Balancing Food Security and Surplus for Export

07-Apr-2020 Intellasia | Vietnam Business Forum | 6:02 AM Print This Post

On March 24, 2020, the general Department of Vietnam Customs issued a dispatch express, demanding provincial/municipal customs departments to suspend registration, receipt and clearance of export rice shipments of all kinds in all forms from 00:00 March 24. Earlier, the Ministry of Industry and Trade proposed the prime minister to suspend rice export. However, right after the official dispatch delivered by the general Department of Customs, the ministry sent an express dispatch to the prime minister for permission for continued rice export.

The puzzled regulation in rice export raises the question: Should Vietnam boost rice exports to take advantage of rising world demand or save rice to prevent food shortages it could face in the near future?

Rising demand and soaring price

The Covid-19 epidemic has resulted in a soaring demand for rice. In just a short time, China continuously purchased rice in Vietnam, making the export value to this market boom in the first three months of 2020. In addition, the severe drought in the Mekong Delta also caused significant pressure on rice export as well as domestic food security.

Specifically, in the first two months of the year, the country exported 66,222 tonnes valued more than $37 million to China, compared to just 9,534 tonnes worth more than $4.5 million in the same period of 2019. Thus, the rice export volume to China soared nearly 7 times. Rice shipments to Malaysia also jumped 149 percent in the first two months. The Philippines remained Vietnam’s largest rice importer, with volume rising by 15.8 percent and value growing by more than 26%.

According to the Ministry of Agriculture and Rural Development, Vietnam exported 1.298 million tonnes of rice worth $602 million in the year to March 15, up 26.5 percent in volume and 34.6 percent in value year-on-year.

Data released by the general Department of Customs showed that the average export price this year was nearly $560 per tonne, compared to $472 per tonne a year ago, growing by 20-25%.

Unlikely food shortage

Reporting to the prime minister on rice production and consumption demand in 2020, the Ministry of Agriculture and Rural Development forecasts that Vietnam will produce 43.5 million tonnes of unhusked paddy and may export 6.5-6.7 million tonnes in 2020 (13-13.4 million tonnes of unhusked paddy). The domestic demand for paddy is 29.96 million tonnes.

Nguyen Nhu Cuong, director of the Crop Production Department under the Ministry of Agriculture and Rural Development, said that despite being affected by saline drought in the Mekong Delta, Vietnam will still ensure sufficient food for domestic demand. A food shortage is unlikely.

Industry and Trade deputy minister Tran Quoc Khanh added that, given prolonged epidemic conditions, Vietnam can still ensure food security because there is always a national rice reserve as instructed by the prime minister. On the other hand, Decree 107 requires enterprises to reserve 5 percent of export volume. Rice cultivating time is also relatively short and the country can restore production and meet domestic demand in a short time.

Nguyen Duc Thanh, Member of the Vietnam Agriculture Policy Alliance, said, when the global demand for rice suddenly increases, Vietnam should at least take advantage of the first wave. In 2008, the world rice price surged on the risk of global rice shortage, Vietnam hastily closed its rice export market and lost an opportunity to export rice in large quantities and at very good prices.

“Rice is a commodity that the supply can be replenished after 3-4 months. The excessive fear of supply shortages caused both rice producers and exporters to lose the opportunity,” he analysed.

According to experts, the ban on rice export may help solve food security in the short term but this may cause counter effects like reducing domestic rice price and hurting rice farmers and exporters. On the other hand, the sudden ban on exports contracted with foreign partners may affect international trade relations. Therefore, ministries should consider specific situations before making a decision on suspension of rice exports.

On export regulation, Tran Quoc Khanh emphasized that it is necessary to have certain measures for rice regulation. If Vietnam continues to export rice at the same pace as in the first two months of the year, Vietnam will face the risk of rice shortage.

Given unpredictable fluctuations, the world market demand for necessities is soaring. For the domestic situation, if something unexpected happens, excluding the likelihood of psychological factors, rice hoarding may occur. “Under normal circumstances we do not lack rice, but under some special conditions we may face a risk if we export rice. Therefore, we must take measures in consideration of all possibilities to ensure food security for the people,” he stressed.

In addition to stopping rice export to ensure food security, Vietnam can set up a reserve fund, increase compulsory reserves, maintain a large area of rice land, and extend the delivery time for partners to timely replenish supplies.

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Category: Economy, Vietnam

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