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Vietnam: Low prices put rice exports on a slow boat
According to the Vietnam Food Association (VFA), deliveries slowed down during March and April, while it became more difficult to book new orders. A source said that the Philippines has asked for a delay in delivery of the one million tonnes of rice bought in late 2009, because their warehouses have been full.
“Expenses will rise if we must hold rice in storage,” said a businessman.
Contrary to all predictions, the world market remains quiet. Vietnamese exporters still cannot find clients in the Philippines, Africa, the Middle East or Iraq, regions that they hoped would buy much rice.
In late March, the Philippines announced that they would issue a tender to purchase 800,000 more tonnes of rice. However, a source from VFA said on April 27 that the plan has been delayed. Meanwhile, clients from Africa would rather purchase rice from Pakistan which has rice of the same quality and price as Vietnam’s rice. If they buy rice from Pakistan, they can save $15-20 per tonne in transport costs.
Prices have been decreasing because clients are sitting on the sidelines. They seem to have decided to wait for a while, and will make transactions only when prices fall further.
VFA’s indicative price to exporters of five percent broken rice at $350 per tonne. However, it is not easy to export rice at that price. There have been successful transactions in the $320-330 per tonne range. As such, rice exporters have taken a loss because they had to buy rice in February and March from farmers at 6600-7000 dong per kilo.
“We purchased some tens of thousands tonnes of rice,” complained a Kien Giang broker. “Now the rice price has been decreasing and we cannot sell that rice.”
Other enterprises said they still cannot decide whether to sell rice now. “If we sell now, we’ll take a loss. However, we may suffer heavier losses if we wait until later,” a businessman said, adding that he must pay bank interest of 40 dong a month for every kilo of rice he has on hand.
The total volume of rice in inventory had reached one million tonnes by the end of April. This includes a considerable overhang from the winter-spring crop that’s still in farmers’ hands. Every day, moreover, thousands of tonnes of rice from Cambodia are carried to Vietnam. Now enterprises must sell all the winter-spring crop rice to have room to store summer-autumn crop rice, about two million tonnes.
The source from VFA said that VFA will try to manage sales in the most flexible way, so that enterprises can optimize their profit. He called the difficulties enterprises are facing ‘not really big’ yet, because they include a substantial number of contracts signed early in the season that locked in high export prices.