Last update 3/26/2012 2:40:00 PM (GMT+7)

Mekong Delta has bumper rice crop – the opportunity for VN to boost exports

VietNamNet Bridge – Mekong River Delta farmers have, once again, a bountiful crop. Exporters keep optimistic about rice export in 2012.

Analysts say Vietnam may export 7-7.2 million tons of rice this year and it is likely to outstrip Thailand to become the biggest rice exporter. Thai rice exports may fall down to less than 7 million tons this year because of the flood and the government’s price subsidization policy, which makes Thai rice more expensive.

The opportunity for Vietnamese rice

International sources have said to date; Thailand has collected 6.7 million tons of rice from farmers out of the expected amount of 10 million tons under the subsidization program. With the purchase price at 500 dollars per ton on average, the export price would be 800 dollars per ton and higher, becoming less competitive than Vietnam’s rice.

As it is difficult to export rice at high prices, the majority of the rice collected from farmers has been kept in storage. In the past, Thai rice was 100 dollars per ton higher than Vietnamese rice. Meanwhile, the price gap has become wider, which has made it more difficult to sell. Therefore, Vietnam now has the opportunity to boost exports.

Vietnam has found many new partners, including China which has been increasing the imports from Vietnam. Vietnamese enterprises have signed contracts on exporting 500,000 tons of rice to China so far this year, while they only exported 258,000 tons to the market in the whole year 2011.

Pham Van Bay, Deputy Chair of the Vietnam Food Association VFA, said that the rice export market has warmed up since mid March 2012 after a period of stagnation which last from late last year to early March.

About 90 enterprises have joined the program on collecting 1 million tons of the 2011-2012 winter-spring crop rice from farmers for storage at no less than 5000 dong per kilo. According to the Ministry of Finance, the production cost of the crop was 3357 dong per kilo. In order to ensure the 30 percent profit for farmers as requested by the government, the purchase price must not be lower than 4323 dong per kilo.

VFA has affirmed that the rice collection program has benefited farmers. They do not bargain rice away when the prices go down, but they store in their houses, waiting for the prices to go up.

Bay has predicted that the rice price would rise further, since the big markets in the world have high import demand. The Philippines in March invited for a bid to supply 500,000 tons of rice. Malaysia has also purchased rice from Vietnam, while it is negotiating for more imports.

While Bay affirmed that no need to worry about the sale of high quality and fragrant rice, he warned that the low quality rice would be in low demand. The partners from Africa and Australia, who usually ordered low quality rice in the past, now also demand high quality products. Meanwhile, 50-60 percent of the rice growing area in the Mekong Delta were reserved for the low quality IR50404 rice, while fragrant rice just accounted for 10 percent of the growing area.

VFA, on one hand, advised farmers to store rice until they can sell for good prices, on the other hand, keeps the floor rice export price at high level (VFA’s member companies must not export rice at the prices lower than the floor price). Bay said that exporters are trying to obtain export contracts at the best prices, so as to be able to buy rice from farmers at the highest possible prices.

Profits fall into the hands of exporters, not farmers

Commenting about the possibility of Vietnam outstripping Thailand to become the biggest rice exporter, Dr Le Van Banh, Head of the Mekong Delta Rice Institute, said that bigger exports would only mean that farmers can easily sell rice. Meanwhile, this does not mean that farmers would make bigger profits. It is the enterprises which enjoy the biggest profits in the rice production chain.

Source: NLD