Date: July 09, 2003
Source: The Hindu Business Line
Author: M.R. Subramani

AFTER having surrendered its number two position in rice exports to India last year, Vietnam is desperately trying to snatch it again. But factors such as logistics and an anticipated rise in demand could make things difficult for it.
On the other hand, Indian exporters could find the competition hot if the current problem of rake availability continues and the Government continues with "its inconsistent policies", the exporting community says.

Vietnam has done two things in the last two weeks that cause concern. One, it has lowered its rice prices and two, it has also raised its export target by four lakh tonnes from 35 lakh tonnes. This is, however, not worrying the exporters.

"India and Vietnam mainly compete for the market share in West Africa. We enjoy freight advantage over Hanoi and on an overall basis, we still enjoy the edge over them," a senior official with a multi-national exporting firm, who did not wish to be quoted, said.

Currently, Vietnam quotes $163 a tonne f.o.b for 25 per cent broken rice, while for five per cent broken it is $183. India quotes $175 for 25 per cent broken and $196 for 5 per cent broken. Other competitors such as Pakistan and Thailand, the top exporter, quote $2-4 higher than Indian prices on f.o.b basis.

"Rice arrival takes place throughout the year in Vietnam and currently, it is from the Mekong delta. Hanoi is also quoting lower because it missed getting an Indonesia tender," trade sources said.

"Indian prices are higher because rakes are not available. At least $10-12 a tonne goes towards transportation. If this problem is solved, we can be even more competitive," the official said.

Besides this, other concerns of the trade are changing Government policy and rising rupee. Since April 1, the rupee has gone up from 47.55 to 46.33 against the dollar. At the same time, dong, the Vietnam currency, has been more or less stable at 15,466 to the dollar.

Official sources said the Government was keen on keeping up the momentum of exports. "The Food Ministry will come out with a `policy position' on exports at a meeting on July 9," they said.

Trade sources said: "Our prices may decline if the new crop, expected in October, is good and hits the market on time," they said.

Trade sources said exports momentum from the country would depend on how quickly the exporters were able to move the stocks from FCI godowns before July 31. "We can get the stocks at the old price only until then," they said.

From August 1, exporters will have to pay Rs 7,300 a tonne for white rice against the current price of Rs 6,610 and Rs 7,500 for par-boiled rice (Rs 6,915). "We will not be able to sell at current prices from August," trade sources said.

On the other hand, the trade also expects demand to perk up in the next couple of weeks. In particular, the Food and Agricultural Organisation (FAO) expects demand for rice to strengthen for Iraq's "Food-for-oil Programme".

"Orders are also expected from Indonesia. When India, which sold 66 lakh tonnes last year, is raising prices, it is just a matter of time before others follow suit," trade sources said.

According to the sources, exporters have pending contracts to deliver 35 lakh tonnes of par-boiled and white rice. FAO has projected Indian exports to touch 40 lakh tonnes against Vietnam's 39 lakh tonnes. As per the Government data, 40.76 lakh tonnes of rice, valued at $750.84 million, were exported during 2002-03 fiscal against 15 lakh tonnes worth $279 million the previous year.