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Vietnamese market awash with low-quality rice
There’s an abundant harvest this year, which isn’t great news for farmers trying to sell their rice crop. Farmers have cultivated much IR 50404 paddy, while the semi-official Vietnam Food Association (VFA) predicts that the world will mostly demand high quality rice in the upcoming months.
Farmers in many localities have been weeping because merchants refuse to purchase their new rice crop, even though when they offer low prices and dry the rice well in the sun.
Rice abundance forecast for year end
As of May 17, Vietnamese rice exporters had signed the contracts to export 3.996 million tonnes of rice, while 2.655 million tones had been delivered, 36 percent ahead of the 2008 pace. From now to the end of June, enterprises will have to deliver the other 1.311 million tones to fulfill the signed contracts. According to VFA, Vietnamese companies have plenty of rice in their storehouses.
According to some Vietnamese rice exporters, international buyers are only offering to pay $380 per tonne FOB for Vietnam’s five percent broken rice and $340-350 per tonne for 25 percent broken rice. Meanwhile, VFA has issued guidance that enterprises should sell rice at $410/tonne, $20 per tonne less than in April. Seeing prices fall, some enterprises have agreed to sell rice now at the low offered prices, which has encouraged importers to force price down further.
VFA Chairman Truong Thanh Phong said that the association warned before that the world market will only accept high quality rice only (up to a maximum of 15 percent broken rice), but farmers, ignoring the warning, still sowed low quality rice, and now they suffer.
According to Phong, the Philippines and Malaysia have nearly completed building stocks of low quality rice already and are only likely to import high quality rice in the last six months of the year. Cuba, Africa, the Middle East and other lower quality rice markets only purchase rice enough for short term use.
Demand quite different from supply
In Mekong Delta provinces, farmers still can hardly sell rice from the current harvest, even when they lower their asking prices.
IR50404 rice is now selling at 3,600-3,700 dong per kilogram only, while long-grain rice is at 4,200-4,400dong per kilogram, 400-600 dong per kilogram less than the last winter-spring crop.
VFA said that enterprises need to export 2.3 million tones of rice in the last six months of the year if they want to clear the unsold grain held by farmers.
However, Phong said that the outlook is not good, because the remaining rice has generally low quality.
Deputy Minister of Agriculture and Rural Development Bui Ba Bong conceded on May 22 at a conference on preparations for harvesting and consuming the summer-autumn crop in the Mekong Delta that rice prices are sagging in some localities.
Bong said that this is quite a normal thing on the rice market, and that it is still unnecessary to interfere the market.
However, he stressed that if the rice price drops further to very low levels, and is generally unsalable, the Ministry of Agriculture and Rural Development will propose that the Government ask enterprises to purchase rice from farmers for storage.
Regarding IR50404 rice, Bong said that the IR50504 rice growing area on Cuu Long River Delta accounts for 18.04 percent of total area, a considerable decrease over the last year. It is expected that the IR50404 rice output will decrease by 50 percent over 2008.
Rice market outlook
Abundant harvests drive down world rice prices
Crops are good all over Asia, the US business paper Wall Street Journal reports, and as a consequence, rice futures prices are only half the level they were a year ago.
The WSJ examined the outlook for world rice markets in its May 25 issue. Unlike rice, it comments, other grain markets have not recovered from the 2008 shortages.
This year, Thailand is expected to unload some of its rice stocks into the market. The U.S. Department of Agriculture (USDA) is projecting Thailand will export 8.5 million metric tons in 2009-10 after that country was a net importer in 2008-09. India is expected to end its export ban, as well as its ban on rice-futures trading. Indonesia and Bangladesh are expected to reduce imports.
USDA thinks world rice production for 2009-10 will be about 450 million tons, up one percent from a year earlier. "Large crops are projected for most of Asia, including record crops in Bangladesh, Cambodia, India, Indonesia, the Philippines, and Thailand; and a near-record in Vietnam and Burma.
Analysts mostly agree that there was no shortage of rice last year; the problem was that some countries decided to ban exports. Now, Thailand and India are expected to slowly release supplies.
One analyst commented that the rice market’s gradual fall has been driven by supply expectations, and a disruption of supply could cause it to rebound. He said, for example, that a reduction in the Indian crop from 100 million tons to 80 million tons, perhaps because of an unusual monsoon season, could change the market’s outlook in short order.
VietNamNet, TT, DT, Wall Street Journal
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