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It needs objective remarks for rice export decline

There are different remarks over the good harvest and export prices of rice in the Mekong Delta but the strong decline in rice export volume.

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In all, subjectively, businesses have been paying more attention to improving rice quality to meet the strict standards of many markets; while objectively, the global demand for food reserves has been increasing and the prices of Thai and Indian rice have made record highs in recent years. In this context, Vietnam can “leisurely” wait for positive rice export results in the upcoming months. However, the real scenario is not quite so.

The scenario may not unfold as expected because of the following reasons.

First, it’s not known what the basis for the remark “The high global demand for food reserves has pushed up the world’s rice price” is but two most prestigious agencies for global rice, including the U.S. Department of Agriculture (USDA) and the Food and Agriculture Organization (FAO), have quite different remarks.

According to the latest forecast by the USDA, the global rice reserves early this year were large, at nearly 178 million tons. Though the volume grew insignificantly against the year-earlier period, it increased by more than 14 million tons from the same period in 2019 and was enough to meet the consumption demand over 129-130 days. Obviously, this is a scenario contrary to the period when the global rice reserves were thin, only enough to meet the consumption demand over half the time above (64-68 days in 2006-2009). For the consumption demand for up to 80 days, the time the reserves can meet this demand is equivalent to seven years (2005-2011), which was the period of the global rice price fever.

Further, the USDA also argued that the global rice growing area this year has increased quite strongly, resulting in an increase of 10 million tons of rice, not standing “the same” as in 2020.

In this situation, the global rice imports this year are forecast at only 43.7 million tons, up 1.33 million tons from 2020, while imports in 2020 were 1.65 million tons lower than 2019. As a result, the global rice imports have been on a downward trend against the record imports of 47.2 million tons in 2018.

The statistics and the forecast of FAO, albeit somewhat different, also show a similar trend in general.

Therefore, one cannot refer to certain particular phenomena to assess the global rice supply and demand as mentioned above. This is also the unpersuasive point mentioned in the scandal over rice export quotas in Vietnam early last year.

Second, the price increase by Thai rice exporters is true, but possibly because of force majeure causes, while the information about the increase of Indian rice price “past the records in recent years”(1) needs verification.

India’s rice exports in the first two months of this year increased exponentially, certainly because of the strongest price decline since the end of the global rice price fever.

According to official statistics of India, the country’s rice exports in the first two months reached 3.63 million tons, surging 84.2% year-on-year, but the average price was only US$460 per ton, the lowest since 2008.

Notably, while exports of fragrant rice fell, exports of non Basmati rice surged 162.1%. The average price of Basmati rice in the first two months was US$855 per ton, the lowest since 2017, and white rice US$353 per ton, a record low since 2008.

Meanwhile, the increase in the price of Thai rice since 2020 is due to reasons beyond the imagination of Thai rice traders, in addition to other reasons similar to those of Vietnam. They are the heavy crop losses in early 2020 due to record droughts in decades, floods which have pushed up production costs, the Thai Government’s diverse rice supports to stabilize prices and the appreciation of the baht. The synergy of these factors slumped rice exports and increased rice storage strongly in 2020. The storage is forecast to continue at a very high level this year.

This situation in Thailand, coupled with the strong price rise of Vietnamese rice, may force some customers to turn their back on Vietnamese rice and switch to the abundant supply of Indian rice with soft prices, especially white rice.

Third, the increase in the price of Vietnamese rice due to the improvement of the rice quality or Vietnamese rice exporters’ increased attention to rice quality improvement and traceability to meet strict standards of export markets like the EU, the U.S. and South Korea is certainly something true and worth cheering in terms of quantity, but it may be doubtful in terms of quality.

Statistics of the USDA show that five years ago, the fastidious markets of Europe, America and Australia accounted for 11.3% of the total of 50.8% of Vietnamese white rice exports and only 2% of the total of 44.6% of Vietnamese fragrant and glutinous rice exports (the total rice exports is 100%). However, in 2020, the share of white rice exports to these markets plunged drastically to 6.9% while the share of glutinous and fragrant rice exports increased to only 2.7%.

Nevertheless, this statement is not meant to completely negate the efforts of the rice industry, but on the contrary, it needs recognition for enterprises which have developed rice material areas and sustainable rice value chains to build a brand for rice. Still, with the possibly vast remaining rice area, it’s too optimistic to say that more and more attention is being paid to the rice quality, and so it may not be sound to say that this is the reason for the rice price increase.

 

SGT

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