exporters again, though they had earlier closed its export market. In the meantime, Thailand and Vietnam have failed to export large volumes of rice.

Tien also pointed out snags in fulfilling the government’s contracts due to many partners’ delayed delivery of their shipments and bidding efforts for new contracts after the news about the bumper rice crops in Thailand, Vietnam and Indonesia was released.

Businesses have also found it difficult to carry out commercial contracts on account of direct competition from Bangladesh and Myanmar as Vietnam’s rice is only of low or average quality, added Tien.

Promoting rice exports

It is forecast that rice exports will run into difficulties in the second half of this year. Vietnam’s target of exporting 6 million tonnes can be reached but its export earnings will be less than expected. Currently, Vietnam and Thailand have a large amount of rice in stock, therefore, the price of rice is likely to fall.

Le Van Hung, Deputy Director of the Can Tho provincial Department of Industry and Trade said that in general Vietnam’s rice exports will find it harder this year because many countries have had bumper crops so they won’t have a high demand for imported rice. In addition, if Thailand increases their export volume, Vietnam will face even more difficulties.

Currently, Vietnam is focusing on African markets, however, export businesses should be aware of international payments because the methods of payment in many African countries are very restricted, warned Hung.

The Vietnam Food Association said that some businesses are finding ways to penetrate the Brazilian and South American markets. If they can access these markets, rice exports will pick up again from now to the end of this year. However, they do not know much about customer tastes in these new markets so success is not guaranteed. The Middle East and Africa mainly consume Basmati therefore it is very difficult for Vietnam to compete with Thailand, Pakistan and India as they all produce this kind of rice.

To help farmers and rice export businesses cope with future difficulties in the future, Nguyen Van Phong, vice chairman of the Tra Vinh provincial People’s Committee proposed that the State support the purchasing and stockpiling of rice. If businesses take out loans from the banks at high interest rates they will find it difficult to compete with their foreign rivals.

It is something of paradox that the traders have the right to decide the price, instead of farmers, which indicate that there are still some problems managing rice exports. The Government requested all agencies to ensure that farmers enjoy 30 percent of the profits. But this is no easy task.

Experts said that in addition to pouring investment in production and supplying up to date information about the markets, Vietnam should pay more attention to building up its trademark as Vietnamese rice has to go through intermediate partners before reaching the hands of customers. – VOV

Tags: Vietnam rice, Vietnam rice exports

Posted by VBN on Jul 8 2010. Filed under Import-Export. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry