Grim situation for Vietnam’s rice companies

Rice has been the most reduced in quantity export from May. Affected negatively by the COVID-19, the amount of rice exported reduced by 14.8% in comparison with the same period in 2020.

In August 2021, Vietnam exported a total of 440 tons of rice, equal to 210 million USD. For the whole eight months of 2021, rice export reached 3.93 tons, with a turnover of 2.1 billion USD. This number is a decrease of 13.4% in quantity and 5.5% in value compared to the same period last year.

Over the past eight months, Vietnamese rice was mostly exported to the Phillippines. The amount exported to the Philippines accounted for 35.5% of the total export turnover of rice. China ranked second, followed by Côte d'Ivoire, accounting for 18% and 7%, respectively.

On the other hand, rice export to Malaysia plummeted, the amount of rice exported to this country dropped by 59.7%, equal a decline of 50.5% in export turnover, making the Malaysia market only account for 5% of Vietnam’s total rice export turnover.

Vietnam’s export rice prices also went downhill in July and August after the increase in the first months of the year.

According to the Vietnam Food Association (VFA), the country’s export rice prices in August 2021 continued the downward trend from the previous month due to slow demand from foreign customers, high shipping costs, and high transportation costs since COVID-19 re-emerged. In addition, the decrease in the price of Thai and Indian rice also pushed the price of Vietnamese rice down.

Rice companies are not ready to sign for new contracts, as they fear delivery might be impossible. Mr. Do Ha Nam, Vice President of VFA, explained this situation further, saying that shipping costs skyrocketed. Meanwhile, cargo ships take a long time to enter the port, but they cannot bring goods on board. That makes it very difficult to release the number of goods in the warehouse of the enterprises.

Other companies cite their trouble being limited shipping ability due to business suspension. Due to such disadvantages, many rice companies are waiting until after the outbreak to sign new contracts and restart rice export.

Financial support for rice manufacturers

The prolonged pandemic broke the rice industry supply chain, specifically in the Mekong Delta region and the southern provinces of Vietnam. To assist rice manufacturers, the credit capital flow has been prioritized by banks to pour into the rice industry, promptly meeting the capital needs for rice purchasing of enterprises. However, the credit source for those targets has not met expectations.

At the end of August, the State Bank of Vietnam has issued policies to direct commercial banks to provide financial support to businesses.

However, the loan limit is low, the loan period is short, and most disbursement procedures require enterprises to have rice export contracts, while the situation of signing and implementing contracts in the current period of social distancing is extremely difficult. Therefore, the capital needs for the business activities of rice companies have not yet been met appropriately.

VFA is urging the State Bank to come up with solutions and direct commercial banks to provide better supports for rice companies.

Prediction for the final months

From now until the end of the year, the export situation may not be positive because the pandemic is still complicated, especially in the southern provinces and cities. The outbreak is seriously affecting the production process and delivery progress of rice companies. Besides, high freight rates continue to put pressure on the rice market.

VFA reported that in the first eight months of 2021, more than 3.96 million tons of rice had been exported, worth 2.11 billion USD, down 14% in quantity and 6% in value over the same period last year. It is forecasted that rice export will reach from 6 to 6.2 billion tons, equivalent to a turnover of around 3.32 billion USD, decrease by 4% compared to 2020.

However, considering the current situation, rice exports in the coming months will still face many difficulties, making this goal not easy to achieve.

Compiled by VietnamCredit