Volume And Value Of Exported Rice

Published Date: 02 Nov 2017

Source: Self-compilation of author from annual reports on value and items exported, General Statistics Office

2009 underwent financial crisis as well as economic slowdown which somehow affect Vietnam’s rice export. However, thanks to the flexible policies of the government, Vietnam overcame such barriers and achieved an evident rise in volume, to around 6.0 million tons, increased by 27.7% against previous year. One sad thing was that there was a nearly 6.9% reduction in value which drove it to the bottom of US $2.7 billion. Decline in rice price could be the core reason [24].

Next, 2010 was crowned as "a golden year" of rice export in term of high value ever. The year’s turnover passed landmark of US $3 billion for the first time in rice export history beside the highest 18.5% rise in value since 1989.

Yet, there were still many concerns in 2011. According to economic specialists, exporting rice of Vietnam in 2011 relapsed the disease called "boosting exports when price down" and "lessening when price up", which once appeared in three consecutive years since 1998 and lately in 2008.

From the VFA’s data on quarter basis of the same year, there was time when export price of second quarter at the bottom US $465 a ton, but volume hit a record of 2.1 million tons, making up 28.9% of total volume. On the contrary, in the last quarter, only 1.2 million tons was traded at the top price US $562 per ton, accounting for just 17.4%. If done in another way, on a term basis, then within the first eight months of 2011, when export price was offered at just US $476 per ton, exported amount was up to over 5.3 million tons, 74.7% of total volume. Meanwhile, with extremely high price at USD 547/ton, the country shipped 1.8 million tons, accounting for around 25.3%.

The source of this situation could originate from incorrect forecasts of Vietnam’s enterprises on world prices. Since the end of 2011, almost enterprises believed global rice would surge due to new rice policy of Thailand (mentioned previously). Then, they started to speculate which drove materials’ price to go up and stocks are always at their fullest. However, these speculators could not foresee an emergence of low-price suppliers, India and Myanmar that appealed Vietnam’s customers. As a result, although world price did rise a little bit, purchasers were sparse leading to a decline in shipped amount. A 2.9% increase in amount and 15.6% lift in value were mainly from shipments at early 2011 [18].

2012 once again broke record of 2011. A total volume is unexpectedly up to 8.0 million tons, 12.7% higher than 2011. Core reason was from Thailand apart from favorable harvests which altogether led to a sharp increase in 2012 exported volume regardless of negative forecast of the FAO. However, 2012 was not a flawless year to this strategic produce. Although there was approximately 13% progress in amount, nearly 3% rise in value was spotted. Moreover, rice export in 2012 underwent the same phenomenon in 2011 [3] [45].

2.1.2. Vietnam’s rice export by price

Figure 2.2: Price of exported rice, years of 2008-2012

Source: Self-compilation by the author form statistics of table 2.1

Exported price was the average of all variations within a year, no distinct among varieties.

There has been a price fluctuation during past five years, without any certain rule. Starting at a peak in 2008, then price reached a bottom in the next year and gently recovered to a higher level in 2011 before fall again in 2012.

2008 saw the highest price ever in this five-year period with US $617 a ton. Average price of the first eight months was US $606 a ton, just US $1 lower than Thailand’s. Especially in November of the same year, Vietnam’s price was equal or even higher than rival Thailand by US $20-30 per ton which was a bright signal for rice export picture of Vietnam. Explanation came from a series of huge governmental shipments to the Philippines and Nigeria [5]. Additionally, there was another external factor. It was the lack of information relating to supply-demand of global rice raising concerns on world food crisis. The outcome was that till the end of April 2008, global rice price tripled compared with the beginning. Being affected by world price, Vietnam’s price rises too.

Approaching the next year, shipped price reduced considerably by US $167 a ton from 2008 record, then total loss would be up to over 1 billion dollars (US $167 a ton x 6 million tons). One thing to note is that 2009 price continuously dropped from beginning of the year. If price of 5% brokens in December, 2008 was US $517 a ton then in May next year, it reduced by 31%, at US $358 a ton. The same thing happened to 25% brokens, quoted at US $335 a ton from original US $466 a ton. Though price recovered a bit in remaining months, it was still lower than beginning of 2009 [22].

Price variation in 2010 was too different from other years. It surged at the beginning, then dipped in the middle and finally recovered at the end of 2010. There were more and more export enterprises at a loss in middle of 2010, mainly because export contracts were signed when price down, but when unexpectedly went up upon collecting rice for export. Export price bottomed around August.

In 2011, price reached the near-record point, at US $521 a ton, up by 12.3% compared with 2010, just lower than "the hot year" in 2008 (USD 617 a ton). It was an optimistic sign since world’s rice price index rose just 10% against 2010 [10].

However, there was a variation in price during 2011. Within just three weeks of January, price of 5% and 25% brokens sharply fell from US $520 and US $498 a ton to US $500 and US $480 a ton respectively. Reason was due to huge supply as either Mekong Delta was in good harvest or over 4 million tons of Thai rice would be in world market in the couple of months. In response, the VFA instructed by the government stockpiled 1 million tons of winter-spring crop. This action stabilized its exported price by a little or much since Vietnam currently ranks second in world rice market. Then, price turned out to be more stable and increased by 10-15%.

Sadly, export contracts in 2012 could not retain high price of 2011. Quoted price is lower than 2011 and kept falling in first months of the year. It was down from US $521 a ton to US $475 a ton, by US $46 a ton. A reduction in export price was because big suppliers, Vietnam, Thailand, India all had good crops. Vietnam had approximately 1.1 million tons abundant from good harvests which created extreme pressure on enterprises to deeply cut price in order to boost export as they could not stock them [7]. World rice supply was in larger excess than ever with joins of Cambodia, Myanmar, beside two available giants, Thailand and India.

2.1.3. Vietnam’s rice export by varieties

From 2008 to 2012, no optimistic change in exported quality was spotted. Vietnam still sold not much added-value rice to partners in Africa and some in Asia. That was because a vast majority of export contracts these years are government-to-government with the Philippines, Cuba,…which mainly purchased 10% to 25% brokens.

Figure 2.3: Varieties of exported rice, year of 2012

Source: [1]

If there was no space for Vietnam’s high-grade rice at that time, then things were different in 2011 which was shown by a relative increase in quantity of 5% brokens mainly exported to Hong Kong and China. There was no sign that this trend would stop in 2012, for one thing, Vietnam’s high-class rice was much more competitive than others, especially Thailand’s.

As per illustration in figure 2.5, 2012 continued trend of the previous year with a growth in high-grade rice export, by 79%, reached 48% of 5% brokens. The reason was due to a shift of that variety demand from Thailand to Vietnam. Import markets were in West Africa beside Hong Kong and Chin.

Exported volume of average-and-low-quality rice falls, accounts for 21% and 11% respectively. Considerable decline was because prices of these varieties failed to be competitive enough to compete with India’s and Pakistan’s, especially the powerful former with huge stocks, over 33 million tons since 2011. Another cause was possibly resulted from a fall in demand of the Philippines.

Certain specifications exported rice could be seen in annex 2.

2.1.4. Vietnam’s rice export by markets

Figure 2.4: Structure of rice export to major regions, years of 2008-2012

Source: Self-compilation by author from annual reports on rice sector, AGROMONITOR

The above chart illustrated percentage changes in Vietnam’s’ rice export to three big regions, comprising of Asia, Africa and Latin-America. It was the fact that its rice was mainly consumed in Asia (from 58% to 70% each year) where traditional markets such as the Philippines, Malaysia, Indonesia, etc still appeared to be among important destinations since 2008. Followed is Africa with exported volume in 2010 to hit a peak of 24.2%. The same as Asia, Africa would be Vietnam’s potential market with increasing number of importers annually. Then, Latin-America ranked third which purchased less as the percentage in quantity seemed to fall every single year.

Table 2.2 on the following page describes three largest single rice export markets of Vietnam since 2009 in volume and value. (Annex 3, 4 and 5 shall provide more details regarding to volume, value and percentage changes of Vietnam’s top fifteen biggest importers between 2010 and 2012).

There were some major changes in Vietnam’s rice export by markets from 2008 to 2012, where gentle reduction in amount purchased by traditional customers was spotted while emerging markets tended to import much more.

2008 marked the expansion of Vietnam’s export markets, up from 63 to 128 countries, but a majority is to the Philippines, Malaysia, Cuba and Singapore where the Philippines continued to take a chief role in importing from Vietnam, not only in 2008 but also in 2009. It purchased nearly 1.7 million tons, stood at US $917.1 million per ton in value, accounted for 34.4% of turnover, followed by Malaysia and Cuba with specific statistics as in table 2.2.

In 2010, the Philippines still topped the list of big importers, account for 21.4% of total volume and 29.17% of turnover. Indonesia replaced Malaysia to be the second and followed by Singapore with around 700 thousand tons and US $346 million; 500 thousand tons and US $227.8 million respectively. Beside markets with strong rise in two aspects (consisting of Indonesia, Hong Kong, Taiwan, etc), the rest showed a downward trend in comparison with those of 2009. They were Spain, Ukraine, Italia, etc [21].

Table 2.2: Vietnam’s rice export to top three markets, years of 2009-2012

Unit: million tons, USD million

Rank

Importers

Volume

Value

2009

1

Philippines

1.7

917.1

2

Malaysia

0.6

272.1

3

Cuba

0.4

191.0

2010

1

Philippines

1.5

947.4

2

Indonesia

0.7

346.0

3

Singapore

0.5

227.8

2011

1

Indonesia

1.9

1,019.3

2

Philippines

1.0

476.3

3

Malaysia

0.5

292.1

2012

1

China

2.1

898.4

2

Philippines

1.1

475.3

3

Indonesia

0.9

458.4

Source: Self-compilation by author from Thời báo Kinh tế Việt Nam

Indonesia, the runner-up in 2010 became leader in the next year, followed by the Philippines and Malaysia. The happiest point was that beside familiar partners, Vietnam also shipped to new markets in 2011 including Bangladesh, Senegal, Ghana, Iraq,