Domestic rice prices too high, exporters incur losses

A lot of rice exporters complain that they are incurring big losses because the domestic rice prices have been increasing more sharply than the export prices.

Rice price on the rise

The summer-autumn husky rice price in Mekong River Delta has hit the 6700 dong per kilo threshold, the highest ever level after a short time of slightly decreasing. The material rice price has also soared to 10,500 dong per kilo.

On July 28, after checking books, Nguyen Thanh Long, Managing Director of Gao Viet Company in HCM City started in surprise that the material rice price has increased sharply by 20 percent just within a month.

Long recalled that in the world’s “rice price fever”, which occurred in late April 2008, when the prices soared dramatically, the highest rice price reportedly reached 9700 dong per kilo. Meanwhile, the record has been broken recently: the price has exceeded the 10,500 dong per kilo ($510 dollars per ton) threshold.

Opinions from well informed circle say that that rice price has been fluctuating in recent days because of the speculation. Some traders have heard that the Thai rice price would increase, believing that this would lead to the Vietnamese rice price increases as well.

Just within the first 15 days of July 2011, Thai five percent broken rice increased by nearly 100 dollars per ton to 570 dollars after the Thai party, which won the elections, have to fulfill its commitments to support farmers by purchasing dried normal husky rice at no less than 15,000 baht per ton, or over 10,000 dong per kilo.

The Thai rice price increases have immediately pushed Vietnamese rice price up by 30-40 dollars per ton, to 500 dollars per ton on average in the first half of July. A director of a private enterprise which specializes in providing material rice to rice exporters has affirmed that traders now try to speculate rice, hoping that they can earn fat profits later, when the export prices increase.

“They all think that Thai rice would get more expensive after the elections, therefore, they have tried to collect rice,” he said.

“In the first 10 days of July, we luckily collected 10,000 tons of material rice at less than 10,000 dong per kilo. We sold the rice earlier this week to an export company and earned a profit of 500 dong per kilo,” he added.

According to Nguyen Van Dong, Director of Tien Giang-based Viet Hung Company, with the current lending interest rates, enterprises have to pay 160-170 dong per kilo for the storage fee. Meanwhile, the rice price has increased by 1500 dong per kilo over the last month, which is ten times higher than the storage fee. This has encouraged enterprises to collect rice to store.

A lot of rice export companies are also stepping up the rice collection, not to speculate, but to deliver products in accordance with signed contracts.

According to the Vietnam Food Association VFA, Vietnam will have to deliver 1.9 million tons in the third quarter, which means that it will have to deliver 700,000 tons of rice a month in the period from July to September.

Some analysts have said that importers now tend to buy Vietnamese rice instead of Thai rice because of the Thai price increases. Therefore, Vietnamese exporters have signed a lot of new contracts and have to collect rice now for deliveries.

Saigon Tiep Thi has quoted its sources as saying that rice exporters have registered to export more than one million tons of rice in July, and that Vietnam has won the bid to provide hundreds of thousands of tons of rice to Indonesia.

Exporters incur loss

Long from Gao Viet said that he now dares not sign any new contracts with exporters, because he may incur loss due to the rapid rice price increases.

Some exporters, who signed contracts in the first two weeks of July with the export price of 500-510 dollars per ton but did not collect rice immediately, have incurred loss because of the domestic price increases of 20-30 dollars per ton. The bigger losses have been incurred by the exporters who signed the contracts at 460-470 dollars per ton.

Huynh Minh Hue, Secretary General of VFA has also affirmed that many exporters have suffered because they did not anticipate the sharp rice price increases. – Vietnamnet

http://vietnambusiness.asia/domestic-rice-prices-too-high-exporters-incur-losses/