Many Vietnamese exporters have warehouses full of rice but the issue of how to empty the stocks is now a headache for the whole industry.
Vietnam has lost its third post on the world’s biggest rice exporter tally to Pakistan, and local rice farmers and exporters are now left in grief over their huge unsold inventory.
Thailand, India, Pakistan, and Vietnam account for 80 percent of the world’s total rice exports, and Vietnam is the only among them to see sales decline in the year to date.
Thailand has enjoyed a 10 percent sales increase whereas turnover in India and Pakistan has risen by 50 percent and 22 percent, respectively.
Vietnam’s rice shipments in the first three months of this year have shrunk considerably compared to the same period last year, according to the Vietnam Food Agency.
Local exporters are mostly completing orders they signed late last year or earlier this year, while new contracts are very rare, the VFA said.
This could result in a record high unsold inventory of more than two million metric tons in the second quarter of this year, the agency warned.
Vietnamese rice exporters still rely heavily on such markets as China, Indonesia, Malaysia, and the Philippines, as it already lost the African market to Thailand, India, Pakistan, and Myanmar.
Thailand has more than 10 million metric tons of unsold rice which it is willing to export at much lower prices than Vietnam’s quotes.
“The Philippines and Indonesia no longer open tenders for large purchases of rice as they can buy from Thailand at anytime,” said Lam Anh Tuan, director of a rice exporter based in the southern province of Ben Tre.
Vietnam used to offer the lowest prices to win tenders for huge orders of rice exports to the Philippines and Indonesia, but Thailand has sold at even lower prices to become the top rice exporter in these two markets since last year.
Nguyen Dinh Bich, a local rice expert, said the Vietnamese rice sector is hurt by the heavy reliance on China, particularly when Chinese importers demand to buy at cheap prices.
Vietnam exported 1.5 million metric tons of rice to China only across the border in 2013, and two million metric tons in 2014, according to Bich.
“Chinese traders know that Vietnamese exporters are struggling to sell their products so they force them to lower prices,” Lam Dinh Quoc, director of a food company based in the southern province of Ben Tre, said, adding this is a common trick of the Chinese importers.
“Vietnam should thus try to diversify its export markets to solve the issue,” Bich said.
Local rice exporters, meanwhile, said Vietnam should first attempt to reduce its prices.
Vietnamese rice prices have been more expensive than those of India, Pakistan, Cambodia, and Thailand so it is very difficult to find buyers, according to industry insiders.
“For the same type of rice, the importers will sign contracts with the exporters who offer the lowest price,” a director of a rice exporter said.
Even though Vietnamese rice is costlier than other countries, local farmers still complain that they cannot make a profit.
“This is really an issue,” the director said.