Rice prices will rise.
Rice prices will not fall further but will rise, according to assessments made at a meeting reviewing first-quarter rice exports and outlining export directions for the second quarter, organized by the Vietnam Food Association on April 4th in Ho Chi Minh City.
According to Mr. Huynh Minh Hue, General Secretary of the Vietnam Food Association (VFA), from the beginning of the year to March 31st, businesses registered export contracts for 3.576 million tons of rice, an increase of 12.42% compared to the same period in 2012. Of this amount, 1.451 million tons were delivered in the first quarter. Therefore, another 2.125 million tons will be delivered in the coming period.
Currently, the export price of Vietnamese rice is only higher than that of similar rice from Myanmar and significantly lower than that of other major exporting countries. For example, Vietnamese 5% broken rice is currently priced at around US$395/ton, while that of Pakistan is US$430/ton, India US$445/ton, and Thailand US$530/ton. According to the Vietnam Food Association (VFA), the sharp drop in Vietnamese rice prices compared to the same period in 2012 is due to a lack of centralized contracts. Most commercial contracts are low-priced, especially those for export to China.
Why is the price of Vietnamese rice so low? According to Mr. Hue, China continues to be the largest customer for Vietnamese rice in the first few months of this year. In the first quarter, China signed contracts to purchase over 1 million tons of Vietnamese rice. Including contracts carried over from the end of last year, the total amount of contracts signed for export to China this year has reached nearly 1.5 million tons. However, the characteristic of this market is that trade is largely driven by price differences, not just to meet domestic consumption needs. Therefore, Chinese traders only buy at low prices to ensure profit.
Therefore, in the first quarter of this year, when the Vietnam Food Association (VFA) set a floor price for 5% broken rice, raising the selling price, Chinese customers immediately stopped buying Vietnamese rice. Meanwhile, demand for rice from other markets was either nonexistent or quite low, so the VFA was forced to remove the floor price for 5% broken rice so that businesses could accept lower prices for Chinese customers, in order to sell their domestic rice in a timely manner. In addition, the situation where some businesses sold rice at undercutting prices to win customers, and some businesses lacked the assertiveness to be pressured by foreign customers... also contributed to the decline in Vietnamese rice prices.
On the other hand, due to the excessively high shipping costs from Vietnam to Africa, businesses are forced to lower rice prices to compete with similar Indian rice in this potentially lucrative market. Mr. Truong Thanh Phong, Chairman of the Vietnam Food Association (VFA), stated that shipping costs from India to Africa are only about 30-35 USD/ton. Meanwhile, from Vietnam to Africa, the cost is 60-70 USD/ton to the nearest destination and up to 90 USD/ton to further locations. Therefore, if Vietnamese rice prices remain the same as similar Indian rice, it will have virtually no chance of entering the African market.
However, according to businesses, the price of Vietnamese rice exports in the second quarter will not fall further. Mr. Le Viet Hai, Director of Mekong Joint Stock Company (Can Tho), said that Vietnamese rice is all new rice, so it has better quality and is more fragrant than similar rice from other countries (mostly old rice), and the price is much lower, so it will attract more attention from importers. Mr. Truong Thanh Phong said that China has signed a contract to buy nearly 1.5 million tons of Vietnamese rice, but only received a small amount in the first quarter. Therefore, from this quarter onwards, the amount of rice shipped to China will increase. Many other markets also signed contracts to buy Vietnamese rice months ago but only started receiving goods in the second quarter. The government agreement between Vietnam and Guinea on Vietnam supplying 300,000 tons of rice to the country annually also came into effect on April 1st. According to Mr. Phong, Guinea will receive 20,000 tons of rice from Vietnam each month. Recently, the Southern Food Corporation completed a contract to export 60,000 tons of rice to Guinea in the second quarter of this year...
According to (NNVN) - LC
