Export Prices for Vietnamese Rice Predicted to Rise

Export prices of Vietnamese rice are likely to surpass 2005’s averaged level in the coming time due to an increasingly soaring demand in the global market, the Vietnam Food Association (Vietfood) forecasts.

 

Despite Vietfood’s forecast, several rice exporters have recently begun to export high-quality rice at low prices of around US$242-245 per ton, said the chairman of the association, Truong Thanh Phong.

 

Phong said the undervalued contracts hurt exporters as well as farmers and the national interest.

 

Statistics released by the chairman showed that many Vietnamese enterprises each incurred huge losses of around VND7-8 billion (US$443,037-506,329) last July because they signed contracts to export rice at low prices. Overall they still made a profit on the year but their profit would have been higher if they had not managed to sell rice at low prices. 

 

The chairman also added that high-quality rice exporters were forced to sell their product at undervalued prices in order to ensure capital that was necessary to continuously run their business.

 

Vietnamese enterprises have encountered a decreasing market for their high-quality rice and rice importers are capitalizing on the sudden low prices from Vietnamese exporters.

 

The country has so far this year signed contracts to export up to 2.4 million tons of rice, however, most of these contracts are for low-quality rice.

 

Rice exporters need a significant injection of capital, said Phong, adding that during the export season, each rice exporter needed between VND200-300 billion (US$12.66-18.99 million) for operations.

 

To deal with the situation, Vietfood has recently asked local banks to allow rice exporters to use stockpiled rice as collateral for loans in order to help them avoid having to sign undervalued export contracts.

 

However, according to the current regulations, rice exporters are not qualified to borrow from banks unless they sign contracts and secure letters of credit.

 

Moreover, due to the increasing capital demands from rice exports, each rice exporter can currently borrow only VND40-50 billion (US$2.5-3.2 million) instead of the previously higher levels of between VND150-200 billion (US$9.5-12.66 million).

 

Under Vietfood’s suggestions, exporters should be able to stockpile roughly 500,000 tons, helping them avoid selling their rice at unreasonably low prices.

 

Phong also recommended farmers, who do not need capital as urgently, hold their grain until rice prices increase again. Phong said he believes rice prices will surge during the coming months and will reach levels even higher than last year, due to an expected decrease in the world’s rice supply while demand is set to keep rising.

 

Phong said India this year targeted to export only three million tons of rice, roughly two million tons lower than last year. Vietnam is also decreasing its rice export volume by 200,000 tons this year.

 

Other large world rice suppliers such as Thailand and China will not increase their rice shipments. Meanwhile, Indonesia will resume its rice imports from this year, Phong added.