Positive Prospect for Vietnam Rice Export

Possibly, unexpectedly high price of rice exported to the Philippines sent the export volume to a record 6 million tonnes in 2009. This year, many anticipated the exported rice will be traded between US$500 and US$533 per tonne and the export value will reach a record US$3 - 3.2 billion.

 

First of all, if rice is traded at US$500 per tonne, Vietnam will surely take US$3 billion. This will be a miracle that Vietnam missed in 2009.

According to data from the Vietnam Food Association (VFA), although Vietnam surprisingly exported more than 6 million tonnes of rice in 2009, the average price was only US$405.71 per tonne, totalling US$2.437 billion. If the price is US$500 per tonne, the export earnings will reach US$3 billion, or a rise of 23.4 %, and if the price tops US$533 per tonne, the value will climb to US$3.2 billion, or an increase of 31.4 %.

 

This forecast is not groundless. The spectacularly high price at four bidding sessions to supply rice to the Philippines in less than a month and a half in late 2009 is the groundwork for the belief in the new goal. Particularly, in the first bid held on November 4, 2009), the winning price was US$480 per tonne, the rates in the next three bids were respectively US$622.7, US$661.9 and US$664.9 USD per tonne (C&F price). Together with high successful bid prices, bid-winning volumes were also very big, totalling 1.286 million tonnes worth US$835.5 million, accounting for 70.8 % of volume and 71.4 % of value. The winning bids account for nearly 22 % of annualised export target and the average price was US$633.5 per tonne (C&F price). It was US$575 per tonne (FOB price).

 

Furthermore, according to the media in the Philippines, the Southeast Asian nation imported 2.05 million tonnes of rice in these four bids. Thus, this country reordered a consider volume of rice, helping Vietnamese firms to sell over 1.4 million tonnes.

 

In addition, also according to newspaper in the Philippines, Vinafood II won contracts to sell nearly 150,000 tonnes of rice but both sides did not provide the price which is unlikely surprisingly low.

As a result, Vietnam will export 1.55 million tonnes of rice to the Philippines at very high price rates. This volume is equal to a quarter of Vietnam’s target this year. Possibly, this is the best year for rice exporters for over the past 21 years. In late 2007 and 2008, Vietnam won rice exporting bids at very low prices which then leapt in the following year. This was the dear lesson for Vietnamese exporters.

Even though a fourth of expected exporting volume is sold at very high price, the remainder will be decisive to the full-year value. Because, assuming that the average price of 1.55 million tonnes of rice exported to the Philippines is US$550 per tonne and the total value is US$852 million but the average price of 4.45 million tonnes of rice is below US$483 per tonne, Vietnam will fail to attain US$3 billion, let alone US$3.2 billion, which requires an average price of nearly US$528 per tonne for remaining 4.45 million tonnes.

 

To date, the objective is hard to achieve. According to the data from the US Department of Agriculture, in the first four weeks of January, the price of 5 %, 10 %, 20 % and 25 % broken rice was hovering at US$430 per tonne and the best of Vietnam was only US$445 per tonne. The statistics released by VFA also showed the similar result. In the first 42 days of this year, the average price of Vietnamese rice was only US$472.3 per tonne. This is also the base for the expected floor exporting price of Vietnamese rice in February and March at US$450-470 per tonne, lower than the rate offered to the Philippines.

 

Furthermore, if compared with other top rice exporters, the price offered by Vietnamese enterprises is praiseworthy. According to the statistics of the Thai Rice Exporters Association, after a significant success when the Philippines opened the bid for 250,000 tonnes this year, the average price of three grades of Thai white rice (100 % Grade B; 5 % and 25 % broken) topped US$583 per tonne in the week ending September 12, 2009 but then gradually sank to US$532 per tonne in February.

Therefore, the decisive factor is the global rice price. Can the price re-establish the all-time high of US$1,000 per tonne in 2008 or even set a new record of US$2,000 per tonne in few months.

 

However, ongoing market movements showed that the fever caused by the Philippines has slowed down and is unlikely to recur.

 

First of all, both factors that can cause sudden changes in the world market tend to be stable.

 

The first factor is the speculation that the Philippines will soon seek more supplies to meet the domestic demand. However, a Filipino official immediately denied, saying that his country was stockpiling 2.6 million tonnes in addition to contracts to import 2.4 million tonnes, a small amount short of the record of 2.5 million tonnes in 2008. Recently, the US Department of Agriculture predicted the Philippines will import 2.6 million tonnes in 2010 and it will import only 200,000 tonnes more.

 

Meanwhile, the largest rice importer, the Philippines, seems to purchase enough. Thus, India, the third rice importer, was expected to become the largest importer this year with 2-3 million tonnes, even 5 million tonnes, but this will surely not happen.

 

At the same time, the move from Thailand in the year to date reflected a completely opposite outlook. First of all, the trade ministries of Thailand and India on January 21 reorganised an auction to clear 379,000 tonnes of rice agreed at US$610-700 USD per tonne in 2008 but the bid price was just US$489 per tonne (5 % broken rice), causing a loss of US$52 million. So, they had to cancel the auction but the date for the next auction has not been determined.

 

However, Thailand is seeking all possible measures to clear 1.5 million tonnes or 2 million tonnes, or 1-3 million tonnes out of 5.6 million tonnes in reserve while the Thai Government wants to lower reserve costs and reserve loss and clear the space for the new harvest estimated at 7 million tonnes of rice. This may drag down global rice price.

 

In that context, while Thailand plans to lower price to increase exports, Vietnam hopes to hike exporting price and maintain a record exporting volume. Vietnam’s target is reachable in theory but unlikely in practice.