Vietnam Rice Annual Report 2018 & Outlook for 2019

Vietnam Market Analysis and Forecast Joint Stock Company is the leading provider of in-depth ANALYSES & FORECASTS on agro-commodity sectors. We would like to introduce Vietnam Rice Annual Report 2018 & Outlook for 2019 (scheduled to be released in Jan 2019), with detailed contents as follows:

EXECUTIVE SUMMARY

 

The macro data on Vietnam’s rice exports in 2018 show encouraging export results. According to the preliminary data, Vietnam’s paddy production is estimated at 44.29 million tons, up by 0.3% in which the paddy production of Mekong River Delta is 24.8 million tons, up by 1.5% from 2017. In 2018, Vietnam’s rice exports through official channel are expected at 6.21 million tons, worth US$ 3.1 billion, up by 7.4% in volume and 19% in value from 2017.

 

Rice production in crop seasons in Mekong River Delta was quite favorable. 2017/18 Winter-Spring crop achieved quite good results and 2018/19 Winter-Spring crop as of December 2018 did not encounter any major disadvantages. In 2018 Summer-Autumn crop, the flood came early but did not have too great impacts on paddy yield and paddy quality; the early arrival of the flood mainly affected the sowed area and sowing time of 2018 Autumn-Winter rice. In 2018, the structure of rice varieties changed towards the decreased area of Jasmine and glutinous rice, and the soared area of IR 50404, RVT/ST21 and Dai Thom 8 compared to 2017.

 

In 2018, there were fundamental changes in Vietnam’s rice exports which is expressed by 2 aspects (1), Firstly, the sudden changes and fluctuations of the market had a profound impact on the rice industry trends and business results of the business community and (2), Secondly, there was an important milestone marked of institutional adjustments both in Vietnam and key markets.

 

The sudden changes and fluctuations of the market were reflected in the sharp decrease and risks of the Chinese market while the return of Vietnam’s two traditional export markets, Indonesia and the Philippines, with the strong import demand in a short time became the most important factor, supporting Vietnam’s rice exports.

 

In 2018, total rice exports to China through official channel are estimated at just 1.3 million tons, down by 43% from 2017. The tariff barrier on glutinous rice in mid-2018 and tariff imposed on broken rice and the troublesome procedures of the Customs and the Department of Plant Protection at the end of the year caused Vietnam’s enterprises to experience risks when transacting rice with China. This market used to be the only export market for Vietnamese glutinous rice with more than 1 million tons per year but in 2018, the market only imported more than 500 thousand tons of glutinous rice, down by as much as 54% from 2017. Exports of other major rice varieties such as OM 5451, ST21, KDM, Nang Hoa and Dai Thom to China also experienced a decrease due to the influence on the tariff barrier erected on glutinous rice because of the lower import quota to be spent for glutinous rice and the soared “transaction costs” to have quota.

 

In 2018, Vietnam’s four largest import markets (BIG4), China, Indonesia, Philippines and Malaysia accounted for nearly 60% of Vietnam’s total exports. Rice exports to African markets tended to decline because high-priced Vietnamese white rice was impossible to compete with rice from India and Thailand. Iraq continued to have a very significant import demand for fragrant rice, supporting the market of Vietnamese fragrant rice. Korea (Republic) also tended to raise its procurement demand for Japonica, helping the emerging industry.

 

Given the strong demand of Indonesia, the Philippines, Malaysia and Cuba, the IR 50404 rice market of Vietnam was very bullish in 2018, establishing “a high rice price level”. Prices of Vietnamese 5% brokens were often at least US$ 10/ton higher than prices of Thai 5% brokens with a common price gap of US$ 20-30/ton. There was a soared demand of Bulog/Indonesia when the supply of white rice of Thailand decreased as the stocks of rice from the rice mortgage scheme ran out and the supply of IR 50404 of Vietnam tended to decrease in the context that exports of fragrant rice, glutinous rice, Japonica and long-grain rice  were quickly expanded. In addition to the demand of Bulog in the first half of 2018, the demand of the NFA and Filipino traders helped the demand for IR 50404 to remain high, causing prices of IR 50404 paddies to be equal to prices of OM 5451 paddies at some points of time – a threshold beyond the expectations of most people in the industry.

 

The fever of the IR 50404 paddy rice market led to an overall concern about the shortage of this rice variety when the NFA’s tenders were taken place at the end of 2018. This reflected difficulties of enterprises as they had to face the complexity of the market not only by grasping the demand but also by monitoring the supply and inventory. In 2018, we paid much attention to monitoring the information on paddy supply at the website www.viettraders.com and we made periodical analyses on the structure of rice varieties by crop for major exported rice varieties such as IR 50404, OM 5451, Dai Thom 8, Jasmine, Japonica, glutinous rice and ST21. In addition to the estimate on area share of rice varieties, the information also refers to the harvesting progress, rice supply-demand balance.

 

Jasmine, after having been a promising rice variety for several years and even being considered a symbol of Vietnam rice brand or a “new weapon” penetrating into the African market, underwent a bearish year. In 2017, the market of Jasmine was heated on the demand of Africa and Iraq but in 2018, there were alternatives with cheaper rice in which the preferred rice variety was Dai Thom 8. Dai Thom 8 has not only been a rice variety mixed with other fragrant rice varieties but also become a rice variety exported independently to China and the Philippines.

 

OM 5451 continues to affirm to be an important rice variety in Vietnam’s rice export structure. In 2018, according to the official data, OM 5451 rice exports are estimated at about 550 thousand tons, up by 66.7% despite facing interventions leading to restrictions on China’s rice imports. If more fully calculated when cleaning the classification of the official data by separating OM 5451 from the group of long-grain rice, OM 5451 exports in 2018 are estimated at approximately 800,000 tons. This is an impressive number which reflecting exactly the position of OM 5451 in Vietnam’s rice export structure. OM 5451 is preferred by Chinese consumers and continues to conquer the Philippine market, and starts to be exported to Korea.

 

Japonica rice exports also achieved a very impressive milestone in 2018. According to the official data, Japonica rice exports in 2018 are estimated at approximately 500 thousand tons, up by 49.6% from 2017.  However, according to the estimate that is more accurate to the reality when subtracting the volume of other rice varieties mixed with Japonica for exports to Papua New Guinea, Japonica rice exports in 2018 are revised to 432 thousand tons. Japonica rice exports to Korea (Republic) in 2018 through the tenders are 122 thousand tons, up by 2.3 times from 2017, while according to the official data, Japonica exports to Papua New Guinea in 2018 are also 215 thousand tons, up by 62%. Therefore, for exports of Japonica, there have been two key export channels, reducing the risk of depending on the only channel, Papua New Guinea as before.

 

In 2018, VinaFood 1 continued to sustain its key position in the top exporters as this enterprise kept on exporting rice to Cuba and Syria, and penetrated more in-depthly into Indonesia and the Philippines in addition to the rice delivery of VIP Ltd, a joint venture between Vietnam and Iraq, to the Iraqi market. Meanwhile, “the new factor of 2017”, Tan Long continued to be listed in Vietnam’s top 10 exporters in 2018. Thinh Rice ranked 6th in which its Japonica rice exports to Papua New Guinea accounted for more than 95% of its total rice exports to all markets. Thinh Rice has been known for contributing an important role in supplying Japonica to SunRice.

 

2018 also marked an important milestone in the institutional changes. After many petitions on the amendment of Decree No.109, the Ministry of Industry and Trade promulgated Decree No.107 with important changes unexpectedly. Decree No.107 has greatly reduced administrative interventions for enterprises on export registration procedures, reports on export contract information as well as the export floor price mechanism of the Vietnam Food Association (VFA). Investment requirements in the rice export industry such as processing capacity, warehousing capacity, etc. are also alleviated, making it easier to invest in the rice export industry.

 

2018 is also the election year for a new term of the VFA. The new context of Decree No.107 replacing Decree No.109 in the direction of expanding the open mechanism for enterprises to develop, reducing the role of intervention and supervision of the VFA will create new development opportunities and challenges for the VFA.

 

In 2018, VNF2, a leading rice enterprise, started being equitized. This change will have a profound impact on the long-term development of the rice export industry. The operating mechanism of joint stock company considering its profit as the most important criterion rather than a state-owned enterprise considering the profit and helping of the State to regulate the market as a criterion will result in fundamental changes for VNF2 itself about the organizational structure, competitive strategy, and thereby affecting the domestic market as well as international transactions.

 

The institutional changes also took place not only within Vietnam’s rice export industry but also in important markets. The Philippines, after opening the G2P public tenders in 2017, continued to open its G2P tenders in 2018. The Philippines also planned to revise the NFA’s role in the direction of reducing the import control, strengthening the wider participation of the private sector in imports of rice and proceed to impose rice import tariffs. Bulog also implemented the government-to-government importation and in 2018, in addition to Vietnam and Thailand, Bulog also imported rice from Pakistan and India. Meanwhile, the return of President Mahathir Mohamad prompted Malaysia to reform its rice import mechanism towards reducing Bernas’s power in parallel with strengthening the anti-smuggling of rice so that Malaysia is not a transition place of rice smugglers on the way to the Philippines.

 

What will shape the outlook on the rice market in 2019?

 

In 2018, prices of paddies, rice in Vietnam were higher compared to the rivals. It is very hard to sustain the price level of 2018 in 2019 unless there is soared demand. The outlook on Vietnam’s rice exports in 2019 will be shaped based on some major trends as follows:

 

  • Rice prices of Vietnam will likely go down in 2019 so that Vietnam can compete with large rivals such as Thailand to export rice especially IR 50404 (long-grain white rice).

 

  • The import demand of China will remain weak for a long time in 2019 because of China’s glutinous rice import tariff imposed in mid-2018 and measures, challenging Vietnam’s rice exports in late 2018. Glutinous rice, OM 5451 and ST21, rice varieties often imported a lot by China will not have a bright outlook.

 

  • We are concerned about Iraq’s demand as at the end of 2018, Iraq signed an agreement with the United States to import rice from this market in the first half of 2019.

 

  • The import demand for IR 50404 in 2019 is very likely to decrease as the demand of the NFA/Philippines and Bulog/Indonesia will not be as strong as in 2018. Meanwhile, the good prices in 2018 encouraged farmers to expand 2018/19 Winter-Spring IR 50404 rice area.

 

 

  • There will be a big change in the demand of the Philippines as the country will tend to boost imports of better-quality milled rice compared to the rice varieties selected by the NFA before.

 

  • 2018 was a very hard year for Jasmine rice exports. It is very likely that in 2019, Jasmine rice exports will have a similar trend or be revised up slightly compared to 2018.

 

  • The market of Japonica will be hard to thrive in 2019 because in 2018, Vietnam exported a large amount of Japonica to Korea (Republic) in its rice tender structure. It is said that exports of Japonica (DS1) of Vietnam may be difficult in 2019.

 

  • Dai Thom 8 will remain an important rice variety among the group of exported fragrant rice.

 

In our Vietnam Rice Annual Rice Report 2018 and Outlook for 2019, we would like to note you at some points as follows:

 

  • Our analyses on the rice supply-demand balance of key varieties such as IR 50404, Jasmine, Glutinous rice and Japonica continued to be carried out with revised estimates on the rice export volume compared to the official data. Indicators of the supply-demand balance including production, consumption, exports through official channel, exports through unofficial channel (border trade) and stocks are monthly analyzed.

 

  • We supplemented the contents of Rice area share – Yield – Quality by crop and the paddy market developments by rice variety of Mekong River Delta in 2018.

 

  • Some official data on rice exports were revised to reflect the reality more accurately. Our consultations with rice traders/exporters as well as supplying warehouses have helped us revise the data on exports of Jasmine, Japonica or Dai Thom 8.

 

  • The estimated data on rice flow to the North in 2017 were also revised down and there started to be new ways of estimating rice flow to the North in 2018 to more accurately reflect the rice flow from the South to the North and border trade.

 

Some data on rice exports of enterprises should be considered carefully. The characteristics of the rice industry in terms of export supply, the entrust for delivery to a third party due to no export license have made the export volume of enterprises recorded reflect incorrectly the real power of some enterprises. There are “anonymous” enterprises having a modest rating in the list of top exporters but they have a much larger export scale and play a more important role in the export market.

 

TABLE OF CONTENTS

 

LIST OF TABLES     9

LIST OF FIGURES   14

LIST OF PHOTOS     15

LIST OF BOXES       19

EXECUTIVE SUMMARY   20

PART 1: WORLD RICE MARKET IN 2018 & OUTLOOK FOR 2019    27

1. World rice production, trade and stocks    27

2. World rice prices in 2018    34

2.1. Export rice prices of Thailand in 2018     35

2.2. Export rice prices of India and Pakistan in 2018 38

3. Outlook on world rice market in 2019        39

PART 2: RICE PRODUCTION OF VIETNAM AND MEKONG RIVER DELTA IN 2018       43

1. Rice production of Vietnam and Mekong River Delta in 2018 and the plan for 2019      43

1.1. Nationwide rice production by crop        43

1.2. Rice production of Mekong River Delta by crop            45

2. Rice area structure of Mekong River Delta in 2018           48

2.1. Rice area structure by crop          48

2.2. Yield and quality of rice varieties for exports     57

PART 3: RICE SUPPLY-DEMAND BALANCE OF MEKONG RIVER DELTA IN 2018 AND OUTLOOK FOR VIETNAM’S RICE EXPORTS IN 2019         65

1. Rice supply-demand of Mekong River Delta by rice variety in 2018        65

1.1. IR 50404 rice supply-demand balance    65

1.2. Jasmine rice supply-demand balance       67

1.3. OM 5451 rice supply-demand balance    70

1.4. Glutinous rice supply-demand balance    72

1.5. Japonica rice supply-demand balance      75

2. Outlook on Vietnam’s rice exports in 2019            77

2.1. Outlook on key export markets and exported rice varieties of Vietnam in 2019            77

2.2. IR 50404 rice supply-demand balance of Mekong River Delta in 2019 82

2.3. Jasmine rice supply-demand balance of Mekong River Delta in 2019    83

2.4. OM 5451 rice supply-demand balance of Mekong River Delta in 2019 84

2.5. Glutinous rice supply-demand balance of Mekong River Delta in 2019 85

2.6. Japonica rice supply-demand balance of Mekong River Delta in 2019   86

PART 4: PADDY MARKET OF MEKONG RIVER DELTA IN 2018     87

1. IR 50404     87

2. OM 5451     91

3. Jasmine        95

4. Dai Thom 8 98

5. Nang Hoa    102

6. RVT/ST21   104

7. Japonica      105

8. Glutinous rice          108

PART 5: RICE EXPORTS OF VIETNAM IN 2018            112

1. Export rice prices of Vietnam in 2018        112

2. Exports through official channel    115

3. Exports through unofficial channel (border trade) 116

4. Total revised exports           118

5. Rice export markets of Vietnam     118

6. Vietnam’s rice exports by rice variety/grade          129

6.1. IR 50404  132

6.2. OM 5451  143

6.3. Glutinous rice       146

6.4. Fragrant rice         149

6.5. Japonica               160

PART 6: RICE EXPORTING-IMPORTING ENTERPRISES        163

1. Top exporting enterprises    163

1.1. Top exporting enterprises 163

1.2. Dominance of top rice exporting enterprises       165

1.3. Changes in rank of top 10 rice exporting enterprises       165

2. Top importing enterprises   166

2.1. Top importing enterprises 166

2.2. Dominance of top importing enterprises  168

2.3. Changes in rank of top 10 importing enterprises 168

PART 7: RICE FLOW TO THE NORTH AND BORDER TRADE           169

1. Channels of rice for shipments to the North           169

2. Rice varieties           175

PART 8: CAMBODIAN PADDIES, RICE DELIVERED TO MEKONG RIVER DETLA        180

1. Varieties      185

2. Paddy quality          186

3. Fresh paddy prices  188

4. Rice delivered from Vietnam to Cambodia            189

PART 9: INTERNATIONAL TENDERS IN 2018  194

1. Korea’s tenders       194

1.1. The 72,800-ton-rice tender (April 26, 2018)        194

1.2. The 102,800-ton-rice tender (June 23, 2018)       195

1.3. The 92,700-ton-rice tender (August 26, 2018)    195

1.4. The 25,200-ton-rice tender (December 5, 2018)  196

1.5. The 189,700-ton-rice tender (December 13, 2018)          197

1.6. The 82,900-ton-rice tender (December 21, 2018)            199

1.7. The 45,300-ton-rice tender (December 28, 2018)            201

2. The Philippines’ tenders      201

2.1. The G2G tender for 250 thousand tons (15% brokens and 25% brokens) (April 2018) 201

2.2. The G2P tender for 250 thousand tons of 25% brokens (May 22, 2018)           202

2.3. The G2P tender for 250 thousand tons of 25% brokens (October 18, 2018)      203

2.4. The G2P tender for 500 thousand tons of 25% brokens (November 20, 2018)  203

2.5. The G2G tender for 203 thousand tons of 25% brokens (November 28, 2018) 206

3. Transactions with Bulog/Indonesia 208

3.1. The tender for 346 thousand tons of 5% brokens and 15% brokens on January 10, 2018         208

3.2. The import contract for 55.6 thousand tons of 5% brokens and 15% brokens with Vietnam                            209

3.3. The import contract for 300 thousand tons of 15% brokens with Vietnam        209

3.4. The import contract for 200 thousand tons of 15% brokens with Vietnam        210

4. Tender of Egypt (GASC)   210

PART 10: ANALYSIS ON RICE SECTOR STRUCTURE            212

1. Rice value chain in Mekong River Delta    212

1.1. Farmers                212

1.2. Traders (merchants)         213

1.3. Processing and exporting enterprises       213

1.4. The Vietnam Food Association (VFA)   213

1.5. Ministry of Industry and Trade   214

1.6. Ministry of Agriculture and Rural Development 214

1.7. Banks                   215

2. SWOT analysis for rice sector        215

2.1. Strengths  215

2.2. Weaknesses          216

2.3. Opportunities       216

2.4. Threats     216

PART 11: APPENDICES      217

Appendix 1: Rice vessels at Saigon port and Hai Phong port            217

Appendix 1.1: Rice vessels at Saigon port     217

Appendix 1.2: Rice vessels at Hai Phong port           233

Appendix 1.3: Rice vessels at My Thoi port   240

Appendix 2: Basis for revising exports by market and variety/grade for the first 9 months of 2018            248

Appendix 3: Rice market highlights in 2018  256

Appendix 4: Concepts and terms of rice industry      264

Appendix 5: Policy documents affecting the rice industry in 2018 272

 

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