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The 'game' of rice prices in the hands of sellers

24 July 2023

On July 20, India officially banned rice exports, the following days the Asian rice market stopped trading to "digest" the ban. Major news agencies forecast the price of rice will increase by up to 100 USD/ton or the price of 5% broken rice up to 600 USD/ton.

How the world rice market is going to be is a hot topic with many different opinions.

Responding to reporter of Thanh Nien Newspaper, Ms. Phan Mai Huong, co-founder of SSResource Media Pte.Ltd (Singapore), the publisher of news website specializing in providing information and analysis of the world rice market, said: "5% broken rice priced at 600 USD/ton is no longer a forecast but the price of some businesses in Vietnam and Thailand who reluctantly quote. Now getting a bid from the seller is also difficult. The market balance is tilted in favor of the sellers, it's up to them to decide."".

The Mekong Delta always has rice being harvested, which is a good condition to take advantage of export opportunities. Cong Han

Expected but still surprised

According to Ms. Huong, from the beginning of this year, market experts have estimated that India will ban rice exports; however this will happen at the end of the year, not now. Information that SSRiceNews collects, in 2022 India exports 21 million tons of rice. Due to the shortage, it is estimated that without the ban, in 2023 India's rice export output will only reach about 17-18 million tons, down about 4 million tons compared to 2022.

India's export ban earlier than expected is mainly due to the EL Nino phenomenon causing severe weather affecting food production; Besides, high and continuously increasing inflation is also an important reason leading to this decision. India has a policy to support the poor with 5 kg of rice per month. Recently, one of the 19 states of this country, instead of distributing rice, has switched to giving money. This is one of the signals about the rice export ban. It comes from before the rice export ban was leaked to Bloomberg.

As Bloomberg reported, large Indian enterprises have been rushing to open LCs even though there are no orders. They want to take advantage when the ban is issued, the price will increase, they can still export. This is a lesson learned from the rice export restriction order issued on September 9, 2022 (banning the export of broken rice and imposing a 20% tax on non-basmati rice).

Vietnam and Thailand added no more than 2 million tons of rice

The US Department of Agriculture (USDA) has just adjusted global rice production in the 2022/2023 crop year from 512 million tons to 508 million tons. Meanwhile, Reuters said some analysts had forecast output as low as 500 million tonnes as extreme weather conditions threatened crop yields in countries such as China, India, Bangladesh and Pakistan. India's rice production fell 6% to 105 million tons, even if it was only about 100 million tons. As for China, the biggest consumer of the grain, rice production could fall 2.9% from a year ago to 206 million tonnes.

Both Vietnam and Thailand could not fill the "gap" that India left behind by more than 2 million tons due to the critical supply. Meanwhile, Pakistan is less likely to take advantage of this opportunity as it is still affected by severe floods that have devastated crops, production could drop by 18% to 7.4 million tonnes. Other Asian producers such as China, Bangladesh and the Philippines were all affected by adverse weather conditions, including droughts, floods, typhoons, etc.

Huong said: Even without the ban, the supply from India alone would have been short of 4 million tons of rice, a very large number. That is why from September 2022 to now, rice prices have continuously increased and reached the highest level in a decade. Now the supply, which accounts for 40% of global production, is completely cut off. The ban will have a great and far-reaching impact on the market in the near future. The main rice supply for the world is currently only Thailand and Vietnam, and Pakistan, which suffered from historic floods last year, has recently returned to export with negligible output. Therefore, the upcoming problem in the rice market is not how much the price is but how the supply is.

"I have talked to some traders in Vietnam and Thailand, no one wants to quote. They are watching the reaction of the market. A few are reluctant to offer 5% broken rice up to 5% 600 USD/ton. In Thailand, millers have temporarily stopped dealing with exporters, so they also have no products to offer. In Vietnam, it is customary for businesses to quote and then sign a contract, but only then buy and deliver. Currently, Vietnamese businesses do not dare to offer because they are afraid that the price will continue to increase. For businesses that have signed contracts before, now they are in a very difficult situation," said Ms. Huong.

Domestic rice price increased by 500-600 VND/kg

The rice market survey in Ho Chi Minh City at this time has many price fluctuations. Mr. Loi, owner of Yen Phuong rice shop at Tran Chanh Chieu rice market (District 5), said: In recent days, the price of rice has increased by 500-600 VND/kg, depending on the type. Prices started to inched slightly from the end of last year until now with a total increase of nearly 2,000 VND/kg, common rice varieties from 11,000 to 12,000 VND/kg are now 13,000 to 14,000 VND/kg. As for fragrant, high-quality rice, an average increase of more than 1,000 VND/kg. Particularly, the ST specialty rice decreased by about 1,000 VND/kg. "The market is weak, selling is slow. The price has increased, but the supply is not lacking, I want to import as many businesses in the West as I can", Mr. Loi said. Many shop owners in this market and some other traditional markets also confirmed that the price of rice in the past half year has increased slightly and recently has increased more in line with the export price of rice. However, the supply is always guaranteed, and the purchasing power market is weak.

Mr. Tran Vu Khanh, Director of Hiep Quang Company in Ho Chi Minh City, said: This is a good opportunity for Vietnamese rice. However, how far the price will increase is very difficult to predict because one of the world's largest importers, China, is not very interested because rice prices are very high. They have a large stockpile so they are unlikely to buy at any price. Besides China, other Asian countries and Africa still have great demand. "Rice prices will stay high, benefiting exporters until India has a new policy on rice exports," Khanh said.

In the Mekong Delta rice bowl, Mr. Nguyen Van Don, Director of Viet Hung Co., Ltd (Tien Giang), said: Compared with market prices before the ban of India, the price of rice in Mekong Delta has increased by 30 USD/ton. 5% broken rice reached the level of 540-550 USD/ton, while aromatic and high-quality rice varieties increased slightly, only about 20 USD/ton.

"A price of $600/ton for 5% broken rice is possible. Popular rice varieties will increase sharply because world demand is currently mainly in this segment. However, currently, Vietnam's output in this quality is very small because the planting area is only about 4-5%. But because there is no other source, forcing customers to choose to buy rice in the higher segment, this is usually not a market problem," Mr. Don said.

Mr. Nguyen Nhu Cuong, Director of the Department of Crop Production (Ministry of Agriculture and Rural Development), said: This year the rice is good, so farmers boost production on the entire area and the output is estimated at over 43 million tons. This output ensures at least 6.5 million tons of rice for domestic consumption and export. Vietnam has the great advantage of short-term rice varieties, high yield and many crops a year, so there is almost always rice being harvested in the field. The current context is a good opportunity for Vietnamese rice grains to increase export value.

Source : (Unofficial Translation)