Boosting rice export, short-term opportunity, fear of reverse losses

Rice prices increase, some businesses... suffer reverse losses

A "fever" in rice prices has appeared on the world market after many countries banned exports. Mr. Nguyen Luu Tuong - Director of the Best Rice Company Limited (HCMC), shared information: many export enterprises are suffering "reverse losses" due to not anticipating price fluctuations.

That is, these businesses signed orders with foreign partners when rice prices were still low and had not fluctuated. Meanwhile, the businesses were not sure how much rice they would have in stock to meet the orders. This led to the situation that when rice prices increased, businesses were forced to buy from the people at high prices to have enough output for the signed export orders.

If businesses buy at the old price, people will not sell. Therefore, some businesses are having to suffer losses, buying at high prices and exporting at lower prices (due to previous contracts).

Mr. Tuong's company itself, these days often receives phone calls ordering rice from foreign partners, but he also considers it very carefully. He only accepts orders when there is enough rice.

Domestic rice supply ensures food security. Photo: Hoang Ha

In addition, when signing with international partners, Mr. Tuong said that enterprises need to make a "when the water rises, the boat goes up, when the water falls, the boat goes down" agreement. That is, if the rice price increases, the purchasing price from the people increases, the partner will adjust the enterprise's purchasing price. Conversely, if the price goes down, Vietnamese export enterprises also need to lower the selling price to international partners; this is the only way to ensure the harmony of interests of both parties.

"Businesses just close their eyes and sign export orders early, and then when prices fluctuate, they complain of losses. They have to accept reality and cannot ask the Government or the State for support," he said.

Should boost exports at this time

Referring to the recent submission of the Ministry of Agriculture and Rural Development to the Prime Minister for consideration of issuing a directive on strengthening rice export in the new situation.

Mr. Dinh Quang Thanh - Sales Director, Phuong Nam Food Joint Stock Company (representative of Ong ST25 Rice in Ho Chi Minh City), said that when the expected surplus of rice production is expected, exports should be promoted. This is a beneficial time for farmers and businesses. According to the information he received, rice prices in the West are increasing slightly.

The Director of the Best Rice Company Limited stated that Vietnam needs to boost exports right now. When there is good room for rice exports, farmers will likely benefit.

Director of the Department of Crop Production (Ministry of Agriculture and Rural Development) Nguyen Nhu Cuong said that in 2022, Vietnam's rice output will reach over 42 million tons, exporting 7.13 million tons of rice. This year, the whole country is expected to produce over 43 million tons of rice, rice exports may surpass the record of 2022.

According to Mr. Cuong, the increase in world rice prices is an opportunity for Vietnam to boost rice exports, which needs to be taken advantage of to increase income for rice growers.

Speaking with VietNamNet reporter, Master Phan Minh Hoa - Lecturer of Economics (RMIT University) commented that in the short term, rice prices are expected to continue to stay high in the second half of this year.

Ms. Hoa cited data from the General Department of Customs, in the first 6 months of this year, the average export price of rice was 539 USD/ton, up 10% over the same period in 2022. The price of 5% broken rice from Vietnam was traded at 588 USD/ton, at the highest level since 2011.

This is good news, an opportunity for Vietnam, the world's third largest rice exporter, to increase both output and value of exported rice, develop rice brands, and expand markets.

According to Master Hoa, market forecasting is very important. When signing a contract, businesses must ensure that they have a certain amount of rice in stock, avoiding the situation of signing a low-price export contract but having to buy at a high price.

On the part of state management agencies, ministries, branches and localities need to monitor, promptly direct and facilitate businesses to ensure smooth supply chains.

In the long term, Ms. Hoa believes that due to the short crop season of rice, the price increase cycle of rice in the world often does not last long. In the country, when the rice growing area tends to decrease, Vietnam needs to persistently improve the quality of rice, build brands, and meet the increasing demand of consumers in the world.

Former Deputy Minister of Industry and Trade Tran Quoc Khanh also commented that Vietnam is benefiting in the short term from India's decision to ban rice exports.

Specifically, in this year’s summer-autumn rice crop, farmers in the Mekong Delta are excited that input fertilizer prices have decreased compared to the previous crop, while output prices remain high and stable. It can be said that with this crop, farmers are making the best profits ever.

However, according to Mr. Khanh, we should not be too optimistic. Vietnam should not consider this as a long-term opportunity to increase production and exports.

Because, this is a short-term phenomenon.

As the weather returns to normal, countries will increase rice production. In particular, when India lifts its export ban, the rice market will return to normal.

According to data from the Vietnam Food Association, as of August 1, the export price of 5% broken rice from Vietnam was trading at 588 USD/ton, up 20 USD/ton compared to the session on July 31 and up 55 USD/ton compared to before India banned rice exports on July 20. 25% broken rice also jumped from 513 USD/ton on July 19 to 568 USD/ton in the trading session on August 1.

Similarly, the prices of 5% and 25% broken rice from Thailand continued to increase sharply, reaching 623 USD/ton and 564 USD/ton, respectively. Compared to the session on July 19, the price of 5% broken rice from Thailand increased by 82 USD/ton, and 25% broken rice increased by 62 USD/ton.

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