Vietnam seeks best possible scenario for rice exports

Apr 17th at 13:45

17-04-2014 13:45:06+07:00

Vietnam is placing high hopes on its bid to supply rice to the Philippines. However, it has been warned that Thailand, which has announced that it will clear its stocks at any cost, will be a formidable rival.

NFA, the Filipino national food agency, on April 15 opened bidding for the purchase of 800,000 tons of rice, to be delivered in the months between May and September. The Vietnam Food Association (VFA) has confirmed that it will join the bid.

Analysts say that, while many companies from different countries have registered to attend the bidding, Vietnam and Thailand are the most eligible candidates.

Vietnam’s advantages in its competition over Thailand are lower transportation costs and higher quality product. The prime disadvantage is the relatively high price of rice due to current demand in the domestic market. The price escalated when the government initiated a program to buy 1 million tons of rice from farmers.

Meanwhile, Thailand, with a record high inventory of 12.5 million tons, equal to 1/3 of the globe’s rice trade, has made known its strong determination to win the bid. The international press has quoted the chair of the Thai rice exporters’ association, Chookiat Ophaswongse, as saying that Thailand will export rice no matter what.

Vietnam also is strongly motivated to win the bid to supply rice to the Philippines. In 2013, the nation’s rice exports fell by 14 percent to 6.7 million tons, from 7.8 million tons in 2012.

The unsatisfactory export level was only offset by the sharp rise in cross-border export to China to 1.4 million tons. The cross-border trade, referred to as an unofficial channel, has been carried out by Vietnam and China under an agreement signed between the two governments.

But analysts warn that current circumstances seem to be impeding this export channel. The cost of transporting one ton of rice from Hai Phong City to the northern border has surged by VND700,000.

With the cross-border traffic stalling, export companies are looking to boost exports through official channels. The Philippines is one of the most attractive markets.

Thailand’s main disadvantage is believed to be its higher transportation cost. It is estimated that shipping firms would have to charge $10 per ton more on rice shipped from Thailand to the Philippines than on rice from Vietnam.

Nevertheless, Thailand is now pushing sales in order to clear its huge stocks. It is believed that heavy pressure is being put on Thai exporters.

One concern with Thailand is that it may not be in a position to satisfy the Filipino requirements on the delivery schedule (200,000 tons a month) due to an overloaded transport infrastructure. Another concern among some importers is that Thai rice, once kept in storage for many days, may not satisfy the quality requirements.

A well-known rice expert said he believes neither Thailand nor Vietnam would take major risks by offering overly low prices.

It has been noted that the Filipino government is reserving a budget of $382 million for the purchase and import of the 800,000 tons of rice. Based on that, the expert said, the ceiling price may be $477 per ton. If so, Vietnam may well win a bid for supplying 500,000 tons, while Thailand supplies the remaining 300,000 tons. This is believed to be the optimal scenario for all three countries – Vietnam, Thailand and the Philippines.

vietnamnet