World loses its appetite for pricey Vietnamese rice

By Ho Binh Minh   February 24, 2017 | 09:00 am PT
World loses its appetite for pricey Vietnamese rice
Farmers plant rice on a rice paddy field in Ha Tinh Province, Vietnam February 4, 2017. Photo by Reuters
Rice exports are likely to wilt into the fields this year unless global tastes change.

Slowing overseas demand is putting the brakes on Vietnam's rice exports this year, industry players say.

Indonesia, one of the country's key export markets, has said it has no plans to import any of the grain from Vietnam this year, and a government agreement with the Philippines to supply three million tons is unlikely to remedy the situation.

The agreement with the Philippines is not a contract, and can be subject to negotiations with importers. Last year, Vietnam shipped only 396,000 tons of rice to the Philippines, a plunge of 65 percent from 2015, based on government data.

The Philippines is forecast to import 1.4 million tons of rice in 2017, a jump of 75 percent from last year, the U.S. Department of Agriculture (USDA) said in a February report. 

"Vietnamese rice prices are very high now, making the grain uncompetitive against Thai rice," a Vietnamese trader with a European firm based in Ho Chi Minh City said.

Vietnam's 5-percent broken rice stands this week at $350-$355 a ton, free-on-board Saigon Port basis, up nearly 4 percent since the end of 2016, while Thailand offers a similar grade for $353-$355 a ton. 

Buyers, mostly in Asia, followed by Africa and the Middle East, would only consider the grain if it is offered about $10 a ton below Thai rice of the same variety, traders said. 

Indonesia, Vietnam's fourth-biggest rice market last year, will not import rice this year given an expected surplus and efforts to stabilize rice prices by increasing local procurement, the Jakarta Post reported.

Indonesia is projected to produce 80 million tons of paddy, or unhusked rice, this year, above its demand of 60 million tons, the newspaper cited Indonesia's Agriculture Ministry as saying.

But Indonesia's decision not to import rice this year remains questionable. The USDA still projects Indonesia will import 1 million tons of rice this year, down from 1.1 million tons in 2016.

"Even if Indonesia does decide to import rice this year, it will not focus on Vietnam," a Ho Chi Minh City-based trader said. 

Rice exporters say they are facing problems with mounting stockpiles, while the Mekong Delta's winter-spring crop harvest is expected to peak from next month. The crop is the largest of three crops planted in the delta every year, with grain mostly used for exports due to its high quality.

Rice export firms had nearly 1 million tons in stock at the end of January, while sales abroad were slowing, the Vietnam Food Association said. 

Rice exports fell 32 percent last month from January 2016 to 325,000 tons, according to data from the agriculture ministry.

The association projects Vietnam's rice exports this year will reach around 5 million tons. Last year, the volume fell to 4.8 million tons, the lowest level since 2008.

In contrast, the USDA has forecast a rebound in Vietnam's rice shipments this year to 5.8 million tons, leaving the country in third place behind India and Thailand.

"This is based on improved prospects to Asian markets such as the Philippines, where quantitative restrictions are set to expire later this year," it said in its February report.

Late last year, the Philippine government said it would not seek a further extension of the so-called quantitative restrictions on rice due to expire in June 2017 and will allow higher rice imports, Reuters reported.

Related news:

Philippines keeps door open for Vietnamese rice

Another gloomy year forecast for Vietnam’s rice exports

Vietnam’s rice exports may continue slide in 2017

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