In 8M22, Vietnam’s rice export value and volume reached US$2.3 billion (9.9% yoy), and 4.8 million tonnes (20.7% yoy), respectively.

A boost for rice prices  

India banned the export of broken rice (which made up 11% of all exports) and imposed a 20% tax on all other varieties (with the exception of basmati and parboiled rice, which made up 18% of all exports) on September 8, 2022. Given that India contributes around 36.7% of the world's rice trade and exports rice to more than 150 nations, any decrease in its shipments would put additional upward pressure on rice prices. When India forbade exports in 2007, prices throughout the world soared to all-time highs of about US$1,000 per tonne.

Despite the increase in food prices, rice prices have varied in the region of US$390-US$490 per tonne since September 21, around 45% below their peak of around US$570/tonne 6 months earlier. According to Mr. Vu Manh Hung, an analyst at VNDirect, the India export ban caused a spike in rice prices.

Global rice supplies at risk

In contrast to other grains, rice has defied the general trend of rising food prices over the past two years, despite bumper yields and significant stockpiles at exporters. Although over 90% of the world's rice production is produced in Asia's major rice exporting nations, the recent bad weather there is likely to alter the price trend. This year's production has been significantly reduced by the patchy rainfall in India, the drought in China, and the floods in Bangladesh.

China, the greatest rice consumer in the world, is currently experiencing an acute draught in seven regions, which could reduce rice production by 3-6% in 2022. Global stocks have reached a 4-year low, according to the U.S. Department of Agriculture, as the stock-to-use ratio (also known as the inventory-to-consumption ratio) is only expected to be 34.4% in FY2022-23 (as opposed to an average of 36.6% for the years from 2018 to 2022).

On the other hand, Mr. Vu Manh Hung sees the demand picking up. Due to the yield losses, China is expected to lift rice imports to a record 6 million tonnes in 2022/23, according to the U.S. Department of Agriculture. Besides, he sees the rise of protectionism as necessary to ensure food security in light of recent geopolitical disputes. Food export bans have included wheat and sugar from India, palm oil from Indonesia. Food import countries are trying to increase the stock inventory, e.g., the Philippines. "We believe rice may be the next in line with upward pressure on prices", said Mr. Vu Manh Hung.

Vietnam’s position in the rice market

Vietnam is the world's third largest rice exporter, behind India and Thailand, with about 7.8% global trade; and the largest exporter to China with a 24.5% market share. With higher duties, Indian rice prices will become uncompetitive and likely prompt buyers to shift towards Thailand and Vietnam. In 8M22, Vietnam’s rice export value and volume reached US$2.3 billion (9.9% yoy), and 4.8 million tonnes (20.7% yoy), respectively. The Philippines is Vietnam’s largest rice market (46%), followed by China (12%) in 8M22.

The Thai government is seeking solutions to support its farmers in the context of high input costs. Specifically, Thai Agriculture Minister Chalermchai Sri-on said that while rice farmers were affected by the high production costs due to complicated developments such as the COVID-19 pandemic or the conflict between Russia and Ukraine, the price of rice on the global market had increased disproportionately. In 2021, the total rice export value of Vietnam and Thailand accounted for 20.6% of total global trade.

"Three listed companies (LTG, TAR, PAN with large exposure to rice exports will likely benefit from the rice price upturn", said Mr. Vu Manh Hung.