Rice export targets lifted as India, Thailand cut back

The government has set a target of 4.5mil tonnes of rice exports this year, which is expected to bring in US$1.7bil in revenue, an increase over last year of $300mil.

The target was set out by the Ministry of Agriculture and Rural Development at a meeting last Friday in Hanoi.

Truong Thanh Phong, chairman of the Viet Nam Food Association (VFA), said rice exports were forecast to be favourable this year because of strong demand and a lower supply on the international market.

He said this year India, which usually exports about 3mil tonnes annually, would stop exporting rice to ensure national food security.

China is expected to import more rice and Thailand plans to cut its export volume.

"Export rice prices will remain high, benefiting both enterprises and farmers," he added.

Vietnam exported a total of 4.5mil tonnes of rice last year, earning $1.4bil in revenue.

The export rice price stood at $309 a tonne, up $41 a tonne over the previous year.

Local rice exporters said that rice prices offered by foreign importers hade risen by $20 a tonne over the past week to $385 a tonne, and could climb to $400 a tonne.

On the local market, rice prices were VND4,000 a kilogram, the minimum price set by the VFA for the year, according to Phong.

Phong warned that rice exporting businesses should be cautious and wait for the highest possible price before signing contracts.

"Rice prices are on an upward trend so we recommend that farmers not sell rice immediately unless they really need the money," he said.

Deputy Minister of Trade and Industry Nguyen Thanh Bien said that the 2008 rice export volume of 4.5mil tonnes scheduled for connacts include 700,000 tonnes in the first quarter, 1.5mil tonnes in the second quarter, 1.5mil in the third quarter and 800,000 tonnes in the last quarter.

Contract problems

Despite favourable conditions for rice exports in 2007, rice export businesses said that profits were declining compared with previous years, with some companies only breaking even or suffering a loss.

The director of a rice export company, who asked to remain anonymous, said that many rice contracts at the end of last year were not honoured because local rice prices were higher than the price quoted in the contracts.

He said the contract-based allocation of rice quotas was unfair and lacked transparency.

"When the allocated quota of rice export volume reaches us, export prices on the local market have already climbed to VND4,200 a kilo, while the price contracted is merely VND3,800 a kilo," he explained, adding that losses were inevitable.

Many companies have complained that they received information about export quotas two to three months after contracts had been signed.

The best time to buy rice, they said, would be when a business was able to decide whether it can make a profit or a loss.

Another problem is that local rice exporters can take out bank loans only if they have contracts that state the quotas.

The allocated time for rice shipment delivery was also too long, exporters said.

Unhealthy competition among rice exporters in securing rice contracts by offering a low bid is also damaging both businesses and farmers, according to industry insiders.

"If businesses scramble to win rice contracts at a competitively low price, they will suffer if export rice prices should later soar on the local market," said Pham Van Bay, director of An Giang Agricultural Products and Food-stuff Co. (VNS)