Vinh Hoan Seafood Company has decided to quit rice production and export though it spent big money on building a factory and choosing high-quality rice sources for export.
Analysts said that Vinh Hoan made a reasonable decision. Many other rice export companies took a loss in the last year, had to be dissolved or kept operations at a moderate level. Many exporters reported a sharp decrease of 40-45 percent in export volume in 2016 compared with the year before.
Vietnam’s rice experienced an unsuccessful year in 2016 with the decline in both export quantity and turnover. China, Vietnam’s major export market, had the consumption decreasing by 35 percent. The demand was also lower from other loyal markets, including the Philippines (65 percent), Malaysia (48 percent) and the US (33 percent).
The total export volume in 2016 was 1.6 million tons lower than predicted by the Vietnam Food Association (VFA) in early 2016.
The latest report of MARD showed that Vietnam could only export 4.9 million tons in 2016, worth $2.2 billion, down by 26 percent in volume and 21 percent in value compared with 2015.
The director of a rice export company in the south said his company could not export one ton of rice in 2016. Though Laos and Cambodia exported less rice than Vietnam, their products could enter the choosy market of Japan. Meanwhile, Vietnam’s rice still cannot enter the market.
Nguyen Trung Kien from IPSARD (Institute for Policy and Strategy of Agriculture and Rural Development) commented that Vietnam’s rice sector has high production cost but the profit is lower than that of Thailand, India and Cambodia.
Meanwhile, the post-harvesting loss rate and poor infrastructure conditions all make the transport costs high, thus weakening competitiveness.
VND7 trillion to improve Vietnam’s rice
Seventy-six percent of Vietnam’s rice is exported to Asian markets at low prices, which explains why Vietnam can only obtain modest profits despite high export volume, according to Kien. Meanwhile, more orders have been placed with neighboring countries.
Pakistan, Vietnam’s loyal market, on January 4 suggested an inter-governmental rice purchase mechanism with Myanmar. Vietnam was warned that even Cambodia could also be a strong rival, though it has been exporting rice only in the last few years.
MARD has approved a VND7 trillion plan on restructuring the rice sector which says that 50 percent of rice exports by 2030 will bear a Vietnamese brand, 30 percent of which will be specialty and fragrant rice.
Of the total amount of VND7 trillion, VND5 trillion will be spent on upgrading rice fields, transport conditions, irrigation systems and the electricity systems in rice growing areas in the Mekong Delta, Red River Delta and coastal areas in the south central region.