Rice prices drop 12% due to abundant harvest and declining global demand
Published on: March 4, 2024.
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Rice Prices Fall in Vietnam Amid Increased Supply and Decreased Global Demand
Amid a surge in supply and cooling global demand, the prices of paddy and rice purchased for exports in Vietnam have plummeted by 10-12% since the last harvest. The Mekong Delta region has seen paddy prices drop to VND7,200-8,000 (US$0.29-0.32) per kilogram. According to the Vietnam Food Association, paddy prices have decreased by VND1,000-1,300 per kilogram in the year to date. In An Giang Province, the IR 504 variety is currently selling for VND7,200-7,350, while the Japanese J02 variety is priced at VND7,800-8,000.
Local farmers have been affected by the decline in prices. For instance, Nguyen Van Thuan, a farmer in Kien Giang Province, has experienced a decrease in paddy prices from VND9,000 to VND8,000 after traders paid deposits to buy his paddy last month. Similarly, Nam of Tien Giang Province sold his paddy for VND7,700, down 10% from the previous month.
Huynh Thi Bich Hien, director of export company Ngoc Quang Phat, noted that her company is currently procuring 1,000-2,000 tons of paddy per day at a maximum price of VND8,000. Consequently, Vietnamese export prices have also declined, with 5% broken rice now being sold for $594 per ton, nearly 10% cheaper than at the beginning of the year. In comparison, rice from Pakistan and Thailand is priced $12 and $15 higher, respectively.
The drop in paddy and export rice prices has been attributed to excess supply and sluggish rice exports. The winter-spring crop harvest, which is three times larger than the autumn-winter crop, has contributed to this excess supply. With approximately 1.5 million hectares planted in the Mekong Delta alone, of which 300,000 hectares have already been harvested, there is an ample supply for both domestic consumption and exports. Nguyen Nhu Cuong, director general of the Department of Crop Production, confirmed this trend.
Furthermore, the lack of new contracts from countries that typically import large volumes of rice from Vietnam has also contributed to the price decline. Hien explained that the surge in prices caused significant losses for many exporters who had already signed contracts at fixed prices before procuring the grain. As a result, these exporters have been forced to lower their buying prices.
Dinh Ngoc Tam, deputy CEO of agricultural goods exporter Co May, stated that rice prices and global demand are simply returning to their normal range following a temporary shortage. He added that farmers still earn profits of VND3,000-4,000 per kilogram, even at current prices. However, Vietnam is now facing increased competition in the international market, particularly from Thailand, which is seeking to boost its rice exports to the Philippines, Vietnam’s largest buyer.
Despite the decline in prices, it is unlikely that they will fall below $570-600 unless India lifts its ban on rice exports. Tam emphasized that global supply remains limited, preventing further price drops.
