Local rice prices stay low despite scant competition

Pham Thai

In the first four months of this year, Vietnam’s FOB (free-on-board) rice export prices averaged out at less than US$438 per ton, the lowest in the first-four-month period over the past three years.

Since March, 5% broken rice prices have rarely exceeded US$390 per ton. On Tuesday, the product was offered at US$375-385 per ton, US$75 lower than that of India.

Speaking at a conference in HCMC last week, Truong Thanh Phong, chairman of the Vietnam Food Association (VFA), said that supply has exceeded demand though many rice exporting countries are keeping back their huge stockpiles.

The problem has forced many enterprises to lower prices or even sell at a loss to liquidate stockpiles. However, experts at the meeting said that the rice market would not see tough competition.

Last year, India became the biggest rice exporter in the world with 10.3 million tons exported thanks to bumper crop and a big rice storage accumulated in three previous years in a row. However, the nation is unlikely to export the same or higher volume in 2013 as old stockpile will run dry while it has to store up to serve domestic demands.

Expert Nguyen Dinh Bich said that India may adopt a law on national food security this year, aiming to give free food or food price subsidy to its people.

If the law is passed, a large volume of food, mainly cereal, rice and wheat, must be stocked up to distribute in the country. Therefore, this will hinder India from launching a huge rice volume onto the global market like in 2012, Bich said.

Thailand is offering high-quality long-grain rice at US$535-545 per ton, US$160 higher than Vietnam’s 5% broken rice. However, Thai traders will incur losses because given the nation’s farmer subsidy program, export prices must be US$800-850 a ton.

Therefore, despite a stockpile of 20 million tons of rice, Thai exporters may not reduce rice prices immediately to offload the stockpile as they have to calculate impacts of the government’s subsidy policies.

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