Local exporters concerned about falling rice prices in Thailand

Any impact?

Vietnam Food Association (VFA) Deputy Chairman Nguyen Trung Kien believes rice exports will not be affected by a fall in price. The reason is that with some 17 million tonnes of rice in stock Thailand will suffer an estimated loss of US$9 billion if it continues to lower the purchasing price of rice.

According to the Bangkok Post, the Thai National Rice Policy Committee (NRPC) recently decided to cut the paddy ceiling price from 15,000 baht/tonne  to around 13,500 baht/tonne. Such a 15–20% reduction will cause a loss of 136 billion baht during the first year of Thailand’s rice programme.

Nguyen Dinh Bich—Deputy Head of the Trade Development Strategy Department under the Ministry of Industry and Trade’s (MoIT) Trade Research Institute—says local rice exporters’ comparatively low prices will inoculate them against the Thai Government’s move. Bich doubts the Thai rice price will fall to a level where Vietnamese exporters will be threatened.

Rice reverses needed

Vietnam is second only to India which is the world’s largest rice exporter. So in the face of falling rice prices in the world domestic businesses fear that they will find it difficult to secure a firm foothold in the rice export market.

In the first six months of this year, Vietnam exported approximately 3.5 million tonnes. With the price of 5% broken rice dropping from US$410/tonne in January to US$365/tonne in June, Vietnam has become the world’s cheapest rice exporter.

The VFA says Vietnam’s rice exports in the first half of 2013 increased by 2.55% in volume but fell 2.04% in value year on year.

For this reason, there is a plan afoot to cut the rice export level from 8 to 7.5 million tonnes by the end of this year. Rice shipments will be 2.2 and 1.8 million tonnes in the third and fourth quarters, respectively.

VFA Chairman Truong Thanh Phong proposes promoting rice exports to reduce excessive stocks and maintain the purchasing level.

The Government has encouraged local rice purchases by providing additional preferential loans, Phong says.

He underscores the need to increase rice exports, citing Africa as a potentially lucrative market that annually has to import 6.5 million tonnes of rice.

Meanwhile, Nguyen Dinh Bich argues that if foreign partners get used to buying Vietnamese rice so cheaply, they will refuse to accept a higher price—even if the global trend permits. The bottom line is Vietnam will have to export more rice but earn less in revenue.