Vietnam's rice export prices are unlikely to fall significantly this year despite a recent bumper harvest due to surging production costs, an industry executive said, tempering the country's edge in export markets. Despite a major dong devaluation in February that Thai traders said made Vietnamese rice more competitive and hurt Thailand's market share, rising costs in Vietnam had offset that advantage and helped to narrow the gap between the two nation's export prices.
"Export prices are forecast not to fall much because production costs, such as the cost of fuel, steel and transportation, have increased much against 2010," Director Tran Ngoc Trung of Vinh Phat Investment Corporation said in an interview on Tuesday. Trung also said Vinh Phat planned to export 60,000-90,000 tonnes of parboiled rice, its new product this year, to South Africa, the Middle East and Bangladesh, helping to raise Vinh Phat's annual rice exports by 11 percent to 200,000 tonnes.
The sales would also help raise revenues by 30 percent, said Trung, who declined to elaborate on the firm's earnings, putting the company on track for a listing in the near future. "The company will list shares in two or three years. Now we already have a plan but we need to stabilise production and goods first," Trung said. Another firm, Gentraco Aquatic Products Co - an affiliate of rice exporter Gentraco - has secured initial permission last November from the Hanoi Stock Exchange to list shares. Banks tightening lending this year to control inflation and annual interest rates of 18-20 percent, have made it difficult for businesses, including rice firms, to obtain funds for operation.
Listing could be an option to get funds but the country's stock market has so far this year lost nearly 6 percent, making many reluctant to list, and Trung noted that Vinh Phat is under no pressure to do so despite the plans. Trung did not forecast any specific rice prices for 2011 but said Vietnamese prices would closely track those in Thailand, the world's largest rice exporter.
"This year, prices still depend on demand by major importing nations, while the big exporters are mainly Thailand and Vietnam," he said via telephone from Ho Chi Minh City, Vietnam's largest rice trading market and the headquarters of his company, now the country's largest exporter of parboiled rice. Vietnam could get more buyers if it offered cheaper prices than Thailand, Trung added.
This week Vietnam's 5 percent broken rice was offered at $460 a tonne, free-on-board (FOB), while Thai rice of the same grade stood at $480 a tonne, or a gap of $20 a tonne, narrowing from the $90-$100 a tonne difference a year ago. The Vietnamese rice grade's price has fallen 15 percent so far this year, but it is still 18 percent above a year ago.
Vietnam raised the retail prices of oil products by between 16.6 and 24.1 percent in late February and lifted electricity prices from March 1, pushing March's consumer price index to the biggest annual increase in 25 months, straining the costs of agricultural and manufacturing production. Trung said domestic prices have been stable thanks to a government-backed purchase aimed at stockpiling 2 million tonnes of unmilled rice, even though harvesting of the Mekong Delta's winter-spring crop, the country's largest, has been at a peak. The crop output is expected to rise 5 percent to 10.4 million tonnes.