Rice export advantage likely short-lived: experts

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Farmers harvest rice at a paddy field in Hanoi. Vietnam has contracted to sell around seven million tons of rice so far this year.

Vietnam could see advantages in rice export as Thailand pays higher prices to farmers and massive floods affect production in the kingdom, but it should focus on developing a long-term strategy that provides bigger benefits to Vietnamese farmers as well, experts say.

"The world situation is favorable to Vietnam's rice exports. We are expected to become the biggest rice exporter in terms of quantity. However, we do not have yet a strategy to increase the export value of the grain, as well as the benefits for farmers," said Pham Quang Dieu of AgroMonitor, a company specializing in agricultural product market and analysis.

The government of Thailand, the world's biggest rice exporter, has paid farmers 15,000 baht (US$483) a ton of rice since October 7, up 50 percent over the market price early last month. With the higher purchasing prices, export prices of Thai rice would increase to $750-800 per ton.

Since it accounts for some 30 percent of the world's rice export market, the move by Thailand will push up rice prices globally, Dieu said. Like other exporters of the grain, Vietnam could benefit from the higher world prices.

In addition, the Thai move may also make global importers switch to buying from Vietnam.

Vietnam's rice exports between January and October rose 8.5 percent from a year ago to an estimated 6.38 million tons, according to the General Statistics Office. Meanwhile, export revenue from the grain in the first 10 months jumped 17.3 percent from the same period in 2010 to an estimated $3.22 billion.

In the international market, rice prices were pushed up by the massive flooding that is damaging rice fields in large parts of Southeast Asia.

The floods, said to be Thailand's worst in the last 50 years, is estimated to have damaged over 12 percent of rice fields in the country. There has also been damage caused in the Philippines and Cambodia as storms and floods have hit the region since September.

In these conditions, Vietnam is expected to exceed the export target of seven million tons of rice for this year, according to the Ministry of Agriculture and Rural Development.

Pham Van Bay, vice chairman of the Vietnam Food Association, said local exporters have signed contracts for some seven million tons in the first ten months, up 1.2 million tons over the same period last year.

In addition to South and Southeast Asian customers such as Bangladesh and Indonesia, China is importing rice from Vietnam, he said. The neighboring country imported 300,000 tons of rice from Vietnam in the second quarter of this year.

Indonesia has overtaken the Philippines to become the biggest importer of Vietnamese rice. So far this year, it has purchased some 1.75 million tons of Vietnamese rice.

Dieu of AgroMonitor said Vietnam should not be too optimistic about the current rice export situation, as Vietnamese rice now can compete with Thai rice in terms of price, but not quality. At the same time, Vietnamese rice could have better quality but less competitive prices than rice from India, he said.

For the remaining two months, Vietnam may find it hard to continue to boost rice exports as very few new customers are looking to sign contracts. "No new export contracts have been signed since a month ago," he added.

Another reason for slower shipments is that big exporters do not want to sign contracts now, expecting higher prices later, while smaller ones are not able to purchase more rice from farmers, said Trinh Van Tien of the Institute of Policy and Strategy for Rural and Agricultural Development.

Despite the hike, rice prices have not increased as expected, he said. It has not reached the peak of 2008, when rice prices hit some $1,000 per ton, he noted.

The export price for Vietnamese 5-percent broken rice was around $555 last week, according to AgroMonitor.

The Vietnam Food Association has also advised exporters to sign contracts only when they have stocks to avoid losses or delivery penalties.

"In fact, the first or second position in rice export volume is not very important," Tien said. "We need to be more interested in long-term policy and benefits for farmers."

Thailand is not very focused on export volume, only on increasing export value, so it cultivates rice only in suitable areas to benefit from low production costs while producing high quality grains, he said.

"We should seek ways to improve our rice quality, so that Vietnamese rice is able to compete in the high-quality segment," Tien said.

Bay said the number of firms allowed to export rice is large, which can make it difficult for them to purchase rice from farmers and attract customers. As many as 140 firms are qualified and get licensed to export rice from Vietnam.

More firms are applying for the license, so the number of rice exporters may continue to rise, he said.

However, Tien said, producers should be able to sell their rice at better prices even when there are many exporters.

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