Enterprises win big contracts, farmers can enjoy Tet with peace of mind

Million ton orders are waiting

On January 31, 2024, the Indonesian National Logistics Agency (Bulog) announced the list of winning bidders for the 500,000-ton rice contract, divided into 17 lots. Vietnam has 7 enterprises winning a total of 10/17 lots; of which 3 large enterprises are Loc Troi Group Joint Stock Company, Northern Food Corporation and Southern Food Corporation, each winning 2 lots, the remaining 4 units each winning 1 lot.

Bulog did not announce the detailed quantity of each shipment, however, according to information from many sources that Thanh Nien has, the total volume of rice that Vietnamese enterprises won the bid is about 351,000 tons. In addition, some enterprises in the region that won the bid this time also used Vietnamese rice. If both groups of subjects are included, the total amount of rice that Vietnam needs to supply to Indonesia in the first quarter of 2024 will be nearly 420,000 tons.

Farmers in the Mekong Delta can enjoy Tet with peace of mind when businesses have many big contracts in their pockets.

Mr. Do Ha Nam, Chairman of the Board of Directors and General Director of Intimex Group Joint Stock Company, and Vice Chairman of the Vietnam Food Association (VFA), said: This will be a new "boost" for the domestic rice market, helping to stabilize prices when preparing to enter the upcoming winter-spring rice harvest. It is forecasted that Vietnam's rice export price will still hover around 650 - 660 USD/ton (FOB price - delivered at Vietnamese ports). In addition, the world's demand is still very large, especially in traditional markets.

"Most businesses want to wait until the season starts and they can buy rice before signing contracts. The problem is not how much contract can be signed, but how much rice Vietnam has to export and at what price," Mr. Nam emphasized.

In addition, according to some businesses, the recent visit of the President of the Philippines to Vietnam has opened up many expectations for this market in the new year. It is estimated that the number of trade contracts with the Philippines is at more than half a million tons. Thus, the total rice export orders that Vietnamese businesses have in their pockets before the Lunar New Year holiday this year for the Indonesian and Philippine markets alone has reached about 1 million tons.

Mr. Nguyen Van Don, Director of Viet Hung Company Limited (Tien Giang), commented: Recently, although rice prices have decreased slightly, they still remain high, such as DT8 rice at 15,400 - 15,700 VND/kg, ST24 at about 18,400 VND/kg, 5% rice at an average price of 14,500 VND/kg. The fact that many enterprises won bids in Indonesia will help the domestic market keep prices stable during the peak harvest season. Regarding the general trend, in 2024, the world market will still be in a state of excess demand, so rice prices will remain high.

Farmers are reassured, many businesses "bet" big

One day after the news that many Vietnamese enterprises won big contracts in Indonesia, Mr. Nguyen Thanh An in Thoai Son (An Giang) informed: Winter-spring rice has bloomed evenly and will be harvested before the 15th day of the first lunar month. Recently, many factories have closed early for Tet, and traders have stopped buying, causing rice prices to drop by about 500 VND/kg. Currently, DT8 rice is about 9,000 VND/kg. However, information in the press about Vietnam winning the contract to export rice to Indonesia has made people here feel secure to celebrate Tet. "For more than a year, rice prices have been at a favorable level, farmers are very excited and now many people are no longer under economic pressure or having to sell rice immediately after harvesting," said Mr. An.

The US Department of Agriculture predicts a global shortage of about 8.6 million tons of rice in 2024.

Mr. Pham Thai Binh, General Director of Trung An Joint Stock Company (Can Tho), also admitted that the rice market has cooled down recently, but that is normal because many businesses are preparing for Tet holiday. In addition, the amount of winter-spring rice is relatively abundant. However, the possibility is that this year, rice prices will remain at a level that is beneficial to farmers because the number of contracts pending for export until the end of the first quarter of 2024 is relatively high.

"I think farmers can rest assured to celebrate Tet. Some export enterprises are facing the greatest pressure, especially those that have just won bids. With the common winning bid price of 650 - 660 USD/ton, CIF price - delivered at the port of Indonesia, at the current price, there will certainly be no profit. I think they bid "close to the price" like that because they forecast that according to the market's rules of previous years, during the peak harvest of winter-spring rice, prices will decrease. Or these enterprises themselves have other plans to ensure profits, that is their internal matter," said Mr. Binh.

The leader of another enterprise analyzed: The cost of shipping from Vietnam to Indonesia is about 13 USD/ton, in addition to the cost of "making goods" (packaging) according to requirements, an additional 17 USD. Thus, the actual price is only 620 - 630 USD/ton. This is a price close to the current price of rice in the domestic market; 5% broken white rice is currently priced at 14,800 VND/kg, the average price of fragrant rice is also over 15,000 VND/kg. In addition, there are also conditions for deferred payment... which will cause other costs such as bank interest rates. Thanh Nien contacted representatives of some winning enterprises, but these units refused to provide detailed information because they were afraid that it would "disturb" the domestic market.

Thailand admits that the surge in rice exports is thanks to Vietnam.

Thai media quoted the country's Ministry of Commerce as saying: In 2023, rice exports increased by 13.6% to 8.76 million tons, exceeding the target of 8 million tons, with a value increase of 28.4%. In January 2024, rice exports skyrocketed by 44% over the same period to 1.12 million tons.

Thailand's rice export price this month reached 653 USD/ton, about 14 USD/ton higher than the same quality rice from Vietnam. At the end of 2023, Mr. Chookiat Ophaswongse, Honorary President of the Thai Rice Exporters Association (TREA), admitted that the country's rice exports skyrocketed in price and volume due to a shortage of supply from Vietnam at the end of the year.

Thailand’s Ministry of Commerce forecasts rice exports to reach 7.5 million tonnes in 2024, down 14.4% from a year earlier due to lower production and increased competition. Rice production this year is also expected to fall 5.9% due to the impact of the El Nino weather phenomenon.

USDA: Global shortage of 8.6 million tons of rice

In the January 2024 Rice Outlook Report, the US Department of Agriculture (USDA) said: Global rice production in the 2023-2024 crop year will reach about 513.5 million tons, down 4.5 million tons from the previous forecast of 518 million tons. This is the second consecutive year that global rice supply has decreased. Rice production has decreased sharply in some countries including: India decreased by nearly 3.8 million tons, China decreased by 1.3 million tons (due to smaller harvested area); Thailand is expected to decrease by 0.9 million tons (due to the rainy season coming later than usual)...

In contrast, total consumption is forecast to reach 522.1 million tonnes. Given the above supply-demand situation, the world is forecast to have a deficit of about 8.6 million tonnes of rice in 2024. The significant decline in global rice trade in 2024 is largely due to the bans and export restrictions from India implemented in 2022 and 2023.

In terms of rice importing countries, the Philippines is forecast to remain the world's largest rice importer, followed by China, Indonesia, the EU, Nigeria and Iraq. Of these, the Philippines is forecast to import a record 3.8 million tonnes in 2024, with China and Indonesia at 2 million tonnes.

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