Vietnam's rice exports are sharply down this year as demand is lower in its main markets and Thailand returned to the marketplace with a bang after a two-year slowdown.
The difficult situation is forecast to continue in the coming months, forcing the world's second-largest exporter of the grain to cut its export target for this year to 7-7.2 million tons from the earlier 7.5 million tons.
Vietnam exported 5.2 million tons for US$2.2 billion in the first nine months, down 13 percent in terms of value and 11 percent in volume year-on-year, according to the Vietnam Food Association (VFA).
Demand was lower from major customers like the Philippines, Indonesia, and China, it said.
The country's rice exports are forecast at 7.4 million tons this year, following India's 9 million tons but higher than Thailand's 6.5 millions, according to the London-based International Grains Council. The two countries jumped ahead of Thailand in rice exports last year.
But the Thai government has this year scaled back its rice-pledging scheme, which was criticized of inflating the quotes for Thai rice and cripples the export market.
50 percent losses
The chief of a Vietnamese rice export firm said the export market is gloomy. "There are few customers though we have accepted losses, offering at lower than cost to boost sales."
He said 5-percent broken rice is exported for $360 per ton, 10 percent down from two months ago.
"Importers expect a price of just $340. But the loss will be too big if we accept the price since cost is some $390 per ton.
"It's better to stockpile the rice."
Le Minh Truong, head of another rice export company, Song Hau, said exporters would be lucky to get away with 50 percent losses this year.
"If the difficulties continue in the coming months, the loss may rise to 70 percent or even 90 percent."
Philippine, Chinese sales
Vietnam has recently signed contracts to sell a total of 120,000 tons of rice to private companies in the Philippines, helping push up export prices by around 10 percent in recent weeks, traders said.
Securing the Philippines contracts will come as a relief to Vietnamese traders after a long period without major contracts, but higher export prices could mean the loss of new deals to rivals such as Thailand and Pakistan.
The 5 percent broken rice was quoted this week at $400 to $405 a ton, free-on-board (FOB) Saigon Port, up around 10 percent from the start of this month.
"Buyers can opt to take rice from Thailand or Pakistan," a second trader said, noting that Thai 5 percent broken grain was quoted at $410 a ton, FOB basis. "When the gap is less than $20 a ton, buying Thai rice is better," he said.
The jump in Vietnamese rice prices in recent weeks is also due to demand from China, traders said. Rice has been shipped from the southern region incorporating the Mekong Delta food basket to Vietnam's port city of Hai Phong in the north and moved further on to China.
China, Vietnam's biggest rice buyer so far this year, has bought some 1.2 million tons of the grain via border trade, the official Vietnam Economic Times said last week, citing Vietnam Food Association data.
"Sales to China via border trade can affect Vietnam's rice export management because the authority does not know how much rice has gone to China," a trader said, adding that rice exports via border trade were not included in the country's statistics.
Based on Vietnam government data, China has imported 1.62 million tons of rice in the first eight months of this year from the Southeast Asian nation, up 3.2 percent from the same period last year.
The industry would be in a tough situation if it gets no more orders this month, VFA chairman Truong Thanh Phong said.
Africa accounted for nearly a fourth of Vietnam's total exports in the first nine months, but Vietnam has been able to increase exports of only jasmine rice.
It finds it hard to ship low-priced products to the continent because of the high transport cost of $50-55 per ton.
This has made its prices less competitive than that of India, Thailand, and Myanmar.
Meanwhile, Thailand and India are boosting exports to liquidate their large stockpiles of an estimated 15 million tons and 26 millions respectively, Phong said.
Vietnamese rice export prices could therefore continue to decline in the coming months, an industry insider said.
Its prices are already the lowest in the world due to low quality, according to the VFA.
Output is poised to drop next year for the first time in more than a decade since the second-largest rice exporter is promoting other crops to boost farmers' incomes, Pham Dong Quang, deputy head of the Crop Production Department, said.
A plan to convert rice-growing areas would be approved by the Ministry of Agriculture and Rural Development before the end of the year, he revealed.
The country has around four million hectares (9.9 million acres) of rice fields, where farmers can also grow other crops, Quang said.
The most fertile areas would still be kept for the grain, which would remain the key crop with the biggest area, he said.
Urbanization is also cutting into the area, and the government plans to have 3.8 million hectares under rice in 2020-30, he added.
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