Vietnam’s Rice Price Hits Historic Peak, Exporters Struggle with Declining Profits
November 14, 2023
Vietnam, one of the world's leading rice exporters, is experiencing a historic peak in rice prices, with the cost of its five percent broken rice reaching an unprecedented $653 per ton. Despite the record-breaking export figures and rising prices, large exporters in the country are grappling with a decline in profits.
According to data from the Ministry of Agriculture and Rural Development (MARD), Vietnam exported 7.12 million tons of rice in the first 10 months of the year, generating a turnover of $4 billion. This marked a significant 34.9 percent increase compared to the same period last year, setting a new record for rice exports in the last 34 years.
The Vietnam Food Association (VFA) reported that on November 1, the price of Vietnam’s five percent broken rice reached $653 per ton, while 25 percent broken rice was at $638 per ton. These prices make Vietnam’s rice the most expensive in the world currently. The five percent broken rice is $93 per ton higher than Thailand’s equivalent and $90 higher than Pakistan’s. The figures rise to $118 and $150 per ton, respectively, for 25 percent broken rice.
The export price for Vietnam’s five percent broken rice has surged by 38 percent since the beginning of the year, and 25 percent broken rice has seen a 40.8 percent increase. Despite these gains, large rice exporters are facing unexpected challenges.
Loc Troi, a major player in the Vietnamese rice export market, reported a loss of VND327 billion in the third quarter, despite a significant increase in net revenue. The CEO, Nguyen Duy Thuan, attributed the decline in profits to rising costs, especially expenses related to loan interests, and losses caused by exchange rate fluctuations.
Similarly, Trung An Hi-tech Agriculture reported a modest profit of VND11.9 billion in the third quarter, only a slight increase compared to the same period last year. The company faced increased production costs, with the paddy price soaring by 36.6 percent in fields and 37.9 percent at warehouses.
Pham Thai Binh, vice president of Trung An, emphasized the challenges faced by export companies during the 'global price fever.' He pointed out that while export volumes and turnover increased, production costs also rose significantly. High-interest rates and a more substantial increase in domestic rice prices compared to export prices have put pressure on exporters.
Do Ha Nam, deputy chair of the Vietnam Food Association (VFA), acknowledged that many enterprises had to cancel contracts due to substantial losses. He highlighted that although revenue has increased, profits are declining for these companies.
Experts have cautioned that the current high export prices may not necessarily be an advantage and could pose high risks. Exporters are reluctant to store products, fearing a potential loss of competitiveness compared to rivals. Moreover, with the cost of collecting paddy in fields reaching unprecedented levels, exporters are struggling to achieve reasonable profits, making the current market conditions challenging for Vietnam's rice industry.