Appetite for scarce export orders

2012 is predicted to be a tough year for rice exports. How has the country fared?

At this point of time around 1.25 million tonnes of rice remain to be exported this year based on signed contracts. However, most of the export contracts were carried forward from 2011 and due for delivery in the third quarter, meanwhile export orders for the first and second quarters are scarce.

Vietnam shipped abroad 280,000 tonnes of rice in January 2012, sliding over 42 per cent on-year on the back of dwindling demands. Besides, competition among rice exports has mounted up.

Recently, India and Pakistan have jumped into rice export with ‘softer’ prices whereas Vietnamese export rice charges higher. Local rice stock is forecast to be fruitful with a constant rise in stockpile volumes in the past years. Hence, draining out the stockpiles will be rather difficult.

What measures have VFA and firms taken to weather the storm?

The association has worked out several solutions. First, the VFA recommended the government buy to temporarily keep in stock one million tonnes of rice between March and April 2012 at around VND5,000 per kg. However, if market price of paddy rice is around this level at that time, we will not need to take on this move.

Second, that is raising the competitiveness of export rice. Thus, we must compete head-on with partners from India and Pakistan to keep traditional markets, while hiking exports to other markets.

In the forthcoming time, firms need to ramp up efforts to seize back the African market and step into Chinese and Hong Kong markets which demand top grade rice products.

India and Pakistan are exporting rice at $340 per kg. Can Vietnamese rice exporters be competitive in pricing terms in the global market?

It is not a wise decision to compete in exporting low grade rice with India or Pakistan. If we buy paddy rice from farmers at VND5,000 per kg, export price must be set at $390 per kg. VFA just called a meeting and set out the floor rice export price at $420 per kg. Its top target is to deter firms from racing into shipping low grade rice and hike export of quality rice.

May price dumps to hike export volumes become a reality on the back of the current export contract scarcity?

Dumping often takes place in rice export which is hard to be stamped out. VFA has tried to bridle it through regulating floor export prices to deter firms from racing into export of low grade rice to expand export volumes.

China has a huge demand for importing rice. The Ministry of Agriculture and Rural Development said China once proposed Vietnam provide it with around 500,000 tonnes of rice annually. We can then hike export volume to China.

Will this situation be ameliorated?

VFA’s trade promotion remained ineffective in the past years. In fact, most of rice import markets are in the hands of multinationals which are all present in Vietnam. Hence, to hike export volumes, we should be cautious to avoid being forced to sell products at low prices.

Relative to the Chinese market, we held several exhibitions and workshops and formed a club of rice exporters to China in 2012’s first quarter to effectively step into this market.