Rice exports take numerous opportunities from trade agreements

Busy right at the beginning of the year

Rice exports in the first months of 2022 are quite busy, especially for large enterprises. Recently, Loc Troi Agricultural Products Joint Stock Company, a subsidiary of Loc Troi Group, has completed its first export delivery of more than 4,500 tons worth over USD3 million (VND80 billion). It was the first batch of the year including fragrant rice, white rice, brown rice, and sticky rice.

The amount of rice was delivered from the beginning of the year until the middle of February 2022 to partners across 4 continents such as Italy, France, Canada, Hong Kong, Singapore, Philippines, Kuwait, etc. These partners have been in long-term business with the Group including the leading agricultural trading firms in the European Union, which have worked with Loc Troi for more than 10 years.

This whole batch of rice was produced through a process of scientific cultivation and production under strict quality control meeting standards of each market. The Group also shares benefits with farmer households which have been associated with it for the long term.

Right in the early days of 2022, Trung An High-Tech Farming Joint Stock Company (TAR) also exported more than 11,000 tons of rice to Korea. Besides, Trung An has also exported many shipments of fragrant rice to other markets. Mr. Pham Thai Binh, TAR General Director said since the beginning of the year, the company has continuously exported to many markets.

The excitement in rice exports in the early year was evidently shown in data from the General Department of Customs (GDC). Accordingly, in January, rice exports reached 505,741 tons, equivalent to USD246.02 million, a sharp increase of 45.4% in volume and 28.2% in turnover compared to January 2021.

Market favorable conditions

According to Mr. Binh, rice exports this year will be more favorable than last year. The reason is that many markets are recovering from the Covid-19 pandemic and many supply chains, which were once broken due to the pandemic, are now also reconnected to help increase purchasing power. In addition, global instabilities including the recent armed conflict between Russia and Ukraine, also make people in many countries continuously pay more attention to food reserves.

In the global rice industry, both production and consumption this year are forecasted to increase, but that in consumption is much higher than output. This is also a good sign for Vietnam's rice exports.

Specifically, according to the US Department of Agriculture's January 2022 report, global rice production in the 2021-2022 yearly crop is forecasted to reach a record of 509.9 million tons (milled rice), an increase of more than 2. 6 million tons compared to the 2020-2021 crop. Global rice consumption in the 2021-2022 crop is forecast to reach a record 510.3 million tons, an increase of nearly 7.8 million tons compared to 2020-2021.

Stable in quantity, increasing in value

According to GDC, in 2021, rice exports reached 6.24 million tons, worth nearly USD3.29 billion with an average price of USD526.8/ton. Compared to 2020, rice exports in the past year decreased slightly by 0.2% in volume but increased by 5.3% in turnover thanks to a 5.5% increase in average export price.

Thus, it can be seen that Vietnam's rice export activities are continuously moving in the direction of not following high volume but focusing more on improving values. This has been shown quite clearly in rice exports to EU markets.

In the first 11 months of 2021, rice exports to the EU only reached 53,910 tons, up 0.8% over the same period of 2020. The main reason was that this market area reduced rice imports and sea freight increased too high. Although the rice export volume to the EU almost did not increase, the value rised sharply since it reached USD38.07 million, up 21.6%.

According to the Import-Export Department (IED) under the Ministry of Industry and Trade, this result shows businesses have effectively taken advantage of the EVFTA Agreement to boost the value of rice exports to the EU. Among the 10 major foreign rice supplies to the EU, the price of Vietnam's rice achieved the strongest increase in the first 9 months of 2021, up 20.3% reaching an average of USD781/ton.

In 2022, Vietnam's rice exports will continue to follow a trend of volume stabilization and value improvement. According to the Vietnam Food Association (VFA), this year's rice exports are expected to remain at just over 6 million tons and may reach 6.3 million tons, which is the same or insignificant increase compared to last year.

Mr. Pham Thai Binh, TAR General Director, said the rice price in Mekong Delta is currently at a high level. Raw rice ST24 and ST25 of early winter-spring crop, is sold at VND8,300-8,500/kg right on the field. In the centre of winter-spring crop, although prices of such rice species decreased due to high output, they were sold at a high level of VND7,200-7,300/kg. Other rice varieties are being sold on the field at VND5,700-5,800/kg. These are high prices so can bring good profits for rice growers.

Better exploitation of EVFTA

This year, Vietnam's rice exports will continue to ‘exploit’ advantages from EVFTA Agreement to boost exports to the EU which currently accounts for only a small proportion of the country's total rice exports (about 1% in volume and 1.3% in turnover), but is a potential market for exporting high-value rice varieties.

According to VFA, Vietnam's rice exports in 2022 to the EU market will not be less than 60,000 tons because the quality of Vietnamese rice has changed in the eyes of importers. Besides, Vietnamese rice already has a number of traditional customers in Germany, the Netherlands, Italy and Poland.

Meanwhile, the IED stated that in 2022, Vietnam's rice exports to the EU are expected to increase significantly. The improved quality of Vietnamese products, mainly fragrant rice, has been hitting the tastes of European consumers.

Taking advantage of the EVFTA to export fragrant rice with 0% tax is in hands of enterprises who own large raw material areas with cultivation meeting high standards such as Loc Troi, Tan Long and Trung An. Especially, the EU will automatically and completely liberalize the trading of broken rice. This commitment will help Vietnam export an estimated 100,000 tons of rice to the EU each year.

With a stable consuming demand, particularly at a high level for specialty rice from Asia in the coming time, the EU will continue to be a potential rice export market for Vietnam. However, the pandemic is still complicated while sea freight rates remain high. These may cause difficulties for Vietnamese enterprises to exploit the advantages of the EVFTA to boost rice exports to the EU market in the year 2022.