Not Enough Rice Export Deals for Vietnam
While it is still uncertain whether potential customers will buy its rice, Vietnam has to compete with the two new rivals.
Vietnam rice export is in difficult situation with rice exporters gaining few commercial export deals. Vietnam Food Association (VFA) is concerned that if this situation continues, it is not only rice exports that will be severely affected, but will also lead to decreased purchase power of domestic rice.
Many Indefinable Unknowns
Mr. Pham Van Bay, Vice President of VFA said: “The hardest thing for local rice exporters is that they could not find any commercial contracts, especially in Africa where it used to be a vastly potential market for Vietnam businesses. The worse thing is that even with the signed deals, importers still did not execute the contract with the reason of inadequate finances. It is expected that not until early of the second quarter of 2010 could the rice market be eventful again.”
Another potential market is Iraq, which is bidding for 120,000 tons of rice. Previously, Vietnam businesses sold rice to the Iraq market via intermediaries and gained many contracts. Yet, since the Ministry of Industry and Trade identified that this should be a concentrated market and assigned the Vietnam Northern Food Corporation (VNFC) as a single point of finding rice export contracts, there have been no more contracts for domestic rice exporters.
Moreover, the other two countries considered as the unknowns of the world rice market, India and Indonesia, have showed signs of importing rice in order to ensure national food security. However, it is still unclear whether these two nations will import rice or not.
Another trouble for Vietnamese rice exporters in the African market is the appearance of two competitors, Myanmar and Pakistan. At present, the selling price of low-class rice of these two countries is around US$320-330 per ton, which is considered to be reasonable for the African market. However, the advantages of Vietnamese export are convenient shipping and a stable political situation, which make importers feel secure.
Rice market analysts in the world all agreed that rice is an uncalculated item. It is because apart from production and supply-demand, rice is also a product of political influence.
Restricting Private Merchants to Buy Rice From Farmers at Low Prices
With rice yield at an estimated 5.5 million tons from now until the end of this year, together with stock of above 1.2 million tons, the current deals totaling 2 million tons is not enough. Therefore, what rice exporters should do at the moment is to speed up acquiring new commercial deals in order to reduce pressure once new harvest is ready.
VFA policy his year is to make sure that the price of raw rice is above VND4,000 per kg (US$0.22). If the price falls below this benchmark, VFA will interfere by buying rice for temporary stocking. In 2009, VFA already bought for stocking twice when the price of raw rice fell too low. In some ways, this method has proved to be efficient.
At present, the Ministry of Finance has not published the production price ,but VFA estimated it at around VND2,500 (US$0.14) per kg. With that estimation and with the purchasing price of VND4,500 – VND4,600 (US$0.24 – 0.25) per kg, farmers could make a profit of 60%.
A new point for this year is the VFA and Vietnam Southern Food Corporation (VSFC) will have measures to curb the situation of private merchants forcing farmers to sell rice at a low price. To do this, rice will be bought by merchants at a price above VND4,000. Then rice exporters will pay them more than VND4,000 (US$0.22) per kg. The terms and conditions of the deals will be published on mass media so that farmers can have a full understanding of this policy.
However, the difficulty is that private merchants will still try to force farmers to sell rice lower than VND4,4000. VFA and VSFC does not have enough manpower to go to every single area of the country to buy rice directly from farmers. Furthermore, farmers in Vietnam often have small rice paddy fields, which makes rice purchasing in a collective way problematic. Also, farmers are usually under pressure to pay debts as soon as they can. As they have to borrow money for investing in rice seeds, insecticide, fertilizer, etc., long before growing rice, they are beleaguered of securing the money from their harvest. Therefore, farmers have no choice but to agree on selling rice at cheap price even before harvesting time.
(From Vietnamnet and Phapluat Newspapers)
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This is a great article. My friend and I will need to consider how to sell farming goods to the rice farmer in a way that doesn't create a money burden upon them until after the sell of their crop. This could give them a little more strength to hold out on selling their crop of rice at or below VND 4400.I will sent this article to others. Thank you.
Jeff, how long have you been involved in this industry? It seems like many of the farms in Vietnam are local/small family run businesses (perhaps I am wrong?). How do you reach out to them? Or do the farmers sell their crops to a large local company who deal with foreign businesses? Just wanted a perspective on how farmers make a living… thanks!
It's true that farms in Vietnam are small scales and they dont know how to deal directly with big businesses. That's why some private businesses will collect from different households until they could gain quite a large amount and sell to exporters. It's also the reason why they try to lower the standard price.
Brian, My friends family has done a lot Import /Export for sometime. (Other friends smuggle across cambodia border.but that is another story)In this case she (my friend) wants to move more into farming and help boost production. Mostly to help small farms and maybe extended family members.
Its a great article. We would love to assist Mr Pham Van Bay to locate buyers in West Africa
Great article.
I am interested in importing rice to West Africa. I hope I could talk to a farmer and see how we can work it.
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