Rice exports looking up

Vietnam is expected to export 6.5-7 million tonnes of rice this year

Optimistic signals

The export prices of Vietnamese rice in the first two months of 2023 rose by 9.8 percent year-on-year to US$528.5 a tonne, according to the Ministry of Agriculture and Rural Development (MARD).

The Philippines was the largest importer of the food from Vietnam in January with over 129,000 tonnes worth US$64.55 million, accounting for 34.6 percent of Vietnam’s total export. Vietnam recorded the highest price increase in rice exported to Chinese Taipei in January, with a surge of 54.6 percent year-on-year.

According to the January 2023 report of the US Department of Agriculture (USDA), the global rice trade is forecast to drop approximately four percent in 2023 compared to 2022. The world's largest rice producers, including Argentina, Brazil, Cambodia, China, the EU, India, Laos, Malaysia, Pakistan, Paraguay, Russia, Senegal, Tanzania, Turkey, Uruguay, and the US, are expected to experience a massive decline, with India and Pakistan dropping the most (approximately 2.1 million tonnes) as a result of decreased output.

Despite the forecasts, the Ministry of Industry and Trade’s Agency of Foreign Trade predicts that Vietnam's rice output will stay positive in 2023 due to climate change and drought in the US, Europe and China that are generating a rice supply deficit. In addition, India, the world's largest exporter of rice, has prohibited the export of plate rice and set a 20 percent tariff on white rice.

Coupled with increased global demand, the quality of Vietnamese export rice is also improving, which contributes to the rise in demand. The Agency of Foreign Trade projects that Vietnamese rice exports would reach 6.5-7 million tonnes this year.

Nguyen Viet Anh, General Director of Orient Rice Co., Ltd, told a recent conference on rice exports that firms are hopeful about the rice industry considering the aforementioned potential.

Capital issue

Despite a favorable market, companies in the rice industry are hampered by a shortage of funds. According to General Director of Orient Rice Co., Ltd, Nguyen Viet Anh, most businesses must mortgage their property in order to purchase rice during the harvest season. Several rice producers are considering leasing out their facilities.

Nguyen Van Nhut, General Director of Hoang Minh Nhut Joint Stock Company, noted that accessing capital is a major challenge. Without adequate financial resources, many firms struggle to purchase rice reserves during the harvest season. Nguyen suggests that the state introduce a policy package during the harvest period that provides businesses with full credit, thereby maintaining stable rice prices for the people.

In addition to financing difficulties, logistics incur high costs and reduce the profitability of rice enterprises. While Vietnam benefits from its river and canal infrastructure, transportation of the crop is carried out solely by road, generating substantial post-harvest losses. Loc Troi Group's Director of Quality Management, Vo Cong Thuc, estimates the post-harvest mass loss to be between 11 and 13 percent.

Phan Van Chinh, Head of Agency of Foreign Trade, suggests that local businesses invest in transportation and delivery locations to reduce logistical costs when exporting goods through the ports of Cai Mep (Ba Ria-Vung Tau Province) and Cat Lai (Ho Chi Minh City).

Chinh suggests a method to harmonize the security of commercial bank operations with capital-providing firms in the rice industry. The rice export contract that a company has signed with a partner nation could serve as collateral for a bank loan.

Businesses need to strengthen trade promotion in key countries, particularly the Philippines, where other rice exporters in the region, such as Thailand and Cambodia, are also promoting their products.