Updated: Aug 17
Thailand and Vietnam are the world's second and third-largest rice exporting countries, with export values of $3.69 billion and $3.12 billion in 2020, accounting for 15.07% and 12.75% of the total global rice export value, respectively. Additionally, Vietnamese rice and Thailand rice also hold the first and third positions among the countries that export the most rice to the Chinese market.
Rice, a staple food for over 3.5 billion people worldwide, is particularly significant in Asia, Latin America, and parts of Africa. Among them, China stands as the largest rice importer globally, with an import value of $1.46 billion, making up 5.84% of the total global rice import value. As a result, there is fierce competition among rice-exporting countries, including Thailand and Vietnam, in the Chinese market. Statistical data reveals that Vietnam has maintained an advantage over Thailand in terms of export value, export prices, and comparative advantage index in the Chinese rice market since 2011.
Vietnamese Rice and Thailand Rice Prices Soar Following India's Export Ban.
Rice prices in the export hubs of Asia continue to experience a substantial surge this week, driven by the recent export ban imposed by India, the leading rice-exporting nation. The ban has raised concerns about the global supply of this essential staple food.
Since India's effective ban on non-basmati white rice exports in July 2023, the prices of rice from Vietnam and Thailand have surged by nearly 20%. Specifically, Vietnam's 5% broken rice is being sold at a range of $620 to $630 per metric ton, marking the highest level since July 2008. This price surge is notably higher than the range of $590 to $600 per metric ton observed in the previous week.
Vietnam Emerges as Largest Rice Exporter to China.
Vietnam has taken the lead as the largest rice exporter to China, propelled by China's decision to nearly double its rice imports from Vietnam in the first four months of this year. China's shift from its Zero COVID policy to reopening its economy has significantly impacted trade dynamics, resulting in Vietnam's ascendancy as the primary rice supplier to China.
According to data from China's Customs, the country imported 1.36 million metric tons of rice worth $704 million in the first four months of the current year. This marks a decrease of nearly 40% in quantity and 26.5% in value compared to the same period last year. However, rice imports from Vietnam surged dramatically, experiencing a 93.2% increase in quantity and a 116% increase in value, reaching 445,237 metric tons worth $260 million. With these figures, Vietnam has now firmly secured its position as the largest rice exporter to China in the first four months of 2023, surpassing other competitors such as Myanmar, India, and Thailand.
Statistics from the General Department of Vietnam Customs indicate that China stands as the second-largest rice export market for Vietnam, trailing only the Philippines. Vietnam's rice exports to China in the first four months of 2023 reached 507,066 metric tons, the highest level in the past five years, accounting for 17.5% of the country's total rice export volume.
This shift in trade dynamics underscores the pivotal role that Vietnam now plays in supplying China's rice demand and highlights the adaptability and competitiveness of Vietnam's rice industry on the global stage.
Competitive Edge through Affordability and Freshness.
After years of dedicated efforts, Vietnamese farmers, the agricultural sector, and businesses have managed to introduce certain rice varieties priced higher than Thai rice, a feat previously unseen. Among these, several Vietnamese rice varieties of the same type as Thai rice have demonstrated a heightened level of competitiveness. Many of these Vietnamese rice types are priced higher, causing Thai traders to be concerned about losing market share due to the competitive edge of Vietnamese rice.
Traditionally, Thai businesses purchase rice from farmers during the main harvest season, then process and gradually export it from storage. In contrast, in Vietnam, due to flexible harvest seasons, businesses buy rice directly from farmers, process it, and promptly export it. As a result, Vietnamese rice is notably fresher than Thai rice. Currently, both Vietnam and Thailand produce similar rice types, including fragrant rice, white rice, sticky rice, long-grain rice, medium-grain rice, short-grain rice, etc. These countries share similarities in terms of rice quality, diversity, and renowned brands. Both nations have products that have won prestigious awards in reputable global competitions.
The competition between Vietnam and Thailand in the rice market extends beyond just product types; it's also about factors like affordability and freshness. The adaptability of Vietnam's approach, its swift processing, and focus on immediate exports provide a competitive advantage, making Vietnamese rice a sought-after choice. This shift in the market dynamic underscores Vietnam's progress in the rice industry and its ability to stand strong among global competitors.
Dominating Competitive Advantages in Multiple Markets.
According to a report by the market research firm Research And Markets (USA), there are significant reasons behind the stable development of Vietnam's rice export activities from 2022 to 2031.
The positive impact of the EU-Vietnam Free Trade Agreement (EVFTA) has provided Vietnamese rice with a competitive edge over rivals in the market, such as Indian and Thai rice. Additionally, trade missions have actively promoted the trade of rice products, emphasizing communication efforts and encouraging businesses to import Vietnamese rice to benefit from tariff advantages. "The EVFTA recognizes and safeguards geographical indications for certain types of Vietnamese rice. Rice varieties like ST24 and ST25 have won international awards for their quality. Enterprises can explore introducing these rice types to the Northern European market under the brand 'Vietnamese Specialty Rice'," stated the Vietnamese Trade Mission in Sweden.
The acknowledgment and protection of geographical indications under the EVFTA, coupled with the acclaim garnered by Vietnamese rice varieties, particularly ST24 and ST25, have given Vietnam a competitive advantage in various markets. This recognition paves the way for Vietnamese rice to establish a unique presence, and with strategic trade promotions, it's poised to further strengthen its position on the global rice trade stage.
Establishing Vietnamese Rice as a National Brand.
Minister of Agriculture and Rural Development, Mr Le Minh Hoan, shared, "Vietnamese rice has made its way from common markets to high-end ones, reaching hundreds of countries. It now graces luxurious shelves and political menus. This journey stems from the research and innovation efforts of agricultural scientists, as well as the collaboration and investment of businesses with cooperatives and farmer organizations. It's the story of the '4 houses' – farmers, government, scientists, and enterprises – on the fields. Through this, the value of rice has been elevated through quality, adaptability, and alignment with market trends."
From another perspective, Mr. Do Ha Nam, Vice Chairman of the Vietnam Food Association and Chairman of the Board and CEO of Intimex Group, shared, "While we talk about expanding our market and competing with Thailand, we also need to reconsider. There are products that Thailand produces that we don't and vice versa. Consumers prefer certain products, and our stability lies in catering to that demand. The Philippine market favors Vietnamese rice, so our stability lies there. This shows that it's not just about expanding any market; it's about sustainable expansion in a specific market." Mr. Nam also pointed out that the challenges in the rice industry lie in logistics. Many aromatic rice-producing areas struggle due to high transportation costs, affecting their profitability. How can we overcome this hurdle?
On another note, to penetrate discerning markets, the Vietnamese Trade Mission in Sweden highlights the increasing emphasis on sustainable and responsible production and business practices. This trend encompasses various aspects of the supply chain, including working conditions, water usage, waste management, and more. The acceptance of a business's products in Northern Europe hinges on their adherence to sustainable initiatives.
This multifaceted approach illustrates the concerted efforts of various stakeholders, including farmers, researchers, businesses, and trade missions, to not only establish Vietnamese rice as a premium product but also ensure its continued success in competitive and demanding markets.
Rice export has become a pivotal industry for Vietnam, and China has remained a significant market for Vietnamese rice exports for numerous years. Assessing factors such as export value, export prices, and comparative advantage index, Vietnamese rice has held a competitive edge over Thai rice in the Chinese market since 2011. However, this competitive advantage has gradually diminished compared to Thai rice. To enhance Vietnam's competitive capability in the Chinese rice market, the country needs to implement various solutions, with a particular focus on understanding and complying with China's import regulations for rice. This entails improving overall quality, ensuring quality-assured production processes, adhering to packaging standards, enhancing traceability of export rice's origin, and notably, boosting trade relations with China.