Rice traders desperate, make advance payment two months before harvest
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The rice harvest in the Mekong Delta is still more than a month away, but traders are already asking to buy and even putting down deposits.
The paddy has barely bloomed in the still green fields in Hon Dat District in Kien Giang Province, but traders have been making a beeline to them.
On Aug. 8, three of them arrived at the 10-ha field belonging to Nguyen Van Pho and asked to buy his paddy at VND8,300 (US$0.35) per kilogram.
But he refused since he expects a price of VND8,500 or more. “This year, traders are willing to buy paddy when it is still green,” he said. “They are willing to pay a deposit of VND5 million per hectare of paddy. This is the first time I have seen such a situation.”
Phan Van Dong, who has worked as an intermediary between farmers and traders for more than 10 years in the province’s Giong Rieng District, said he has never seen rice prices as high as now.
They have gone up to VND8,300 per kilogram from VND7,500 just a week ago, he said. “There are dozens of intermediaries like me and only a few hundred hectares of paddy. We are competing with each other to buy.”
The Vietnam Food Association said foreign importers are actively seeking to buy Vietnamese rice, and willing to pay $10-20 more per ton compared to period before India imposed the ban in late July.
India accounts for more than 40% of world rice exports, and non-basmati white and broken rice accounted for around 10 million tons of a total of 22 million tons of Indian rice exports last year, according to the U.S. Department of Agriculture. With the ban taking effect, global insiders have raised concerns about food price rises.
In Can Tho City and Hau Giang Province too, traders are making advance payments to buy paddy though harvest is a month or two away.
For the past 10 days, Nguyen Thanh Tam of Can Tho’s Thoi Lai district, who is growing high-quality rice on five hectares, has been pestered by traders to sell his grain at prices that have increased from VND6,200 per kilogram to VND7,500.
The director of a rice export company in Can Tho said his company has deposited money to buy paddy grown on 30,000 hectares and expected to be harvested in the next five or six weeks.
“To ensure we get sufficient amounts of paddy for processing for export, we have had to increase our purchase prices to VND7,500-7,800 per kilogram for normal rice and to VND8,300-8,500 for fragrant rice.”
“This year, traders are willing to buy paddy when it is still green,”
But he said this would mean big losses for the company since prices were lower when it had signed the export contract with a foreign partner.
Ngoc Quang Phat Company in Can Tho said it needs 20,000 tons of rice for export, but it is difficult to buy that quantity now.
It had signed deals with farmers to buy 50,000 tons of paddy at VND6,500 per kilogram (VND6.5 million per ton) in advance, but many are now asking it to hike the price.
Global supply is scarce, pushing Vietnam’s export prices to record levels.
Economist Tran Huu Hiep said the scramble occurring now is because most rice exporters cannot buy their own lands and farm the grain.
Deputy Minister of Agriculture and Rural Development Tran Thanh Nam said the links between rice companies and cooperatives remain weak.
The former buy 50% of their rice through traders, he said.
He said there are 180 rice exporters in Vietnam, but only half have tied up with cooperatives to secure supply. “Businesses should step up cooperation with rice cooperatives.”
On Aug. 6, Prime Minister Pham Minh Chinh instructed the Ministry of Agriculture and Rural Development and other ministries and local authorities to ensure this year’s target of 43 million tons of paddy, equivalent to 20 million tons of rice, is achieved.
By early August more than 24 million tons had been harvested in the country. According to the ministry, if there are no abnormal changes in the weather, the output will be adequate to meet both domestic and export demand.
Vietnam, which is the world’s third largest rice exporter after India and Thailand, estimates exports to be 7-7.5 million tons.
Questions & Answers
Q.Why are traders making advance payments for rice that has not yet been harvested?
Why are traders making advance payments for rice that has not yet been harvested?
Traders are making advance payments because foreign importers are actively seeking Vietnamese rice, and global supply is scarce. This situation is pushing Vietnam's export prices to record levels, leading to competition for paddy.
Q.How has India's recent ban on rice exports affected the market?
How has India's recent ban on rice exports affected the market?
After India's ban, foreign importers are willing to pay $10-20 more per tonne for Vietnamese rice. This has increased demand and prices, causing global insiders to raise concerns about food price rises.
Q.What issues are rice export companies facing when trying to secure sufficient paddy?
What issues are rice export companies facing when trying to secure sufficient paddy?
Rice export companies are struggling to buy enough paddy, even after depositing money or signing deals with farmers. Many farmers are now asking for higher prices, leading to potential losses for companies with pre-signed export contracts.
Q.What recommendations have been made to improve the rice supply chain in Vietnam?
What recommendations have been made to improve the rice supply chain in Vietnam?
Economist Tran Huu Hiep suggests the scramble is due to exporters not owning land. The Deputy Minister of Agriculture and Rural Development advises businesses to strengthen cooperation with rice cooperatives, as current links are weak.
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