Rice race

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"˜Surprising' Chinese purchases fuel food shortage fears in Vietnam


Workers load rice sacks for export at a seaport in Ho Chi Minh City.

Unseasonal and unexpectedly large purchases of Vietnamese rice by Chinese importers have sparked national food security concerns among industry insiders as well as local experts.

Local rice companies said Chinese importers increased buying of Vietnamese rice at the end of June. They noticed that many ships had docked in the Mekong Delta to collect the rice.

Cao Minh Lam, director of the An Giang Import Export Company, said Chinese importers were even offering high prices for low quality rice; and they transport the rice both by sea and via border gates between the two countries.

Vice Chairman of the Vietnam Food Association, Pham Van Bay, said he knew that China was buying rice, but he could not imagine that the purchases would be so sizeable.

China has imported as much as 600,000 tons of rice from Vietnam since April. The purchase through border trade "is not surprising and within control," Deputy Minister of Industry and Trade Nguyen Thanh Bien said.

However, analysts said China rarely imported rice after May, so it was strange that the country was purchasing huge amounts of rice irrespective of quality.

Truong Thanh Phong, chairman of the Vietnam Food Association, said there has been speculation that China has lost 14 million tons of rice due to floods. "Supposing this is true, China will open its door to import rice and in that case both the Vietnamese and global rice markets will be messed up," he said.

If Chinese importers continue to purchase rice from Vietnam, local companies may run out of the grain for export and there could be a shortage in the final months of the year, Phong said. The food association said it has asked member companies to brace themselves for such a scenario, he added.

As of July 21, more than seven million hectares of farmland in China had been destroyed by torrential rains and floods, Xinhua news agency reported, citing the State Flood Control and Drought Relief Headquarters. The Chinese government this month urged local authorities to ensure a good rice harvest in the wake of floods.

Nguyen Dinh Bich, a trade expert, said when Chinese provinces near Vietnam are hit by bad weather, they prefer buying rice from Vietnam to save time and money, instead of transporting the grain from faraway regions in China.

China, the world's biggest consumer and producer of rice, will probably buy up to 1.5 million tons of the grain this year as lower output and higher domestic prices burnish the allure of imports from neighbor Vietnam. "The amount of 1.0 million-1.5 million tons is reasonable, but I don't think China would have to buy up to two million-three million tons as it has a certain amount of rice stocks," said Chookiat Ophaswongse, of the Thai Rice Exporters Association.

Not time to worry, yet

Bui Tat Tiep, deputy head of the Ministry of Agriculture and Rural Development's Planning Department, said it was necessary to calculate the total rice reserves in the country and how much it will export.

He said if rice prices surge because Chinese importers boost purchases, Vietnam will have to take measures to stabilize the market and ensure food security for the country.

But not everyone thinks the anxiety is justified.

Tran Tien Khai of the Ho Chi Minh City University of Economics said the authorities need to verify the estimate of 600,000 tons of rice bought by Chinese importers to eliminate gratuitous concerns.

"I don't believe that they could purchase such a huge amount in such a short time without stirring up the local market."

Vietnam has about 1.4 million tons of rice in stockpiles, while production this year is expected to be "at least the same level as in 2009 or even higher," Phong of the Vietnam Food Association said at a conference in Hanoi Tuesday.

Nguyen Tri Ngoc, head of the ministry's Cultivation Department, said farmers in the Mekong Delta are harvesting the summer-autumn rice crop from an area of 1.6 million hectares. They are expected to produce eight million tons of paddy rice, which is nearly five million tons of husked rice. The country will also receive around one million tons of rice harvested by Vietnamese farmers in Cambodia.

Ngoc said even if China imports a million tons of rice from Vietnam, there is no need to worry about food security because there are sufficient reserves at present. He noted that local exporters have already shipped out four million of the six million tons of rice contracted this year.

The Vietnam Food Association even plans to ask the government to increase its rice export target to as much as 6.5 million tons this year from the previous six million tons.

Price hikes

The increased purchases by Chinese importers have sent prices of 5 percent broken rice, Vietnam's highest quality grain variety, to US$375 per ton, or $20-30 higher than early July. Paddy prices have also surged to VND4,200-4,450 per kilogram, compared to the lowest rate of VND2,800 recorded last month.

Local exporters are not happy with the hikes. They said they expected paddy prices to stay low and had offered low prices under export contracts. Now that input costs have surged, they will have to accept a loss of around $30 on every ton of rice they export, they said.

Farmers, on the other hand, have said it's not fair that exporters worry about price hikes without thinking about the difficulties that farmers have been through. Even the current increases are too small to ensure a 30 percent profit margin for farmers as targeted by the government, they said, adding that they have nonetheless sold most of their rice.

Duong Nghia Quoc, director of the Department of Agriculture and Rural Development in the Mekong Delta province of Dong Thap, said at the beginning of the summer-autumn crop local businesses offered really low prices to farmers.

He said the Vietnam Food Association must study the global market more carefully and offer better forecasting services to local farmers to ensure they have sufficient stock when prices go up.

LOSS OR GAIN

The Philippines, the largest consumer of Vietnamese rice, has said it plans to revise its rice import policies and increase local production in order to achieve food self-sufficiency.

Tran Duc Tung, a former official of the Ministry of Agriculture and Rural Development, said the move would benefit Vietnam in the long term.

He said large rice exports to the Philippines over the past years generated big revenues for Vietnam and its exporters and farmers. However, it's not good to depend on a single market for too long without scouting for new buyers, he said.

Even losing the Filipino market can end up being a good thing as it will encourage local exporters to become more competitive, Tung said.

The Philippines, the world's largest rice importer, is also the largest Vietnamese rice buyer, accounting for 50 percent of Vietnam's exports every year. It has stopped new import orders for this year and asked Vietnam to delay shipments until September because its warehouses are full.

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