Export demand should not jeopardize Vietnam food security: experts

Within over a week, the three announced they were stopping exports of the grain.

This sent the price of Vietnamese 5% broken rice surging by 48% year-on-year on July 31 to US$575 a ton. It is forecast to rise to $600 in August.

Domestic retail prices rose by VND1,000-2,000 ($4-8 cents) per kilogram.

The Vietnam Food Association said importers in other countries are insistently asking Vietnamese businesses to ship rice, and are willing to pay $20-40 per ton more than the pre-ban prices.

China, the Philippines, Indonesia, Turkey, and Chile are reportedly competing to buy 40% to several dozen times more rice than previously from Vietnam.

Vietnam’s exports could reach 7.5 million tons, 6% higher than last year.

The Ministry of Agriculture and Rural Development has sought government approval to increase exports.

Ensuring domestic supply

According to the ministry, the El Nino phenomenon, saltwater intrusion and drought has affected global production, but not in Vietnam, where output this year is expected to top 43 million tons.

But the director of a rice export company in the southern Hau Giang province said this year El Nino and flooding have affected some rice-growing areas in the Mekong Delta.

The heavy rains brought by Typhoon Talim recently destroyed 3,000 hectares of ripe summer-autumn rice.

He assumed output would decrease, and said prices could spike.

According to many exporters, the number of new orders increased by 20-30% compared to the previous month, but they did not dare sign new contracts because they are worried about fulfilling existing orders after prices shot up.

Dinh Ngoc Tam, deputy general director of Co May Company, explained that most exporters had signed contracts when rice prices were low, and the soaring prices now mean higher purchase costs for them, which threaten to cause them losses on exports.

Only businesses that sign new contracts and have rice in stock would benefit from the rice export bans of India, Russia and the UAE, he said.

Most lack the resources to stockpile the grain, he added.

Do Ha Nam, the vice president of the Vietnam Food Association, acknowledges that there are opportunities for Vietnamese rice to increase in price, but he also warns about potential risks.

Many businesses have already signed year-long contracts before the recent price hike, and they are currently focused on fulfilling them, he said.

However, as prices continue to rise, there may not be enough Vietnamese rice to meet all the demands from buyers, he warned.

Meeting the strict criteria set by buyers, such as adhering to food hygiene and safety standards, high quality and being free of pesticide residues, is also crucial for exports, he said.

"The association maintains the view that Vietnam should only export 6.5 million tons of rice this year."

Historically, exports from Vietnam have been around 6.1-6.3 million tons annually.

Although last year saw a record seven million tons of exports, the country had to import certain rice varieties from India and Cambodia.

With imports from India no longer possible, the volume it buys from Cambodia might not be enough.

Additionally, some rice-growing areas in Vietnam may see reduced output due to natural disasters.

This, combined with higher prices for certain varieties in the domestic market, is encouraging many firms to focus on selling locally for better profits.

The price of fragrant rice in the domestic market is VND14,000-16,000 per kilogram, equivalent to $650 per ton, while the export price is only $630.

The director of the Department of Crop Production, Nguyen Nhu Cuong, said the rice crops in Vietnam were good in the first seven months of this year, but warned that possible storms in August and September could have an adverse effect on output.

The government has a plan in place for this year, including growing rice on 7.1 million hectares with an expected output of over 21 million tons.

"We always allocate up to 70% of the total output for domestic consumption," Cuong said.

Food security is a paramount issue in Vietnam, and so authorities always have contingency plans when there are fluctuations in output and prices.

The General Department of State Reserves said there is always an annual plan to buy a sufficient amount of rice to stockpile. In early June it had bought 220,000 tons of the grain.

Authorities are working to address the damage caused by heavy rains and flooding in the Mekong Delta, which affected around 3,000 hectares of paddies.

Stabilizing domestic prices

To stabilize rice prices in the domestic market and avoid sudden surges, the Ministry of Industry and Trade is closely monitoring the market situation and assisting businesses in ensuring a balance between supply and demand.

"In case of supply shortages, there will be measures to control rice exports," a senior official at the Ministry of Industry and Trade said.

A farmer works on a rice paddy field in Quang Ngai Province, Vietnam. Photo by Reuters

In case there is sufficient supply and optimal conditions for exports, the trade and agriculture ministries will work to control the quality of grain that is shipped.

Vietnamese rice has been appreciated in the global market for its quality, and thus fetches high prices.

One firm recently exported the grain at $1,220 per ton.

In the immediate future, to exploit export opportunities, the agriculture ministry said it would increase the area under autumn-winter rice in the Mekong Delta by 50,000 hectares to 700,000 ha.

Besides, irrigation works across the country will be improved to minimize the impacts of El Nino especially on the rice crop.

The agriculture ministry said in the long term it is restructuring the rice sector to improve quality.

It is piloting zoning of agricultural and forestry areas to improve quality.

It is also working on sustainable development of one million hectares of high-quality rice in association with green growth in the delta.

The program will soon be submitted to the Government for approval. The ministry is drafting a government decree on managing agricultural brands, including for rice.

The Vietnam Food Association expects rice prices to increase further until they stabilize again in early 2024.