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Hoarding rice to push up prices: Beware of losing the market

26 thg 3, 2024

Experts warn about the situation of hoarding rice and not selling it, waiting for prices to rise as in 2023 to make a big profit.


In December 2023, Vietnam's export rice price reached an all-time high of 663 USD/ton for 5% broken white rice. This high export price lasted until early February 2024 before starting to drop to around 638 USD/ton, still the highest in the world and higher than similar rice from Thailand and Pakistan.


However, after the Lunar New Year holiday, the export rice price suddenly dropped sharply. At one point in March, the export rice price fell to 580 USD/ton, lower than Thailand's.


Deposits Forfeited, Prices Pressured, Stockpiling

Explaining the cause of the export rice price plunge, Phan Van Co, Marketing Director of Vrice Group, said it was due to a decline in consumer markets. Meanwhile, both Vietnam and Thailand are in the peak harvest season of the winter-spring crop, the largest crop of the year, leading to abundant supply. Major rice importers are well aware of the harvest timing and rice output from countries, so they are not in a hurry to buy but rather wait for better prices.


As a result, there are very few export orders. Currently, only Indonesia and the Philippines are purchasing moderate quantities, with prices much lower than before Tet. “Orders to Africa, the Middle East, and Europe are even fewer due to political instability, the impact on maritime transport, and high shipping costs,” Co shared.


Paradoxically, while export demand and prices are falling, the domestic rice market is experiencing stockpiling and price holding, with traders unwilling to sell to enterprises.


“There is a situation where traders, months ago, when rice prices were high, competed to buy and placed high deposits with farmers. However, when export rice prices fell and domestic rice prices followed suit, they either forfeited the deposit or pressured for lower purchase prices. For example, they previously placed deposits to buy rice in the field at 9,000 VND/kg but now only buy at 7,000-7,500 VND/kg, forfeiting the deposit if not sold,” Co said.


Another worrying reality is that the domestic market still expects rice prices to rise, so traders and mills are stockpiling, hoping prices will increase as in 2023 to sell at a higher profit. The consequence is that if export rice prices drop further, enterprises dare not buy, process, or export due to losses, and traders hoarding also risk losses.


Nguyen Thanh Long, Director of Viet Rice Co., Ltd., said that the company’s export orders have decreased, and export prices have also dropped. The price of 5% broken white rice is below 600 USD/ton, whereas last week, it could still sign for a better price. “Currently, countries have already purchased large reserves, so it is understandable that they are buying less,” Long said.


Representatives of several other companies also said that in recent days in the Mekong Delta, there has been a phenomenon where many traders have forfeited deposits due to continuously falling rice prices and importers and enterprises slowing down purchases to wait for prices to drop. The reason for the rice price drop is the main harvest season, with provinces harvesting simultaneously, leading to congestion from the fields, mills, and even domestic ports. Furthermore, the Philippines, Thailand, and Indonesia are also harvesting from March to May. Additionally, some African countries are holding large stocks of rice.


According to the Ministry of Agriculture and Rural Development (MARD) and related agencies, the rice export situation remains favorable, with rice demand in the region and worldwide still high due to the impact of the El Niño phenomenon and armed conflicts.


However, currently, in the Mekong Delta provinces, the winter-spring rice crop is being harvested, but enterprises are waiting for lower rice prices, while farmers hope to sell at high prices like in the late months of 2023. If this situation continues, it will miss the opportunity for rice exports and affect the production and income of rice farmers.


Abandon Expectations, Diversify Markets

Many experts warn that farmers, traders, enterprises, and management agencies need to abandon the expectation that rice prices will continue to rise in 2024. This is because 2024 has many fluctuations, significantly affecting the global food market, such as geopolitical upheavals and tensions in the Red Sea negatively impacting logistics.


Nguyen Thanh Long, Director of Viet Rice Co., Ltd., analyzed that previously, Vietnam’s rice export price was only about 400 USD/ton for a long time, and farmers sold rice for less than 6,000 VND/kg. Currently, although rice prices have turned downward, they are still about 40% higher than at the beginning of 2023. With the current rice prices, farmers are still profitable, and the price of white rice exports is around 600 USD/ton, still yielding profits.


“However, we should not expect or hoard rice to push prices up, buying and reselling as is happening among traders. Management agencies in the rice industry also need to closely monitor the market situation, provide early warnings, rather than merely forecasting that prices will continue to rise because of the simple reason of global El Niño climate change,” Long emphasized.


Do Ha Nam, Vice President of the Vietnam Food Association, said the rice market in 2024 will continue to have unpredictable fluctuations. Vietnamese rice needs to maintain and further enhance the quality of export rice to build credibility and sustain the market. Statistics show that in 2023, fragrant rice and high-quality rice accounted for more than 75% of the export rice structure, indicating that Vietnamese rice is clearly changing in a sustainable and high-quality direction.


“Besides traditional markets like Indonesia and the Philippines, exporters need to diversify markets more. European markets, the US, South Korea, Australia, and some new markets in the Middle East are showing good growth trends thanks to the advantages of free trade agreements (FTAs) that Vietnam participates in. The most important thing is to improve the quality of Vietnamese rice, meeting the requirements of each country and region,” Nam said.


The Uncertainty from Indian Rice

I think export rice prices may drop if India returns to normal exports. India has a large stockpile, and if they sell it off, global prices will follow suit. Moreover, Vietnamese rice is at high risk of losing markets because India is geographically closer to countries that import a lot of Vietnamese rice, such as the Middle East and Africa.


With political instability and rising sea freight costs, these markets will buy Indian rice at cheaper prices and lower transportation costs.


Phan Van Co, Marketing Director of Vrice Group

Source: Vietstock

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