"Vietnam is liable to miss an opportunity to boost rice exports and sell rice at high prices," Pham Quang Dieu, Chief Economist of Agromonitor, a farm produce market analysis company.
In August 2010, the Vietnam Food Association (VFA) raised the floor rice export price (the minimum price levels at which Vietnamese companies can sell rice to foreign partners) three times.
Commenting on the move, Dieu said in early August 2010, VFA proposed to raise the target rice export volume during the whole year 2010 to 6.5 million tons. However, the rice export steering committee decided that Vietnam should only export 6.1 million tons of rice, and that it is necessary to raise export prices in order to increase export revenue. In order to implement these instructions, VFA has raised the floor export price continuously. Currently, the floor price of 5% broken rice is $450 per ton, while the price of 25% broken rice is $410 per ton.
The problem is that from the beginning of the year to mid-2010, when the world's prices stayed low, Vietnam exported a large volume of rice, 4.8 million tons in the first eight months of the year. Meanwhile, when the world's rice price increased during the last four months of the year, Vietnam could only export 1.3 million tons of rice.
"Vietnam is liable to miss an opportunity to boost rice exports and sell rice at high prices, though the Government says it tries to ensure a minimum profit of 30 percent for farmers," Dieu said in a recent interview with Thoi bao Kinh te Vietnam.
Regarding the current decision to restrict rice exports, Dieu said he thinks there are two reasons.
First, concerns about food security. The agency in charge of regulating rice exports does not have exact figures about the domestic rice supply. Different ministries and branches give different figures on exported volumes. The gap between figures on rice exports released by the Ministry of Agriculture and Rural Development (MARD) and by the General Department of Customs was as high as 25 percent. Meanwhile, government agencies need to know exactly the supply and demand for rice in order to develop an appropriate export policy.
Regarding demand, companies have signed contracts on exporting more than six million tons, so it is understandable why VFA proposed to increase the targeted rice export volume. However, regarding supply, agencies still cannot calculate the total volume of rice kept among farmers. Even the figures about rice stocks released by companies prove to be unreliable, because companies always "say one thing and do another."
As government agencies do not have exact figures, they tend to be cautious in deciding export volumes.
Secondly, unlike previously, the policy on rice exports should not only bring profits to the business community and ensure profit for farmers, but also help curb inflation. The "sacrifice" of rice exports for inflation stabilization is now a solution.
In 2008 and 2009, the rice export volume and export price regularly went in opposite directions. When the export price went to its highest peaks, concerns about food security were raised, which led to exports being stopped.
Dieu said he cannot see any risks for national food security at this moment. He quoted an official from MARD as saying that the supply is now profuse, and food security will remain safe even when Vietnam exports seven million tons of rice.
Food output is increasing. The US Department of Agriculture believes that the food shortage caused by decreases of wheat output in Russia will be just temporary, while most Asian countries have seen their food output increase. The drought has ended, so there is no need to worry about food security.
Source: Thoi bao Kinh te Vietnam