Rice market ventures into the unknown

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According to Vietnam Food Association (VFA) deputy chairman Pham Van Bay it was hard to predict how rice export market would proceed in the forthcoming period.

India reportedly has a rice inventory of 22 million tonnes from a recent bonanza and intended to export two million tonnes in March 2012 at price ranging from $440-445 per tonne, which is nearly $100 per tonne lower than Vietnam.

Besides, the world’s 12th largest rice producer Pakistan planned to export 4.5 million tonnes in 2012, surging 28.6 per cent against this year at prices over $100 per tonne cheaper than Vietnam.

This country also aims to make inroads into Indonesia, an important Vietnamese rice market.

Can Tho city’s Song Hau Food Company’s director Le Minh Truong said the firm was struggling to find rice export contracts for 2011’s remainder, while the director of a rice export firm based in the Mekong Delta’s Tien Giang province said his firm had lost the African market due to a failure to compete with Indian and Pakistani partners in pricing terms.

According to a Tien Giang rice firm representative, Mekong Delta farmers have pushed up prices and hoarded rice in hope of price surges on the back of Thai government’s policy to purchase rice at high prices from farmers.

“With a rice input price at VND10,000 per kilogramme we find it hard to negotiate new export contracts,”  said the representative.

Thailand’s historical floods and its government’s high price rice purchase policy made Vietnamese firms expect selling rice at good prices. However, export prices and contract volumes did not surge as expected since India and Pakistan have jumped into the rice export bandwagon to offset the shortfall from Thailand.

“We urged farmers to make early harvests in the next season for better prices,” said Bay, adding that local firms were forecast to export only around 600,000-800,000 tonnes of rice to near export markets such as Malaysia and Indonesia in early 2012 while the export volume for whole year may come to around 6.7-7 million tonnes.

In this context, the VFA suggested local rice exporters ink contracts only when they have at least have 50 per cent of the export volume in stock and sign export contracts for 2012 in late November 2011 when market movements would be clearer.