The bumpy road of rice export

Transporting rice in the Mekong Delta, Vietnam’s rice basket - PHOTO: LE HOANG VU

Rice export achieved remarkable results in the first eight months of 2018 relying upon the improved purchasing power of the world market. On the other side of the coin, however, things are not all rosy. It is likely that the last four months of this year will be more difficult for rice export.

Customs statistics show that 4.534 million tons of rice was exported in the first eight months of 2018, an increase of 444,000 tons (10.9%) over the same period last year. The total export value of this item reached US$2.287 billion, a sharp rise of 27%. The average export price in this period was US$504 per ton, up 14.6%.

Vietnam achieved such positive results because the Mekong Delta yielded better than planned while greater productivity expands the output. In this summer-autumn crop, if production goes smoothly as it has been so far, the output will also increase year-on-year. This is the main reason the U.S. Department of Agriculture (USDA) has recently estimated that Vietnam’s rice production will set a new record of 46.3 million tons, an unprecedented high volume in the country’s agricultural history.

However, a closer look may reveal some things worth worrying about behind such successes.

First, in January-August, whereas rice exports to the three main traditional markets of the country in the ASEAN region—namely Indonesia, the Philippines and Malaysia, rose 975,000 tons (121.4%)—the largest market since 2012, China, bought 544,000 tons (34.9%) less than the same period last year.

Apparently, such alarming decline in this market which took in 32-39% of Vietnam’s total rice export volume in the past five years should not be entirely ascribed to the tax hike of up to 50%, which has just been effective since July, while decline began in February.

As per Chinese statistics, this country imported only 1.89 million tons of rice in the first seven months of this year, down 61% year-on-year.

Meanwhile, the rice export results of Thailand, the only country with an intergovernmental deal of up to one million tons a year with China, show that the volume this nation sent to the Chinese market in the first seven months was only 477,000 tons, a drop of 37.7% over the same period last year.

It is likely therefore that China has not only tightened the control over unofficial rice imports across the border and the quality of imports, but also adopted several measures to significantly reduce the import volume.

This is probably due to the Chinese government’s policy to keep rice prices extremely high so that farmers feel encouraged to grow more. Such policy resulted in a huge stockpile of 86.5 million tons in late 2017, which will probably have enlarged to 94 million tons by the end of this year, making up 64.5% of the world’s rice reserves and meeting the demand for 240 days, versus the world average of only 110 days.

Second, given the three major markets in ASEAN almost capable of making up for the decline in China and the growth in rice exports in general, it means the other export markets went flat during the past eight months.

According to the USDA, rice exports to Africa in the first five months of this year accounted for only 8.3% of the total volume, while the percentage was 13.1% in 2017 and 17% in 2016. The reason for this “downturn” is probably the fact that the price of our white rice has been pushed up too high compared to India’s, even higher than Thailand’s. As a result, our market share here sharply shrank.

Things will be harder

In this context, it is likely that rice export in the remaining time of the year will be more difficult for three main reasons:

First, unlike the forecast that rice imports globally will hit a new record 48.5 million tons this year, the USDA in September predicted the figure would be only 46.1 million tons. In other words, the growth would be just 1.5 million tons, not 3.3 million tons as previously forecast.

Even so, it seems this demand will hardly be met.

Since China purchased only 1.89 million tons in the first seven months, there will hardly be any miracle for its total rice imports this year to reach 5.5 million tons as the USDA forecast. There are virtually no grounds for Vietnam to expect an additional 742,000 tons of rice will be sold to this vast market in the final four months of 2018, like what happened late last year.

If this year’s glutinous rice output is the same as in 2017, it will be necessary to sell 1.4 million tons to the world market. Considering China’s import tariffs being hiked to 50%, the search for alternative markets is really tough.

What’s more, regarding Vietnam’s second largest market, Indonesia, since it already imported nearly 1.5 million tons from Vietnam and Thailand, there is no guarantee if this country will purchase more rice this year to reach the volume of two million tons.

As for the Philippines, the nation which bought 1.1 million tons from Vietnam and Thailand in the first seven months, it is still executing the import order of 250,000 tons won in late April. Therefore, the country has almost reached the import volume of 1.4 million tons as forecast by the USDA for this year.

Second, while the prospects for market expansion are likely to be unfavorable, the fact that we have enjoyed the most bumper crop ever, leading to the need to export about 1.5 million tons, will exert a great pressure in the rest of the year.

In short, although rice export so far has brought in satisfactory results, there will probably be many obstacles on the remaining road to achieve the volume of seven million tons according to the latest forecast of the USDA.