Rice Export: Falling Volume and Value

The Ministry of Agriculture and Rural Development said Vietnam shipped 450,000 tonnes of rice worth over US$143 million in June, totalling 2.32 million tonnes valued at US$731 million in the first six months of 2007, down 18.5 per cent on year in volume and 5.8 per cent in value. Although the average export price increased US$39 per tonne against the same period last year, revenue still dropped 5.8 per cent on year.

The core reason for declining rice export volume is the government policy limiting rice export to ensure food security and rising shipping fares causing more difficulties for domestic exporters and foreign importers.

 

During the first six months of the year, Southern Food Corporation took the lead with 57 per cent of total exported rice volume, followed by Northern Food Corporation with 10 per cent.

Vietnam also saw a big change in the rice export market structure in the first six months of this year from the same period last year. Export shipments to traditional markets fell in volume. Indonesia became Vietnam’s largest rice export market, consuming a third of exports, increasing more than seven times. Among the top ten Vietnamese rice importers, only Indonesia saw a sudden increase and Singapore witnessed a 6 per cent rise, while shipments to other countries decreased sharply; Russia down 75 per cent, Cuba down 67 per cent, South Africa down 58 per cent, Japan down 52 per cent, the Philippines down 44 per cent, China down 40 per cent and Malaysia down 31 per cent. Declining export volume to main markets will be a disadvantage for Vietnam’s rice export in the coming years.

 

According to the Ministry of Trade, limited rice supply in the last six months tended to push up the rice price and the Vietnamese export supply has already run out. So far, Vietnamese exporters have signed contracts to ship the full allowed amount of 4.5 million tonnes of rice, in which commercial contracts account for 30 per cent. Specifically, the volume of rice to be delivered from July 1, 2007 reached 2.2 million tonnes, including some 100,000 tonnes to be sent in early 2008. Vietnamese enterprises can only signed export contracts for the remaining 100,000 tonnes as provided by the Government. Meanwhile, Vietnamese food output is estimated to only reach 8.7 million tonnes in 2007. Therefore, the Ministry of Trade decided to stop signing new commercial rice export deals.

 

Another difficulty leading to shrinking rice export volume is soaring transport fares. Shipping fees on Asian routes rose from US$18-19 to US$26-30 per tonne and the fare on routes to Africa went up from US$80-90 to US$120-130 per tonne, accounting for over 30 per cent of FOB value of exported high-grade rice.

 

Many exporters had to accept the high fares, but they still faced difficulties finding ships to ensure punctual deliveries, leading to high inventory volume. As of June 30, 2007, inventory had already mounted to 750,000 tonnes. Meanwhile, this hardship is forecast to continue in the second half of 2007.

 

The plan to export 4.5 million tonnes of rice in 2007 will remain unchanged. The Ministry of Trade recommended rice exporters stop signing new commercial contracts. When supply is positive and the Government permits, rice exporters will again be allowed to ink new deals.

The Ministry of Agriculture and Rural Development, the Ministry of Trade and the Vietnam Food Association are closely coordinating to monitor the production situation, balance supply and demand and administer exports to stabilise the domestic market and national food security.

The Ministry of Finance will continue to investigate and survey rice export prices to serve the rice export monitoring workgroup. Commercial banks will provide loans for enterprises to buy rice when the summer crop comes.

 

Regarding the rice order proposal signed between the Vietnamese Government and Indonesia, the Southern Food Corporation was assigned to negotiate with BULOG to export more than 500,000 tonnes. Indonesia will pay 50 per cent of chartering fees.