Vietnam’s rice export prices expected to rise 09/06/2014

This is the third consecutive year Vietnam has experienced a tough year in rice exports. Bountiful rice crops have been harvested in many countries in the world, while rice inventories have increased for the seventh consecutive year.

In Thailand, Vietnam’s biggest rival in rice exports, the inventories have become so high that analysts believe that the country will have to sell inventory rice at any cost to get money to pay farmers.

This will cause rice prices to drop dramatically and make Vietnam, a big rice exporter, suffer heavily.

However, Vietnamese analysts don’t think the market will be too gloomy as predicted. A rice exporter said it is true that Thailand has been trying to boost exports, but in fact, the export volume in the first four months of the year was just 725,000 tons a month, not really high.

He also said that though the rice price has decreased significantly, the white rice price stays firm at $405 per ton.

Another noteworthy development is that 27.2 percent of the total 2.5 million tons of rice auctioned before April 23 was rice kept in stocks for 28-33 months.

The figures were 34.6 percent for 15-27 months, while only 38.2 percent for two to 14 months.

A western newswire earlier this year warned that Thai rice kept in stock for a long time would flood the market.

However, Vietnamese rice exporters did not know about this. Therefore, they offered a low bid of $370 per ton to obtain the contract to export 800,000 tons of rice to the Philippines.

Meanwhile, the other three tenderers’ bids were $35 per ton higher than Vietnamese exporters.

Nguyen Dinh Bich from the Trade Research Institute, an arm of the Ministry of Industry and Trade, who is believed to be a leading expert in rice exports, commented that this was the second time Vietnam has “tasted bitterness” in the rice competition with Thailand.

Prior to that, in the second half of 2011, Vietnam unreasonably raised its export prices sharply to levels which were even higher than Thai prices.

As a result, importers turned their back on Vietnam’s rice, and Vietnam could only clear the stocks in 2012.

At present, many analysts are pessimistic about export prospects. A big amount of rice has been exported to China, which is believed to be a bad situation in the context of the escalating tensions in the East Sea.

The analysts also think that Vietnam is taking high risks when it exports big amounts of rice to China, with the move described as “putting all of its eggs in one basket”.

However, Bich does not think so, citing four reasons that he believes would help Vietnam sell more rice and at higher prices.

First, the Indian weather forecasting agency has finally agreed that El Nino is likely to return to Asia. If this occurs, agriculture production of the South Asian giant would suffer.

Second, the current Thai administration does not intend to sell stored rice at low prices. Third, importers, who hear the bad news, would hurry to buy. And fourth, China is likely to increase import volume in the time to come.