Build and protect the rice value chain against market fluctuations

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Vietnam leads in export rice prices globally
Conditions for price reduction of imported goods
Build and protect the rice value chain against market fluctuations
Rising rice prices bring many risks for export businesses. Photo: TL

Advantages but also many difficulties

Vietnamese rice is creating a new transition from quantity to quality, from rice production to rice economy. Mr. Nguyen Ngoc Nam, Chairman of the Vietnam Food Association (VFA), assessed that this change is due to businesses taking advantage of the increasing demand for rice imports from traditional markets over the last time.

Statistics from the General Department of Customs, in the first quarter of 2024, Vietnam exported nearly 2.2 million tons of rice worth 1.4 billion USD, up 17.8% in volume and 45.6% in value compared to 2023. In the first 15 days of April 2024, rice exports reached 512 thousand tons, up 45.5% over the same period in 2023

From a business perspective, Mr. Dinh Minh Tam, Director of Co May Co., Ltd. (Dong Thap) said that in the first months of the year, the company’s main export markets all grew well. Specifically, Co May’s organic rice and shrimp products had high selling prices of over 1,000 USD/ton. Ms. Huynh ThiBichHuyen, Director of Ngoc Quang Phat Import-Export Joint Stock Company, said that rice export in 2024 benefit much thanks to more orders and upward price trends. Moreover, demand from markets such as the Philippines and Indonesia is still increasing

Besides positive results, Mr. Nguyen Ngoc Nam added that Vietnam’s rice production and export activities also face many difficulties such as weather phenomena, economic – political risks – food import and export policies and cautious psychology,which have existed in the domestic and international rice trade markets since early months of 2023, continues to extend into early 2024. Accordingly, domestic prices and offered prices of major exporting countries (except India) continue to record large fluctuations and tend to be influenced by the two main sources of supply are Thailand and Vietnam. Although there is a need to import rice from other countries, due to both risk concerns and expectations like what happened in 2023, traders, satellite warehouses and businesses must all trade very cautiously when only supplying and signing short-term delivery orders.

Besides, inconsistent policies from overseas markets badly effects domestic businesses. For example, Philippine traders sign contracts but do not receive goods and offer to reduce prices.Typically, the Indonesian market is gradually reducing its dependence on rice supply from Vietnam when opening many small bidding packages for other countries such as Malaysia. The European market is also increasingly placing stricter requirements on quality and product traceability…

Mr. Dinh Minh Tam also raised difficulties stemming from rising rice prices. Specifically, since India has a policy of banning rice exports, domestic rice prices have continuously fluctuated, making it impossible for businesses to predict the future. Businesses have to buy rice at high prices to fulfill previously signed contracts, leading to a decline in business efficiency. In addition, when rice prices increase, farmers do not comply with their commitments and sell rice outside, causing businesses’ purchasing output to decrease. “The linked areas of Co May Co., Ltd. in KienGiang and Ca Mau are almost completely broken. Therefore, in the near future, businesses will be very hesitant to invest in seeds for farmers because they are afraid of being unable to buy goods in harvests and farmers will not return the seed money” – Mr. Tam said.

In addition to the above issues, credit is still an issue of special concern to the rice exporting merchant community. Ms. Huynh ThiBichHuyen, Director of Ngoc Quang Phat Import-Export Joint Stock Company, said that after rice prices continuously increased, with the granted credit limit, the company’s purchasing volume was about 40% short of the inventories from 2 years ago. Therefore, Ms. Huyen wants banks to increase limits for businesses to meet purchasing needs.

Strengthen cooperation and maintain trust

As a successful enterprise in building a value chain, Vietnam Rice Company Limited (Vina Rice) has exported high quality rice to demanding markets such as the EU, Canada, Japan, and Korea. Currently, Vina Rice’s export price to these markets is the lowest at 980 USD/ton

To effectively build the rice value chain, Mr. Truong Tan Tai, Director of Vina Rice, said that it is necessary to first build a rice brand. “Thailand has built a common national brand for rice, while in Vietnam, strong businesses do their own thing and rarely share market information with each other” – Mr. Tai acknowledged. Next, businesses and localities need to sit together to cooperate in building raw material areas. Technology investment also plays a very important role. According to Mr. Tai, currently businesses do not pay much attention to investing in machinery and technology lines. For example, businesses hardly show interests in Japan’s Japonica rice processing line draw. Meanwhile, this investment will help businesses ensure product quality and improve competitiveness. In addition, businesses also need to focus on training high-quality human resources.

To ensure the sustainability of the links between businesses and farmers, Mr. Dinh Minh Tam hopes that localities should take care and support businesses, and at the same time propagate and encourage people to maintain trust and create a profitable harmonious purchasing environment that profit both farmers and businesses. “When links are broken, businesses may move to invest in raw material areas in other areas, causing long-term damage to both farmers and localities” – Mr. Tam emphasized.

Mr. Nguyen Ngoc Nam said that it is time to develop standards for production, processing and product quality consistent with current international integration requirements. At the same time, it is necessary to orient farmers and traders to strengthen preservation and processing to meet import regulations of markets on quality, food safety, pesticide residues, quarantine, and origin traceability.

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