Exporters of rice exercise caution in selecting orders to mitigate risks


Published on: January 27, 2024.

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Political conflicts and climate change continue to drive up the demand for rice imports in various markets. Vietnamese rice exporters, however, are proceeding cautiously in order to minimize the risks of unexpected price changes.

Continued Demand for Rice Imports

Phạm Thái Bình, chairman of Trung An High-Tech Agriculture Joint Stock Company, explains that factors like political conflicts and climate change have led to an increase in rice demand and prices in 2023, and this trend is expected to continue in 2024. Consequently, the need to import and stockpile food, especially rice, is on the rise, creating favorable conditions for Vietnamese rice exports.

The ongoing European war and the emergence of new conflicts have heightened global instability. Moreover, the effects of climate change are becoming increasingly apparent in agricultural producing countries, where food and rice production areas are shrinking. As a result, many countries are facing the need to import and stockpile rice to ensure food security.

Forecasts indicate that the world will experience a shortage of approximately 5 million tonnes of rice in 2024, with India expected to limit rice exports to stabilize domestic prices.

Increased Rice Imports in Traditional Markets

Since the end of 2023 and the beginning of 2024, many countries have been actively looking for rice supplies to import. Traditional rice import markets for Vietnam, such as the Philippines and Indonesia, are in need of increased rice imports.

Phùng Văn Thành, Vietnam Trade Counsellor in the Philippines, reveals that the Philippines’ rice import demand is 3.5-4 million tonnes per year, with Vietnam being the primary rice supplier for the country. Vietnamese rice has several advantages in the Philippine market, as it caters to a wide range of consumer segments, from the poor to high-income individuals. Additionally, Vietnamese rice exporters have established long-term trading relationships and built a strong reputation with import partners in the Philippines.

Furthermore, Thành points out that Vietnam’s geographic proximity to the Philippines allows for shorter shipping times and lower shipping costs compared to other rice-exporting countries. The potential for Vietnamese rice exports to the Philippine market is still vast. The challenge lies in developing a brand and identity for Vietnamese rice that resonates with Filipinos. Currently, a significant amount of Vietnamese rice is exported to the Philippines without Vietnamese brand names, and packaging only includes a small line indicating Vietnamese origin.

Indonesia, another significant rice importer from Vietnam, is expected to increase its imports by approximately 600,000 tonnes in 2024. Moreover, China and Africa are both projected to experience higher rice import demand this year.

Food Security Concerns

Nguyễn Vĩnh Trọng, General Director of Viet Hung Limited Liability Company, echoes this sentiment, emphasizing that the escalating war situation and the adverse effects of climate change have made food security a major concern in numerous countries. Consequently, world rice prices are expected to remain high in the near future. Given Vietnam’s advantageous position in the rice industry as an agricultural producing country, it is crucial to seize the opportunity to increase export value and ensure profits for rice farmers and exporters.

Nguyễn Việt Anh, General Director of Phương Đông Food Company Limited, states that world rice demand will remain high in the first and second quarters of 2024. However, rice exporters face challenges in signing export contracts and need to closely monitor market developments. With the current high rice prices, rice exporters are exposed to potential risks if they decide to buy rice for stockpiling. However, failure to do so would result in insufficient rice supply for the next crop.

Rice exporters are cautious about this decision due to the lessons learned in 2023 when significant price fluctuations caused disruptions in the rice supply chain. Many domestic rice suppliers failed to deliver rice according to previously signed contracts, leaving exporters with no choice but to buy rice from the local market at inflated prices, resulting in financial losses.

India’s decision to halt rice exports has been a key factor driving up global rice market prices. However, India has not made it clear whether the export ban will continue or be lifted. Should the country have enough food reserves, it is likely to resume rice exports, leading to a surplus of rice in the global market and a subsequent decline in prices. Consequently, rice exporters would face losses or potential bankruptcy if they were to stockpile rice at the current high prices.

Bình reveals that many customers express interest in buying rice; however, there are very few actual transactions because Vietnamese rice exporters have depleted their rice supplies. Currently, the price of paddy in the field is exceptionally high, making rice exporters reluctant to sign contracts with long delivery times due to fears of price fluctuations. As a result, rice exporters sell immediately after purchasing and avoid stockpiling rice to mitigate potential risks.

Source: https://www.einnews.com