Vietnam suffers amid Thai rice sell-off

Vietnam is suffering the effects of Thailand’s decision to slash its rice prices to clear stockpiles built by a price-pledging scheme. 

Vietnam will export an estimated 650,000 tonnes of rice this month, bringing the third-quarter export total to 1.84 million tonnes – 230,000 tonnes less than forecast.

A Vietnam Food Association (VFA) report says enterprises exported 620,532 tonnes of rice last month for a FOB (free-on-board) value of US$264.34 million (Bt8.38 billion), a year-on-year fall of 32.55 per cent in volume and 33.09 per cent in value.

With supply outstripping demand, rice exporters have faced considerable difficulties this year. Recently, Thailand decided to slash its rice prices to clear its stockpiles, affecting the rice market in Asia and posing a greater challenge for local exporters.

The Thai government has decided to lower the price of inventory rice through several means, including auctions for exporters, auctioning on the Agricultural Futures Exchanges of Thailand (AFET), selling rice under government contracts and even selling directly to international traders.

However, results of such moves have not been as good as expected since demand is weak and buyers are still cautious about Thailand’s motivation for depleting its inventory.

Buyers are still waiting and watching the market’s movements, as they are not sure of the prices that the Thai government will accept, or of how deep the price cut will be.

In general, a strong reduction in Thai rice prices has had global impacts, and other Asian markets have been particularly affected.

In addition, India is about to harvest a bumper crop Kharif rice, yielding 90 million tonnes. 

In yet another development expected to affect the world rice market, the Indian parliament recently passed the Food Security Bill, which is the biggest national food programme in the world, supporting 800 million people, or 67 per cent of the Indian population. The programme is expected to cost $18 billion, but there are concerns over how such a huge programme can be carried out. 

Export prices of Indian rice have fallen markedly recently, mainly due to a depreciation of the rupee, while prices in the domestic market have been stable, the VFA said.

China has continued to be the biggest importer of Vietnamese rice this year, but there has been a slowdown ahead of the harvest season. 

Demand from Africa has been stable, but there will be more critical competition among rice exporters when the prices of Thai, Indian and Pakistani rice all reduce, shortening the price gap with Vietnamese rice.

Philippines and Indonesia will look to import rice in the remaining months of the year, but there will be fierce competition among rice suppliers to meet this demand, VFA said.

The report said that as of August 31, Vietnam had exported 4.67 million tonnes of rice for a FOB value of $2 billion, a reduction of 7.86 per cent in volume and 10.9 per cent in value from the same period last year.