Prices of Vietnamese Rice Increasing Due to High Demand

Published 2020년 3월 10일

Prices of Vietnamese rice are rising rapidly due to growing global demand. The key to Vietnam's success is export diversification to diverse regions in Asia and Africa, as well as expanding on traditional markets such as the Philippines and Malaysia. Vietnam's decreased dependence on exports to China has also allowed continued stability in export volume amid the coronavirus outbreak.

According to the Vietnam Food Association (VFA), prices of Vietnamese rice are rising rapidly in the last few months as demand is growing globally. Vietnam exported 981K tons of rice worth USD 420 million during the first two months of 2020, which is a 27% increase in terms of volume and 32% increase in terms of value from the same period in 2019.

Global rice prices rose during February due to an increase in demand. As Chinese rice exports decreased due to the coronavirus outbreak, consumers in Hong Kong and Singapore began hoarding supplies, creating an immediate demand for rice from different sources. Demand for Vietnamese rice, however, had been rising even before the virus outbreak.

Vietnam is currently in the winter-spring harvest season and prices are one of the highest they have ever been in the past few years. At the end of February 2020, prices of 5% broken rice were at USD 388-392 per ton, the highest since February 2019. This is after prices reached USD 380 per ton earlier in February.

Harvest Optimal for 2019/2020 Despite Difficulties

Despite a saline intrusion in mid-January, the 2019/2020 winter-spring rice crop in the Mekong Delta region is still highly productive. More than 50% of Vietnam’s rice is produced in the Mekong Delta. Due to the Ministry of Agriculture and Rural Development's guidance in applying the seasonal calendar, crops were successfully sowed 10-15 days early to avoid drought and salinity, causing minimal damage.

The An Giang province in the Mekong Delta covers rice production areas of 234K ha, and nearly 70% of its crops have been harvested so far. One ha of production area produces an average yield of 6.8-8 tons. In the Can Tho area, there was favorable weather and few pests and diseases this season which led to an average yield of 7.2 tons, significantly higher than the five-year average of 5-6 tons.

Key to Vietnam’s Success: Export Diversification

Export prices have increased due to higher demand from the Philippines and Malaysia, the traditional export markets for Vietnamese rice. Prices in February grew by nearly 10%, up by almost USD 40 per ton compared to January. Prices are expected to increase even further as exports to these traditional markets are expected to increase.

The Philippines remains as Vietnam’s top export destination in 2019 as well as 2020 with an expected import volume of 2.6 million tons this year. In addition, Malaysia has recently purchased 90K tons of Vietnamese rice, projected to export more throughout the year, with Indonesia planning to import approximately 1 million tons of Vietnamese rice in 2020.

Vietnam is also focusing on diversifying its export destinations, which is considered to be the main reason for its success in solidifying its prominence in the global market. These new destinations include Iraq, Cuba, South Korea, the Ivory Coast, Hong Kong, Singapore, and Ghana. Recently, Vietnam signed a deal with South Korea on an annual rice export quota of 55.1K tons, starting from January 1st, 2020.

Vietnam is expecting total rice exports of 7.39 million tons of rice in 2020, threatening Thailand’s position as the second-largest rice exporter in the world. Thailand’s estimated export volume for 2020 rests at 8.27 million tons, the lowest since 2013, a target number that the country is struggling to meet due to droughts that affected harvest for this season. As the shortage in Thailand has led Singaporean buyers, who mainly purchase rice from Thailand, and Japanese consumers to consider diversifying their rice supply, Vietnam is also incentivized to expand exports to these markets as well.

Vietnamese Rice Industry to Grow Further

Vietnam is well aware of its strengths in the export market and is focusing on expanding its share even further. The Vietnamese Ministry of Industry and Trade is encouraging traders to export high-quality, high-value rice products, and have recently removed certain regulations on the rice industry, such as removing an act on grinding, milling, and processing of facilities and the sizes of warehouses. Furthermore, the government is granting more certificates for rice exporters in order to increase its competitiveness in the international rice market.

In addition, the State Bank of Vietnam has encouraged banks to expand on lending funds for rice production and consumption in the Mekong Delta region. This allows for loans in 3-6 month terms with a yearly interest rate of 6%, providing support for farmers and producers in the rice industry.

Impact of the Coronavirus / 2020 Outlook on Vietnamese Exports

As Vietnam had been actively diversifying its export markets since 2019 to reduce its dependence on the Chinese market, which occupied 26% of Vietnamese rice exports in 2018, the novel coronavirus did not decrease Vietnam’s rice export volume. Demand even rose from other Asian markets such as Hong Kong and Singapore as consumers began to store basic necessities including rice.

A market Vietnam has set its eyes on this year is Senegal, as well as Africa in general, due to rising demand. According to the United States Department of Agriculture (USDA), Senegal’s demand for imported rice is expected to rise as consumers are storing food products, including rice, due to the locust outbreak in East Africa as well as in anticipation of the coronavirus outbreak.

Furthermore, while Vietnam is not a traditional source of rice to European countries, the recent EU-Vietnam Free Trade Agreement and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is expected to allow Vietnam to expand its status in the European market as well.