The long road for rice exports: Part 2

Rice prices fluctuate

Over the past two weeks, the story of rice prices has become a hot topic of interest to many people. The continuous increase in rice prices has excited farmers, with the hope of making a lot of profit in the current rice harvest. However, right after the 2024 Lunar New Year, rice prices have continuously dropped sharply.

Recorded in the rice granary of the Mekong Delta region, from February 15 to February 25, 2024, rice prices have decreased by 1,800 - 2,000 VND/kg. In recent days, although rice prices have stopped falling, the current level is not as expected by farmers.

The provinces in the Mekong Delta are entering the winter-spring rice harvest season - the largest rice crop of the year.

Mr. Nguyen Van Bay, a farmer in Chau Thanh district (An Giang province) said that before the Lunar New Year, rice prices were high, with many types of fragrant rice reaching up to 10,000 VND/kg. Hoping for a good winter-spring crop and good prices, Mr. Bay often visited his fields during the Tet holidays. However, right after Tet when the rice was harvested, the price of rice suddenly dropped sharply. It is worth mentioning that many traders have abandoned their "deposits" due to the continuous decrease in rice prices. Currently, he has to proactively find a buyer, but transactions are very gloomy because businesses are quite hesitant to buy.

“The price of regular rice in the field this week has decreased by nearly 1,000 VND/kg compared to last week. The current average price is only over 7,500 VND/kg. Many traders cannot find buyers so they have to give up their deposits. Currently, the price of rice is very difficult to predict, so the number of brokers asking to buy has decreased sharply. Ripe rice must be sold, it cannot be left to rot in the field, so even though the price has decreased, farmers still have to sell,” said Mr. Bay.

Like Mr. Bay, Mr. Nguyen Thanh An in Tan Tuyen commune (Tri Ton district, An Giang province) - said: From February 27, his family started harvesting 30 hectares of Dai Thom 8 rice, the estimated yield is over 1 ton/cong (1,300 ^m2 of cutting) but so far the rice price is not as good as expected at over 9,000 VND/kg.

According to Mr. An, rice prices have been continuously decreasing since after Tet, and now the downward trend has stopped, but the price is not as expected, reaching only 8,000 VND/kg. Mr. An is also concerned that the price of the areas that will be harvested at the end of March will decrease further.

However, according to the explanation of Professor Bui Chi Buu, former Deputy Director of the Vietnam Academy of Agricultural Sciences, although the price of rice has decreased, it is still high at over 7,000 VND/kg. With this price, farmers can ensure a profit of over 30%. This is ideal for rice farmers. "We should not expect too much about the price of rice going up to 9,000 - 10,000 VND/kg because it is only temporary and local, not the real price" - Professor Bui Chi Buu said.

In fact, according to Mr. Pham Thai Binh - Chairman of the Board of Directors of Trung An High-Tech Agriculture Joint Stock Company, the high price of rice in the last months of 2023 is due to Vietnamese enterprises signing contracts, selling rice in advance, delivery time at the end of the year and end of the season... having to buy rice at all costs, even when farmers fixed prices too high. Thus, at that time, the purchasing power was "hot" but the supply was limited, so the price increased. Now, the "demand" has decreased, the purchasing power is low, and the price of rice has decreased, which is completely normal.

In 2023, many rice exporting enterprises recorded a decline in profits for many reasons, including price fluctuations.

Operate according to market rules

The story of unstable rice prices has not only been going on this year but has been going on for many years. Accordingly, due to lack of connection and small-scale farming, most farmers sell rice through intermediaries, rice brokers. Then, the rice brokers continue to sell to traders outside the province, few sell rice directly to large enterprises. Therefore, many opinions say that when rice prices fluctuate strongly, traders are the ones who benefit the most.

However, according to a rice broker in Dong Thap, their only job is to connect businesses with farmers and receive commissions, so when businesses do not buy, they have to give up their "deposits". " Actually, the brokers and farmers and businesses know each other because they have worked together for many years. But because the old contracts were all exported in 2023 and January 2024, since February, the new contracts have not been signed, so businesses buy very little, transactions are low, causing rice prices to decrease ", said this rice broker.

As for businesses, previously, in 2023, the Vietnamese rice industry had unexpectedly successful business when exports set a record of 4.78 billion USD, an increase of 38.4% compared to 2022. This result was achieved because the Vietnamese rice industry took advantage of the market shortage and increased exports at high prices. However, not all rice exporting businesses "reaped" success because many businesses suffered heavy losses, and some businesses even "left the game".

According to statistics from the Import-Export Department (Ministry of Industry and Trade), if in mid-2023 the whole country had 210 traders qualified to do rice export business, by August of the same year, it had decreased to 170 traders. Loss-making enterprises include Trung An High-Tech Agriculture Joint Stock Company. This enterprise recorded its first year of loss since being listed on the stock exchange. According to Trung An's recently published financial report, in 2023, although Trung An recorded revenue of VND 4,484 billion, an increase of 18%, it still had a loss after tax of more than VND 19 billion (in the same period in 2022, it had a profit of more than VND 75 billion). Another enterprise, An Giang Import-Export Joint Stock Company (Angimex), also recorded a net loss of VND 208 billion for the whole year of 2023 (previously in 2022, this company had a record loss of VND 234 billion)...

For Loc Troi Group Joint Stock Company, in 2023, the company achieved net revenue of VND 16,069 billion, an increase of 37% compared to 2022. However, due to the erosion of cost of goods sold and expenses, after tax, Loc Troi reported a profit decrease of 35.6% compared to the same period, with only more than VND 265 billion left (in 2022, this enterprise had revenue of VND 11,690.62 billion and profit after tax of VND 411.64 billion).

The fact that some businesses are losing money or have to leave the market is analyzed by Mr. Nguyen Van Thanh - Director of Phuoc Thanh IV Production and Trading Company: Businesses that do not have goods in stock or have little goods in stock but have signed large orders in advance at low prices, then after selling all the inventory, they will have to buy at high prices to deliver the goods, then the business will lose money. "Most rice exporting businesses with large sales are in this case. They often buy rice to supply the contract at the time of delivery, with no or very little inventory to avoid borrowing and paying interest. These businesses rely on small mills to buy rice and when the price of rice increases, they will suffer losses," Mr. Thanh emphasized.

This year, according to experts, the price of rice and paddy continues to fluctuate, along with many objective market factors such as shipping rates increasing by 300% compared to the end of 2023 due to tensions in the Red Sea region, fluctuating exchange rates... have been and are directly affecting Vietnam's rice export business. This context forces both businesses and rice growers to recalculate how to make a profit because, after all, when participating in export, "everything follows the rules of the market".

Number of rice exporters in 2024 will decrease

The Import-Export Department (Ministry of Industry and Trade) said that as of January 22, 2024, there were 161 traders nationwide granted Certificates of eligibility for rice export business.

According to this list, compared to mid-2023, the number of traders qualified to export rice has decreased significantly. Specifically, in the list in mid-August 2023, the whole country had a total of 210 traders exporting rice, but by January 2024 there were only 161 traders (a decrease of 49 traders).

Ho Chi Minh City is the leading locality with 36 qualified traders (1 trader less than the list announced in October 2023); followed by Can Tho with 34 traders, Long An with 22 traders, Dong Thap with 15 traders, An Giang with 14 traders.

Ministry of Industry and Trade recommends solutions for businesses in the face of Red Sea tensions

Faced with tensions in the Red Sea region, since the end of December 2023, the Ministry of Industry and Trade has issued a document informing and recommending to associations, logistics service enterprises as well as import-export enterprises a number of solutions to limit the impacts of the situation arising in the Red Sea region.

In early February 2024, the Ministry of Industry and Trade coordinated with the Ministry of Transport and the Ministry of Foreign Affairs to organize a meeting to discuss solutions to remove difficulties for import-export enterprises due to the situation in the Red Sea.

At this meeting, the Ministry of Industry and Trade proposed a number of solutions to help businesses and shipping lines overcome the difficulties they have encountered in recent times, such as: Requesting shipping lines to strictly comply with legal regulations, especially regulations on listing and publicizing freight rates, not imposing unfounded fees and surcharges; recommending businesses to diversify their sources of goods supply; in negotiating sales contracts and insurance contracts, it is always necessary to ensure that shipping contracts have provisions on force majeure and compensation in case of risks, etc.

Lesson 3: Promoting the efficiency of the rice supply chain

Source: https://congthuong.vn/duong-dai-cho-xuat-khau-gao-bai-2-thi-truong-bien-dong-lien-tuc-rui-ro-thua-lo-chuc-cho-306157.html