Sluggish rice trade dampens Veitnam local price

Sluggish rice trade in the year to date has driven local exporters from buying local rice, sending the local rice price into a downward spiral while harvest is peaking in the Mekong Delta as the country’s main granary.

Food traders refuse to buy rice despite being told to do so by the Vietnam Food Association (VFA), while farmers in the Mekong Delta are seeing the rice price to crash to under the suggested floor price of VND4,000 a kilo.

Stagnant trade

In the first two months of the year, only some 700,000 tons of rice has been shipped abroad, and the export volume for the first quarter is expected at 1.1 to 1.2 million tons compared to 1.6 million tons in the year-ago period. Therefore, despite better export price this year, the local price has hit farmers harshly.

In the Mekong Delta, rice supply is awash. Apart from some one million tons of rice carried over from last year, the commercial volume in this winter-spring crop is estimated at three million tons, which may rise to four million tons in the first six months of the year, according to VFA.

Until now, food traders have been able to sign contracts for 2.5 million tons, mostly under government-to-government agreements.

The vision for the rice trade is still blurred, said Pham Van Bay, vice chair of VFA.

The Philippines has signed agreements to buy 1.6 million tons of rice from Vietnam, but it is uncertain whether this country will order more, Bay said, adding that the situation is similar with other major buyers like Indonesia and India.

“Vietnam’s rice trade is locked in uncertainties this year, as major buyers are keeping a wait-and-see attitude,” Bay said.

A research institute under the agriculture ministry has called for measures to diversify markets if Vietnam is to boost rice trade and to lessen its reliance on traditional buyers. There should be a new mechanism that encourages food traders to look for new markets and new buyers, said the Institute for Development Strategy for Agriculture and Rural Development

Rice price tumbles

In fact, the local rice price has crashed by VND1,500 a kilo from two months ago, and VND500 since after Tet. Low-grade unhusked rice is now selling for some VND3,800 a kilo, while better-quality rice goes for between VND4,100 and VND4,500 a kilo.

Earlier, VFA has set the floor price at VND4,000, and this level was reiterated at a meeting of VFA in An Giang Province on Tuesday.

VFA has picked out 30 local food traders mandated to buy rice from farmers for stocking, but all these enterprises have been reluctant to make a move. Traders dare not buy rice at this time for fear of losses as they expect the price will fall further.

At the meeting on Tuesday, food traders said they were awaiting the final say from the Finance Ministry on the floor price. As food exporters are not ready to buy, intermediary agents also shun from buying rice despite prices are falling sharply.

Pham Van Bay of VFA said the association would conduct an inspection into the rice trade, and any of the food traders who ignore their mandate to buy rice would be disciplined, or even excluded from the association, according to Tuoi Tre. Under current practices, only members of the association are allowed to engage in the rice export business.