The abnormal surge in domestic rice prices in this year’s winter-spring crop has caused some rice exporters, who had signed export contracts before the harvest season, to suffer losses during the first quarter. According to the Ministry of Agriculture and Rural Development, Viet Nam exported 1.28 Million Metric Tonnes (MMT) of rice, worth nearly US$570 million, during the first three months of 2017. This represents a decrease of 18.1 per cent in volume and 17.3 per cent in value terms from the figures during the corresponding period last year. However, the situation changed this year when rice prices remained too high throughout the winter-spring crop, even higher than export prices, causing the companies to lose money on those contracts they had inked.
General Director of the Intimex Group Joint Stock Company Mr. Do Ha Nam, said most exported rice was destined for the Philippines, China and Africa that are also the largest rice importers of Viet Nam rice. However, enterprises that were not among those companies allowed to export to China under the protocol on plant quarantine for Viet Nam’s rice and rice bran exports to China, had difficulty finding markets to sell to. Further, businesses usually signed export contracts early, so when local rice prices declined in the harvest season, they would buy rice directly from farmers. Moreover the paddy price in mid-March was VND 300,000-400,000 (US$13-17.8) per tonne higher than in the same period last year. The price hike was attributed to unfavorable climate and diseases that caused paddy output to plummet because of that many enterprises were unable to respond to the sudden price hike, failing to purchase and ship rice as scheduled. Some even refused to deliver goods, as stated in contracts, as they did not want to incur losses.
Rising domestic prices also led to an increase in export prices, causing prices to reach a level $10-15 per tonne higher than those offered by Thailand and India making it difficult to compete with them in the same market segment. Nguyen Van Don, director of the Viet Hung Co Ltd in the Mekong Delta province of Tien Giang, said his firm did not sign any new export contracts from late February to March 20, while waiting for market changes. It is unlikely that importers would buy Vietnamese rice, whose prices are higher than those in Thailand and India. Meanwhile, the company would suffer from losses if it lowered prices that could not make up for material purchases and delivery expenses, Don said. Most of the surveyed businesses said the market is still unpredictable, but there may be more favourable conditions for rice exports in the third and fourth quarters when Thailand would have finished selling its stockpiled rice.