Vietnam’s rice exports have struggled to compete with cheaper shipments from Thailand in the first four months of 2015 as the Thai government has sought to offload inventories at highly discounted prices.

As a result, a representative of the Vietnam Food Association (VFA) said the country’s exports to highly price sensitive markets such as those in Africa could fall by as much as 60% from the figures in 2014.

Lower exports are resulting in more rice remaining in Vietnamese miller’s and farmers inventories, piling pressure on already-bulging storage and raising the spectre of grain spoiling in temporary silos.

The Thai government began executing a subsidized scheme earlier this year in which it plans to sell 10 million tonnes of broken rice in 2015 and an additional seven million tonnes in 2016 at prices substantially below market prices.

As one example, the Thai government in March sold 5% broken rice from its inventories at around US$236 to US$378 per tonne compared to the global market price of US$405 per tonne.

A representative of the Thai Rice Exporters Association, who declined to be identified, in turn justified the programme by saying that the government's rice is old and has been stored for a long time so its value has depreciated (Reuters).

There is always a large price gap between new rice and old rice, the official said.

The nation’s rice industry can compete with private Thai traders, but not with the Thai government as it slashes prices to bolster demand for old low quality stock, said a VFA representative.

In the four months leading up to May, Vietnam’s rice exports dipped 12.73% in volume and 16.37% in value on-year to 1.686 million tonnes valued at US$707 million according to VFA statistics.

In addition to lower export prices and fierce competition with Thailand, in 2015, Vietnam exporters are at risk of shrinking markets in other countries, particularly the Chinese market.

China has been the largest importer of Vietnam's rice for the past three years. In 2014 alone, Vietnam exported 2.1 million tonnes of rice to China, accounting for 30% of the nation’s export market.

However, Vietnam's rice exports to China during 2015 are likely to see a substantial decline as the Chinese government diversifies its import strategy to increase rice import quota from multiple sources.

To address the situation, Deputy Prime Minister Hai has asked the VFA in collaboration with relevant government offices and those in the private sector to develop specific marketing plans for each foreign market.

In addition, the Deputy Prime Minister asked the parties to lay out a scheme to restructure production and shift rice cultivation areas to planting crops with higher profit margins.

Hai said for 2014 Vietnam rice cultivation area stood at around 7.6 million hectares with an estimated production of around 43.4 million tonnes of paddy rice. Rice production exceeds consumption, but the country imports tonnes of soybeans and corn annually.

The government will guide farmers to shift to crops to soybeans, corn or other crops that will help them improve their overall profits, Hai stressed.

VOV