Vietnam's rice exports: Opportunities and challenges

Rice is both an important food source and a strategic export item of Vietnam. On average, a year, Vietnam produces about 26-28 million tons of rice, besides for domestic consumption, the export volume of rice is about 6-6.5 million tons/year. In which, the Mekong River Delta - the main rice bowl accounts for more than 50% of the total output and more than 90% of the country's rice exports. Rice exports play an important role in Vietnam's socio-economic development. In recent years, the rice industry has made great progress and achieved many results. Annually, Vietnam's rice exports account for about 15% of the world's total rice exports. Vietnamese rice grains have been present in over 150 countries and territories. The main export market is Asia, in which, China and the Philippines, that are the two main markets of rice exports. However, the rice industry is facing many difficulties and challenges in the context of integration and the outbreak of the Covid-19 epidemic. How to take advantage of opportunities to overcome challenges, overcome the limitations of the industry, and promote rice exports is a problem that needs to be solved.

1. Status of rice export

In 2020, export activities in general and rice exports in particular, faced many difficulties and challenges, mainly due to the extremely complicated impact of the Covid-19 epidemic.

Faced with that situation, the Government, the Prime Minister, and the Ministry of Industry and Trade have actively implemented many solutions to both ensure the prevention of epidemics and ensure food security, as well as remove difficulties for export activities, and including the rice export industry, that helps people to consume paddy and rice with the best quantity and price. Up to now, it can be seen that both major goals set by the Government and the Prime Minister for rice production and export have been achieved. Food security was absolutely guaranteed in 2020, even in the most difficult times, when the epidemic broke out and foreign countries increased sharply to buy rice from Vietnam. According to the Vietnam Import-Export report, rice exports in 2020 reached 6.25 million tons, worth 3.12 billion USD. Although the amount of rice exported decreased by about 1.9% compared to 2019, mainly for the sake of ensuring national food security, the export value increased by 11.2%. The average export price for the whole year reached 499 USD/ton, up 13.3% compared to 2019. This is the highest average price in recent years, bringing great benefits to rice farmers.

Vietnam's main rice export market is Asia, especially the Philippines, which always ranks first in terms of Vietnam's rice export market, accounting for 33.9% of the market share. Rice exports to this market in 2020 reached 2.22 million tons and 1.06 billion USD, up 4% in volume and 19.3% in value compared to 2019.

Regarding export categories, in 2020, the export value of white rice accounted for 45.1% of the total turnover, reaching 2.76 million tons; jasmine rice and fragrant rice accounted for 26.8%, reaching 1.64 million tons; broken rice accounted for 13.65%, reaching 834.4 thousand tons; sticky rice accounted for 8.9%, reaching 547.9 thousand tons; japonica rice and Japanese rice varieties accounted for 4.2%.

It can be seen that the rice export results in 2020 continue to increase despite the decrease in the amount of rice exported. The reasons for the decrease in rice exports: Firstly, because Vietnam is gradually replacing low-grade rice products with high-grade products to enter high-end, fastidious markets such as the US, EU, and South Korea. Second, the restructuring of the rice industry has been strongly implemented, which has changed the rice farming process in the direction of improving quality instead of increasing output. Third, in recent years, Vietnam has signed many trade agreements with many strategic countries such as the EU-Vietnam Free Trade Agreement (EVFTA); Regional Comprehensive Economic Partnership (RCEP); The Free Trade Agreement between Vietnam and the United Kingdom of Great Britain and Northern Ireland (UKVFTA) has created favorable conditions for Vietnamese rice to make a breakthrough. Fourth, the situation of the COVID-19 epidemic has reduced many industries, but the demand for food has not decreased but increased, so the amount of rice consumption is always stable. These reasons have impacted and created a position and added value for Vietnam's rice exports in the world market.

In 2021, according to the forecast of the Ministry of Agriculture and Rural Development, our country's rice production plan is to plant 7.257 million hectares, the harvested output is about 43.3-43.5 million tons of paddy, equivalent to 26 million tons of rice. The estimated demand for domestic consumption is nearly 30 million tons of paddy, the remaining 13 million tons of paddy - equivalent to 6.5 million tons of rice need to be exported in 2021.

Right in the first 5 months of 2021, the country's rice exports reached nearly 2.6 million tons, equivalent to 1.41 billion USD, the average export price reached 542.8 USD/year. The Philippines has always been Vietnam's top rice consumption market, followed by China in second and Ghana in third. The structure of Vietnam's rice exports is continuing to shift to fragrant rice, high-quality rice with higher selling price and added value. Rice export results in the first 5 months of 2021 are a positive signal, helping Vietnam's rice industry expect to complete its export target in 2021. However, in the coming time, the industry still faces many challenges. difficulties and challenges in rice export.

Rice export turnover and market in 2020 and the first 5 months of 2021

(According to data published on January 13, 2021, and June 12, 2021, of the General Department of Customs)

Source: Industry and Trade Information Center

2. Opportunities and challenges for rice export

According to the US Department of Agriculture's (USDA) forecast on consumption demand and food reserves in 2021, global rice imports are estimated at 44.79 million tons, up 1% compared to 2020. In which, the countries that are expected to continue to increase rice imports are the Philippines (up 13%), Ivory Coast (up 9.1%), Ghana (up 5.6%), and the EU (up 2.1%). China will remain the largest rice importer in 2021 with 2.9 million tons, followed by the EU with 2.45 million tons and the Philippines third with 2.2 million tons. These are the main export markets of Vietnamese rice.

USDA also forecasts that in 2021, India will continue to be the world's largest rice exporter, expected to export 15.5 million tons, an increase of 940,000 tons compared to 2020. The second is Vietnam, which is expected to export rice at 6.4 million tons, up 233,000 tons. In third place is Thailand, which is expected to export 6.1 million tons, an increase of nearly 400,000 tons.

According to experts, Vietnam's rice exports are receiving many double opportunities, due to the complicated situation of the Covid-19 epidemic and spreading rapidly in the world, make the demand for food in many countries increase. This leads to the forecast that the demand for rice reserves in other countries will increase, especially the demand to buy rice from major markets such as the Philippines, Malaysia, China, Ghana, Papua New Guinea... Even Bangladesh is the world's third-largest rice producer but is emerging to become a major rice importer after consecutive heavy rains caused crop damage and the country is suffering from a new wave of infections caused by the Covid-19 epidemic, lead to an extended lockdown.

Meanwhile, China - the country with the largest population and largest rice consumer in the world, has now been able to control the Covid-19 epidemic, and the rice export trade to China is still active.

Meanwhile, rice export competitors with Vietnam are currently in a difficult situation. India - the world's largest rice exporter is facing difficulties in exporting rice due to the weakening Rupee and the Covid-19 epidemic wave is booming again and causing a wide crisis in society, affecting logistics, from milling to transporting rice to the port. At this time, Vietnam basically controls the disease well and the supply is abundant, so there are favorable conditions to boost rice exports.

In addition, in 2020, Vietnam has expanded and diversified its export markets through recently signed Free Trade Agreements (FTAs) such as the EVFTA Agreement; RCEP; UKVFTA, and the Eurasian Economic Union (EAEU) have been helping Vietnamese rice to be known well in the world, the rice export market is gradually expanding to consumer markets for premium rice, specialty rice, contribute to adding value to Vietnamese rice. In 2021, with the preferential tax rates in the above agreements, Vietnamese rice will have competitive advantages and growth opportunities in the EU, UK, and EAEU countries.

In particular, recently, the Philippine government has decided to reduce the import tax on rice to 35% (previously 40% for rice imported under quotas and 50% for rice imported outside of quotas) within a year, in order to increase the supply of rice for the domestic market, maintain affordable rice prices and reduce inflationary pressures. This Decision takes effect 15 days after the Office of the President publishes it in the Official Gazette on May 17, 2021, and has a validity period of 1 year. This is an opportunity for Vietnamese rice to increase exports to the Philippines - one of the largest markets for Vietnamese rice.

Besides opportunities, Vietnam's rice export activities have to face many difficulties and challenges due to the impacts of climate change, sea-level rise, drought, disease, and strict market requirements on standards, food safety, and environmental protection are very high because rice is a sensitive commodity, many countries tend to be self-sufficient in rice, limiting imports. Some countries apply technology and science to rice production to improve productivity. This makes the rice market very competitive, not only in the world market, but Vietnamese rice is also under competitive pressure in the domestic market (especially in big cities) with Thailand's rice.The quality of exported rice is still low, the percentage of rice above 15% broken still accounts for 36%. There is no stable consumption contract, the price is volatile. Rice production lacks sustainability, smallholder production scale, fragmentation, high cost and low added value, slow mechanization, large post-harvest losses (currently the post-harvest loss rate of our country is 13-16%, Thailand is about 7-10%). The number of enterprises participating in the association contracts to consume agricultural products is small in quantity, small in scale, and limited in capacity, so the association contracts are limited in both quantity and quality. Infrastructure and technology for the preservation and processing of agricultural products are still lacking, leading to increased losses and reduced quality during the preservation process. The industry of deep processing of rice products has not developed uniformly, especially products that have not been processed to increase added value.

3. Some solutions to boost rice exports

The rice industry plays an important role in the development of agriculture and rural areas, especially contributing to ensuring national food security. However, according to the Ministry of Agriculture and Rural Development, the development of the industry is facing many challenges. The industry continues to strongly restructure towards improving efficiency and sustainable development, meeting the domestic and export demand for rice. Therefore, to promote rice exports in the coming time, it is necessary to have solutions from state management agencies and businesses.

* Solutions from State management agencies

Firstly, it is necessary to continue to review and perfect the mechanism of rice export management and the management of rice export business activities of traders in accordance with the market situation, creating favorable conditions for traders to participate in exporting rice, deeply participating in the global rice value chain, that is also an urgent requirement.

Since 2018, the Government has issued Decree No.107/2018/ND-CP on rice export business, replacing Decree No.109/2010/ND-CP, with many new points showing innovative opinions in the management of the Government and the Ministry of Industry and Trade on rice export business, such as: removing regulations on construction investment locations, size of warehouses, and rice mills; encourage traders to invest in the production and export of high-quality and high-value rice products; Traders can rent warehouses, and mills to process rice to meet business conditions. These are new institutional steps towards opening, creating favorable conditions for traders to enter the rice export market. However, in the current context, when Vietnam has signed many FTAs such as the EVFTA Agreement; RCEP; UKVFTA, the authorities need to review and propose mechanisms and policies to respond flexibly and appropriately to frequent fluctuations from the rice export market.

Secondly, the Ministry of Industry and Trade will preside over and coordinate with other ministries, sectors and Vietnam Food Association in deploying and guiding businesses to effectively implement signed FTAs to make the most of the opportunities to expand , exploiting markets such as Korea, EU...Along with that, the Ministry will implement solutions on mechanisms and policies, remove technical and trade barriers, internalize international commitments, Customs procedures, logistics ... help rice exporters exploit the market well.

Notably, the Ministry of Industry and Trade continues to actively and regularly coordinate with the Ministry of Agriculture and Rural Development, which is assigned to assume the prime responsibility for concentrated production, drastically and synchronously deploying solutions related to restructuring on the rice industry, improve the value and quality of Vietnamese rice, and build and develop the Vietnamese rice brand.

In addition, strengthen the selection and development of rice varieties to meet the structure of rice varieties according to the export strategy. In particular, priority should be given to aromatic and specialty rice varieties and the development of concentrated production areas according to the varieties identified in the production, consumption and export linkages. Strictly control the production process so that products have uniform quality and ensure food safety and hygiene standards. In this regard, it is necessary to absolutely meet the regulations on the maximum allowable residue level of pesticides and trace the origin.

In addition, in order to ensure high efficiency of rice export, it is necessary to specify policies to support rice exporters with brands and labels of national certification of Vietnamese rice (Vietnam Rice). Support to set up offices to introduce and promote Vietnamese rice in key markets.

According to the Ministry of Agriculture and Rural Development, it is necessary to effectively implement FTAs to develop rice export markets, in which, taking advantage of Vietnam's export rice ability to penetrate into high-class rice segments; support international activities to promote Vietnamese rice, organize Vietnam Rice Festival abroad and participate in international forums on rice, in order to contribute to bringing Vietnam's rice export value to continue reaching high value.

* Solutions from businesses

Rice exporters, as well as farmers, need to actively improve their knowledge of FTAs; actively research and well implement documents guiding the implementation of FTAs of the Government and related ministries and sectors, especially EVFTA, RCEP...; proactively prepare capacity and source of goods, improve competitiveness through building long-term and methodical plans, improve production and business capacity through application of science and technology to increase product value. Enterprises need to learn and apply existing successful models to have the best preparation when facing competitive pressure in the domestic market. At the same time, strictly implement and comply with regulations on traceability; strengthen inspection and supervision of the use of plant protection drugs in their production and processing stages in service of export; well control the issue of plant quarantine, ensure food safety and hygiene in the entire chain of preservation and processing to have high quality rice products, meeting the requirements of importing countries.

In addition, it is necessary to improve the competitiveness of products through quality and price, and at the same time build and protect the brand name to promote sustainable export, maintain and diversify the market; It is necessary to prepare countermeasures to trade remedy lawsuits by monitoring market conditions, prices, trade conditions and capacity building./.

Do Thi Bich Thuy

Department of Information, Library and Trade Promotion - VIOIT