Agri Business

Indian rice exports to Vietnam in trouble as buyers seek huge discount

Subramani Ra Mancombu Chennai | Updated on August 05, 2021

With domestic prices falling and new crop arriving, importers in Hanoi are bargaining

Rice shipments from India to Vietnam have run into trouble with importers in the South-East Asian nation bargaining hard for huge discounts and threatening to not buy the consignments.

“Vietnam buyers are not taking delivery of our shipments. Due to Covid restrictions in that country, the market is down. They are now trying to drive the prices down,” said M Madan Prakash, President, Agri Commodities Exporters Association (ACEA).

Vietnam buyers’ problems are not just Covid restrictions. The autumn rice crop of the South-East Asian nation at 15.2 million tonnes (mt), which began arriving in end-June, is estimated to be higher than last year’s 15.06 mt. It is also higher than initial estimates of 15.11 mt.

Overall Vietnam rice production is estimated to be 43.9 mt against 43.36 mt last season. Initial estimates, too, pegged the output at 43.36 mt.

Rice for feed, wine making

“Domestic rice prices in Vietnam have dropped. Besides, the new crop has also arrived. Therefore, they are trying to bargain with Indian exporters,” said Vidya Sagar VR, Director, VM Bulk Logix.

Though Vietnam was the second-largest rice exporter last year, it imported rice from India for making wine and feed for the first time in decades last fiscal. “Vietnam bought more of 100 per cent brokens rice that are priced lower than other rice varieties. These are used in making wine,” said ACEA’s Prakash.

Market whispers are that Vietnam could have bought rice from India and sent it to China, which also imported 3.3 lakh tonnes valued at ₹756.20 crore directly from India during the last fiscal.

In April this year, Beijing imported another 1.1 lakh tonnes valued at ₹231.67 crore. Last fiscal, China began buying rice from India after over three decades.

“Vietnam has never been buying rice continuously from us. They are now buying only a limited quantity. Prices in Vietnam have dropped and thus, buyers there are bargaining,” said BV Krishna Rao, President, The Rice Exporters’ Association (TREA).

Shipments to Vietnam

India exported 2.93 lakh tonnes of rice valued at ₹658.43 crore last fiscal to Vietnam. An additional 1.5 lakh tonnes of rice valued at ₹377.46 crore were exported in April this year to Hanoi.

TREA’s Rao said Vietnam buyers were seeking discounts between $100 (₹7,450) and $150 (₹11,150) a tonne.

Bulk Logix’s Sagar said most of the rice held up were 100 per cent brokens.

These 100 per cent broken rice consignments would have been contracted at about $325 a tonne, traders said.

According to the International Grains Council, India’s 25 per cent broken rice is quoted at $368 a tonne, while Thailand quoted 5 per cent broken at $380 and Vietnam’s 5 per cent is ruling at $381 a tonne. Thailand rice prices have dropped by 18 per cent from the same period a year ago and Vietnam prices by 17 per cent.

Volume under dispute

While a section of the trade said the volume of rice under dispute could be as much as two lakh tonnes, others including TREA’s Rao, said it could be 40,000-50,000 tonnes.

“This is not the way to do business. The market in Vietnam has slowed down and it has got its own crop. Traders have tended to overreact. Vietnam buyers are seeking lower prices after our consignments landed there. Such relationships with buyers will not work,” Rao said.

Most of the rice shipments have gone from Kolkata, while all the consignments under dispute have gone from the eastern coast. “Given the high freight charges, all the shipments could have gone from the eastern ports since it is the most feasible option,” said a Delhi-based trade expert.

Resolution in two to three weeks

“Indian exporters have faced such situations previously. Buyers could always contest on grounds of moisture, aflatoxin level and presence of weevils,” said S Chandrasekaran, a Delhi-based trade analyst.

The trade expert said that the issue could be resolved in two to three weeks since the trade cannot afford to allow vessels to build up at ports.

The development comes at a time when India is expected to continue its dominance in the global rice market this fiscal too. Non-basmati rice exports are likely to exceed last fiscal’s record shipments of 13.08 mt.

Besides record non-basmati shipments, India, the world’s largest rice exporter, also exported 4.6 mt of basmati rice last fiscal. Totally, rice exports fetched ₹65,297 crore against ₹45,426 crore in 2019-20.

Record production

Over the last two fiscals, Indian rice exports have been helped by record productions during the last two seasons (July -June).

According to the Ministry of Agriculture and Farmers Welfare, rice production in 2019-20 was 118.87 million tonnes (mt) and for the last season, it has been estimated at 120.32 mt.

Besides, the Food Corporation of India also carried high inventories. In April last year, it carried 32.23 mt of rice and 25.23 mt of paddy that can yield 16.98 mt of rice. This April, it had 29.11 mt of rice and 26.22 mt of paddy that can yield 17.65 mt of rice.

The stocks were against the mandatory norm for FCI to have 11.5 mt of rice as operational stock and two mt as strategic reserve.

Published on August 05, 2021

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