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Rice exporters suffer losses due to sudden domestic price hike

Update: 29-03-2017 | 15:00:43

 The sudden surge in domestic rice prices in this year’s winter-spring crop has made a number of rice exporters suffer from losses in the first quarter.

Vietnam exported 1.28 million tonnes of rice worth nearly US$570 million in the first three months of 2017, down 18.1% in volume and 17.3% in value from a year earlier, according to the Ministry of Agriculture and Rural Development.

Chairman of the Vietnam Food Association Huynh The Nang said although rice shipments fell in Q1, it was still positive compared to the previous years. Most of exported rice was destined for the Philippines, China and Africa, which are also the biggest rice importer of Vietnam, helping to keep domestic prices high in the winter-spring crop.

rice exporters suffer losses due to sudden domestic price hike hinh 0
Farmers in the Mekong Delta harvest winter-spring rice 

Businesses said it was abnormal that domestic rice prices rose sharply in the crop’s harvest season. Most of the firms that inked export contracts before the winter-winter crop have suffered from losses.

Lam Anh Tuan, Director of the Thinh Phat Foodstuffs Co. Ltd in the Mekong Delta province of Ben Tre, said businesses usually sign export contracts early so that when local rice prices decline in the harvest season, they will buy rice from farmers.

However, the situation changed this year when rice prices remained too high throughout the winter-spring crop, even higher than export prices, causing the companies a loss on the deals they had inked, he added.

Many enterprises were unable to respond to the sudden price hike, failing to purchase and ship rice as scheduled. Some even refused to deliver goods as stated in contracts as they didn’t want to make losses, said Do Ha Nam – General Director of the Vietnam Intimex Joint Stock Corporation.

Soaring domestic prices also increased export prices which have already been US$10 – US$15 per tonnes higher than those offered by Thailand and India. As a result, it is hard for Vietnamese rice to compete with Thai or Indian goods in the same market segment.

Nguyen Van Don, Director of the Viet Hung Co. Ltd in the Mekong Delta province of Tien Giang, said his firm did not sign any export contracts from late February to March 20 to wait for market changes. 

It is unlikely that importers would buy Vietnamese rice whose prices are higher than those of Thailand and India. Meanwhile, the company would suffer from losses if it lowered prices which could not make up for purchase and delivery expenses, he elaborated.

Most of the surveyed businesses said the market is still unpredictable, but there may be favourable conditions for overseas shipment in the third and fourth quarters when Thailand will have finished selling its stockpiled rice.

 

VNA
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