Rice export prices are high, but why are businesses hesitant to sign new contracts?

Export rice prices continued to fluctuate in opposite directions in the closing session of 2023. Soc Trang rice exports made a strong breakthrough thanks to price increases.

A week of calm

According to data from the Vietnam Food Association (VFA), in the first week of 2024, export rice prices from Thailand, Vietnam and Pakistan remained unchanged compared to the end of 2023.

Specifically, in the 5% broken rice segment, Vietnamese and Thai rice currently have the same price of 653 USD/ton, far exceeding the same quality of Pakistani rice by 60 USD/ton - this country's 5% broken rice is currently priced at 593 USD/ton.

In the 25% broken rice segment, Vietnam's rice is currently priced higher than other suppliers at a steady price of 633 USD/ton, followed by Thailand at 589 USD/ton, while Pakistan is currently at 513 USD/ton.

Giá gạo xuất khẩu cao, doanh nghiệp chưa dám ký hợp đồng mới

Vietnam's rice exports in 2023 will be bumper in both quantity and price.

World supply and demand continue to fluctuate

Although it has not changed, global rice prices are still considered to be at a high level in favor of sellers, because demand continues to be high. For example, in the Philippines, according to an official from the Department of Agriculture (DA), the country's national consumption is about 36,000 tons/day, equivalent to about 1.08 million tons/month, and the country's rice supply will be enough until the start of the next harvest in March 2024.

However, according to a forecast from the Food and Agriculture Organization of the United Nations (FAO), although the Philippines' second-crop rice planting has been underway, below-average rainfall in rice-growing areas could affect the second-crop rice production (below-average rainfall and higher temperatures are forecast between December 2023 and March 2024) due to the ongoing El Nino phenomenon. As a result, the FAO forecasts that the country's 2024 rice imports will remain high.

For Bangladesh, forecasts show that the country's supply is insufficient compared to domestic demand and will still have to depend on imports. Specifically, on supply, USDA has lowered its forecast for milled rice production in MY 2023/24 (May 2023 - April 2024) to 36.3 million tons (from the previous official forecast of 36.4 million tons). This forecast is slightly down from the previous year's estimate of 36.35 million tons. This decline is due to partial damage to the Aman crop in some coastal districts due to Cyclone "Midhili" that hit on November 17, 2023. Meanwhile, on demand, USDA kept its forecast for Bangladesh's rice consumption in MY 2023/24 unchanged at the official level of 37.7 million tons due to lower forecasts for rice production and imports. The forecast is up slightly from last year's estimated 37.6 million tonnes.

In addition, other countries including Indonesia, Malaysia... are also forecast to have large demand in 2024. From there, experts predict that global rice prices are not expected to decrease before 2025. Regarding the cause, the report said it was due to export restrictions from major producing countries and the threat from the El Nino phenomenon.

Businesses do not dare to sign new contracts.

According to Vietnamese rice exporting enterprises, the market continues to record import demand from countries such as the Philippines, South Korea... However, enterprises also said that high offering prices limit new transactions and they are focusing on delivering signed orders.

Sharing with reporters, Mr. Phan Van Co - Marketing Director of Vrice Group Company Limited - said that the high export price of rice since mid-2023 has pushed domestic rice prices to very high levels.

Mr. Co also said that the very high domestic price pushes up the price of finished rice for export, making the international offer price uncompetitive so customers do not buy. "The current price of Vietnamese rice is almost the highest in the world, so there are almost no new contracts. Even though many parties have asked to buy, the high price makes businesses not dare to sign" - Mr. Co informed.

In fact, in a report released by VFA, the fact that Vietnam's rice export prices are constantly at the top also causes it to lose its competitive advantage. Accordingly, the offered price of Pakistani rice is currently the most competitive in the world rice trade market (the 5% broken rice is currently about 60 USD/ton lower than that of Vietnam and Thailand). In addition to Pakistan, Myanmar is also considered the choice of many importing countries when the export price of 5% broken rice of this country is currently at 613 USD/ton. "The rapid increase in export prices of Thai and Vietnamese rice also contributes to making Myanmar the preferred choice at this time" - VFA commented.

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