Vietnam, the world's second largest rice exporter, is set to face tough competition from other exporters who offer low-quality varieties at very cheap prices, an industry official said.
Rice prices are likely to fall as major exporters have stockpiled a large amount of the grain, Pham Van Bay, vice chairman of the Vietnam Food Association, was quoted by the Tuoi Tre newspaper as saying. He said India is expected to boost sales and clear its stock in the first half of 2012 while Pakistan and Myanmar will also target the low-end market segment.
"The increased competition from these suppliers means Vietnamese and Thai rice products of better quality will see slower sales," he said.
Phong also worried that the low-end market in Africa, which accounts for 20 percent of Vietnam's total rice exports, could be taken over by India and Pakistan.
According to the Vietnam Food Association, local exporters have not secured any large contract for 2012, which is an unusual development. The amount of rice contracted for delivery in the first quarter fell by 700,000 tons compared to the same period last year, the association said.
However, Phong said the prospects are not too negative since Vietnam can take advantage of Thailand's higher prices to increase shipments and expand to high-end markets, especially China.
Even if market conditions are not favorable, the association will make sure farmers can get a profit margin of at least 30 percent, he said.
Vietnam shipped 7.11 million tons of rice in 2011 worth US$3.5 billion, breaking the record of 6.75 million tons in 2010, according to the Vietnam Food Assiciation. Rice shipments are expected to reach around 6.5-7 million tons this year.