India set to overtake Vietnam in rice export

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  Farmers harvest rice in a field outside Hanoi. Vietnam is forecast to export 7 million tons of the grain this year. Photo: Reuters

Vietnam's rice shipments will grow steadily over the next decade but the country is likely to lose its second largest exporter position to India, the Asian Development Bank (ADB) says.

To take advantage of reduced exports from Thailand as a result of a pledge that guarantees farmers receive high prices for their crops, Vietnam is increasing exports and pegging its price at low levels.

However, while Thailand will hold off strong competition from India to remain the top exporter, Vietnam is projected to be replaced by India as the second largest shipper in the world, the ADB said in a report last week.

The Manila-based bank also warned that the unofficial cross border rice trade from neighboring countries is an issue that Vietnam may have to address seriously.

"The recent climb in the price of international rice, and particularly for all types of Vietnamese broken rice, is because Thai traders are buying Vietnamese rice through the Cambodia-Thai borders to meet their export orders," the ADB said. "Purchasing rice through this route is still cheaper for Thai traders than buying high-priced Thai rice."

Prices of unhusked grains in the Mekong Delta, Vietnam's rice basket, have risen around 15 percent over the past two weeks to VND5,000 per kilogram.

Exporters complain that it has become more difficult to buy rice from farmers these days. Even though the trend was anticipated, considering that farmers have already finished harvesting the winter-spring crop, many exporters suspect the main reason is a sudden increase in unofficial border trade.

"It is very strange to see rice flowing into Cambodia from Vietnam this year, because it used to be the other way around," said Tran Thanh Van, deputy general director of Gentraco Corporation, one of Vietnam's largest exporters based in Can Tho City.

He said Vietnamese rice has been heading to neighboring countries for several months now.

Pham Van Bay, vice chairman of the Vietnam Food Association, said he is aware of the practice, but cannot say how much rice has been sold to Cambodia and then to Thailand.

"We've heard that Vietnamese rice has been bought and then resold to Thailand. But that's all we know now," he told Vietweek.

Exporters, though disappointed with the development, say it is inevitable and can be traced to a chronic weakness in Vietnam's rice industry the lack of storage facilities.

Vietnam has been vying with Thailand for the title of the world's top rice exporter for years. But unlike its rival, which has a storage capacity of up to 12 million tons, Vietnam usually just sells what it has.

An exporter from Can Tho who asked not to be named said food companies have very limited space for storing rice, so they can only purchase from farmers in small volumes. For their part, the farmers, with no storage capacity either, look to sell their produce as soon as they can, unable to wait for better prices.

Now that global prices are rising, exporters and many farmers do not have much to sell, he said.

Trade officials in the Mekong Delta told Vietweek that every now and then the government would ask exporters to temporarily stockpile rice to keep prices stable. However, there has to be a long-term strategy to develop storage facilities, they said.

Vietnam announced a plan to build warehouses around the Delta with a combined capacity of four million tons in 2009, but almost half of the project is still unfinished.

The Vietnam Food Association says the country is likely to meet the shipment target of seven million tons this year. Average rice prices in the first eight months fell 14 percent over the same period last year.

According to the ADB, global rice consumption will grow 1.14 percent annually over the next decade, driven solely by population growth. The bank said Vietnamese rice will remain competitive, allowing the country to increase shipments by 1.22 percent a year.

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