Vietnam’s rice export could face struggle after Thailand has started shipping its rice at highly discounted prices. In first four month of the year Vietnam has to compete with cheaper shipments from Thailand as Thai government has started to offload its rice stock.
Lower exports of rice are resulting in more rice remaining in Vietnamese miller’s and farmers inventories, piling pressure on already-bulging storage and raising the spectra of grain spoiling in temporary silos.
The Government of Thailand began executing a subsidized scheme earlier this year in which it plans to sell 10 million tonnes of broken rice in 2015 and an additional seven million tonnes in 2016 at prices substantially below market prices.
In one of the examples, the Thai government in March,2015 sold 5% broken rice from its inventories at around US$236 to US$378 per tonne compared to the global market price of US$405 per tonne.
The Thai Rice Exporters Association has justified the programme by saying that the government’s rice is old and has been stored for a long time so its value has depreciated. There is always a large price gap between new rice and old rice, the official narrated.
The nation’s rice industry can compete with private Thai traders, but not with the Thai government as it slashes prices to bolster demand for old low quality stock, as reported by a VFA representative.
In the four months leading up to May, Vietnam’s rice exports dropped 12.73% in volume and 16.37% in value on-year to 1.686 million tonnes valued at US$707 million according to VFA statistics.
In addition to lower export prices and fierce competition with Thailand, in 2015, Vietnam exporters are at risk of shrinking markets in other countries, particularly the Chinese market.
China has been the largest importer of Vietnam’s rice for the past three years. In 2014 alone, Vietnam exported 2.1 million tonnes of rice to China, accounting for 30% of the nation’s export market.
However, Vietnam’s rice exports to China during 2015 are likely to see a substantial decline as the Chinese government diversifies its import strategy to increase rice import quota from multiple sources.
In one of a delivery note on the situation, Deputy Prime Minister Hai has asked the VFA in collaboration with relevant government offices and those in the private sector to develop specific marketing plans for each foreign market. In addition, he also asked the parties to lay out a scheme to restructure production and shift rice cultivation areas to planting crops with higher profit margins.
The Minister, Hai said for 2014 Vietnam rice cultivation area stood at around 7.6 million hectares with an estimated production of around 43.4 million tonnes of paddy rice. It was observed that Rice production exceeds consumption, but the country imports tonnes of soybeans and corn annually. Further, the government will guide farmers to shift to crops to soybeans, corn or other crops that will help them to improve their overall profits.