Vietnam, which resumed rice imports from India after decades purchasing lower priced 100 per cent broken variety, has now begun to buy better quality grades to meet its other domestic needs.

“Vietnam is buying five per cent broken white rice from us since its production is lower. This five per cent broken is used for supply to its defence forces and industrial users,” said M Madan Prakash, Agri Commodities Exporters Association (ACEA) President.

Vietnam has bought the five per cent brokens at $410-420 a tonne (₹ 30,800-31,550) a tonne, said Prakash, whose Chennai-based Rajathi Group exports agricultural produce.

“Vietnam is buying 10 per cent brokens too from us. It has been buying continuously from us like China. Its monthly imports of rice are around one lakh tonnes,” said B V Krishna Rao, The Rice Exporters Association (TREA) President.

The US Department of Agriculture (USDA), in its grain and feed annual report, said that Vietnam has bought 100 per cent broken rice from India at $310 ( ₹23,300) a tonne, at least $130 (₹9,775) lower than its own offers of broken rice.

100 per cent broken rice imports

Between December last year and January, Vietnam had imported about 65,000 tonnes of the 100 per cent broken rice from India, the USDA said quoting Hanoi Customs statistics. The rice was imported for preparing rice noodles, processing flour, brewing, and feed manufacturing.

While the USDA said that Vietnam would import five lakh tonnes (lt) during the current marketing year ending July, TREA’s Rao said the South-East Asian nation could import about 10-12 lakh tonnes of rice at the rate of one lakh tonnes a month.

“Vietnam is focussing only on producing premium varieties only that fetch good prices in the global market,” said ACEA’s Prakash.

The USDA said that Vietnam high quality rice cultivation increased to 74 per cent last year, up 24 percentage points over the last five years.

Vietnam’s paddy production

Quoting Hanoi’s General Statistics Office, the USDA said that Vietnam’s paddy production continued to decline due to urbanisation, crop alteration, drought and salinity intrusion impact despite higher yield.

Area under paddy in Vietnam has dropped from 7.3 million hectares (mh) in August 2019- July 20 to 7.25 mh this season. This is expected to be maintained next season. Yield has improved to 5.9 tonnes a hectare from 5.88 during the same period. Production is estimated at 43.36 million tonnes (mt) this season, the same as last season. Next season, too, the USDA sees the output at the same level.

According to S Chandra Sekaran, a New Delhi-based trade policy expert, the Mekong delta in Vietnam is drying up with erratic climate compounding the issue. “Vietnam has begun to rely on Indian rice. The dominance of Vietnam and Thailand in the rice market may not continue as earlier,” he said.

Prakash said India enjoyed an advantage in the global market since its prices were competitive. According to the USDA, India’s offerings were competitive by over $100 ( ₹7,500) a tonne.

According to the International Grains Council, Vietnam’s five per cent broken is currently quoted at $491 a tonne and Thailand’s same grade at $483. India’s 25 per cent broken rice was quoting at $419 a tonne, it said. Year-on-year, Indian rice prices have gained 14 per cent, while Vietnam rates have gained 13 per cent.

Vietnam’s high prices have resulted in its rice exports dropping to a five-year low during January-February. China diversifying its rice import basket to include India, Myanmar and Cambodia has also added to its problems, the USDA said.

TREA President Rao said that with the rupee dropping three per cent against the US dollar, there could be a price adjustment to the tune of $10 ( ₹750) a tonne.

“The new crop has begun to arrive in Telangana and Andhra Pradesh. Traders are waiting for the exchange rate to stabilise. They could begin buying over the next few days,” he said.

Global rice market

Last fiscal, India enjoyed an advantage in the global rice market as it had huge carryover stocks that were further boosted by a record production. The country’s rice production in 2019-2020 (July-June) was 118.43 mt.

As on April 1 last year, the Food Corporation of India (FCI) had 32.24 mt of rice as stocks, besides 25.24 mt of paddy that could yield 16.90 mt of rice. The FCI had 28.23 mt of rice and 34.5 mt of paddy that can yield 23.10 mt of rice in March this year.

In addition, rice production this season to June has been projected at a record 120.32 mt.

According to the USDA, India’s rice exports capabilities have been enhanced by operation of deep-water port at Kakinada since February this year.

TREA’s Rao said that after the Andhra Pradesh government allowed the deep-water to be used for exports, the waiting time for the vessels has dropped sharply and shipments speeded up.

India’s rice exports are expected to maintain the same momentum as last year, though rising ocean freight rates may slow it for some time initially.