A farmer carries rice crops while harvesting on a rice paddy field in Thuy Huong Village, outside Hanoi. Vietnam, the world's second biggest rice exporter, is forecast to export 6.25 million tons of rice this year. Photo: Reuters
Despite the government's support to increase rice reserves and positive signs from some importers, Vietnam, the second biggest rice exporter in the world, will still find it hard to boost shipments in the remaining months of this year because of fierce competition from other countries.
Pham Quang Dieu, director of the AgroMonitor, a company specializing in agricultural product markets and analysis, said: "Higher rice supply of main exporters like Thailand and India will create bigger pressures on Vietnam's rice exports this year."
With its bumper harvests in recent years and choc-a-block warehouses, India is now boosting exports to cut surplus stock. India produced a record 103 million tons of rice in the 2011-2012 crop year that ended in June, a jump of about 8 percent from the previous year. The country's rice in stock was estimated at 32-33 million tons early last month against the targeted 12 million tons.
Meanwhile, rice stocks held by Thailand have increased to a record nine million tons. Prices of the grain in the world market could be forced down if the world's biggest rice exporter released some of the grain into overseas markets, he said.
In Vietnam, harvesting of the summer-autumn crop in the Mekong Delta will peak in the next one or two weeks, when some 12 million tons of the grain is normally produced.
Truong Thanh Phong, chairman of the Vietnam Food Association (VFA), said another pressure on Vietnam's rice exports is lower demand from some traditional export markets.
Indonesia, Vietnam's biggest rice export market in 2011, has not yet placed orders, while imports by the Phillipines have been limited as the country has allowed private traders to seek exporters offering more competitive prices.
In Africa, low-grade rice from Vietnam is facing fierce competition from India, which has offered prices 20 percent lower, said an industry insider.
"The lower prices of Indian and Pakistani rice may make Vietnam lose 20 percent of its market share in Africa," he said.
Asia now is the biggest market for Vietnamese rice, accounting for 67.8 percent of the country's total rice export revenues, followed by Africa with 24.2 percent, according to the VFA.
To offset the reduction of low-grade rice exports, Vietnam has increased shipments of its high-grade produce.
According to the VFA, the high-grade 5-percent broken rice accounted for nearly half of the country's rice export volume in the first half of this year, soaring 53 percent over the same period last year. However, the prices were still low, at some $415 per ton, compared to $585 for Thai high-grade rice, $465 per ton for Pakistani rice, and $430 per ton for Indian rice.
Vietnam shipped 3.7 million tons of rice worth $1.7 billion in the first half of this year, a drop of 9.4 percent in volume and 15.3 percent in value over the same period last year, the VFA said.
Logically, rice traders in Vietnam would not want to sell at this time because market demand is low and world supply abundant, but they are having to do so at low prices in order to recoup capital quickly, given the high interest rates on bank loans, Phong explained.
In a bid to keep prices from falling, Vietnamese exporters will stockpile up to 500,000 tons of rice from the summer-autumn harvest, according to the Ministry of Agriculture and Rural Development. The businesses will buy the grain from July 10 to August 10, it said in a statement.
The country is forecast to export 6.25 million tons of rice this year, an increase of nearly 16 percent from an earlier projection of 5.4 million.
Higher domestic output and higher demand are likely to spur the increase in exports, the ministry said in a recent report.
"The import demand for Vietnamese rice from countries such as China, Malaysia, Ivory Coast and Senegal has risen from 2011," the report said, without giving specific figures.
It forecast Vietnam's rice export revenues this year could reach $3 billion, down 17.6 percent from the $3.64 billion earned in 2011.
China in April displaced Indonesia to become the biggest buyer of Vietnamese rice, having bought nearly 680,000 tons in the first four months of 2012, marking a more than threefold increase from 153,000 tons a year ago, the ministry said.
China is expected to increase rice imports about fourfold to more than two million tons in 2012, on track to become the world's third-largest buyer after Indonesia and Nigeria.
To increase rice exports, Vietnam will boost trade promotion in some important markets, including Indonesia, China, South Korea and Japan in the remaining months of this year, Phong said.
The country has just won a bid to export 30,000 tons of rice to South Korea, opening up an opportunity for Vietnamese rice exports to the market, he said.
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