Evolution and Growth of Vietnam's Rice Industry

Posted in Food by Adolf on Jan 31,2022 672

Located in the south-eastern region of the Indo-Chinese peninsula, Vietnam is a beautiful country with tropical lowlands, hills and dense forests. The country is one of the fastest growing economies, which also offers an enthralling blend of both the old and new culture. Vietnam is rich in rice, tropical crops and aquatic products. It is also a major exporter of agricultural products in Southeast Asia, and the third major exporter of rice in the world. The largest rivers in Vietnam - the Mekong in the south and the Red in the north provide fertile ground to grow rice and many other crops.

Vietnam's Rice Industry export value reached US$3.07 billion in 2020, and the rice has become a bright spot in Vietnam's agricultural products exports. This is a remarkable achievement of the rice industry for many years, especially in the context of natural disasters and COVID-19 epidemic that hit Vietnam's agriculture in 2020 in terms of production and export.

In 2020, Vietnam's total rice production was 42.7 million tons, meeting the demand for domestic consumption, processing, poultry and livestock feed, and export, etc. In 2020, its rice exports grew against the backdrop of a decline in exports of many of Vietnam's long-dominant agricultural products due to the COVID-19 epidemic. Notably, the bright spot of the country’s rice exports was not in terms of production, but in terms of price. According to CRI’s analysis, in 2020, the average price of Vietnam’s rice exports increased by 13%, compared to the same period in 2019, reaching US$496 per ton.

In early December 2020, the price of Vietnam’s rice with 5% crushing was US$493 to US$497 per ton, which is US$20 higher than that of Thai’s rice and US$120 higher than that of Indian rice. This is the highest price in the history of Vietnam's rice exports, indicating that the brand value of Vietnam’s rice has increased significantly.

Since the EU-Vietnam Free Trade Agreement (EVFTA) came into force on August 1, 2020, the rice exports have rapidly seen an upturn. According to EVFTA, the EU provides Vietnam with 80,000 tons of rice for export at 0% tax rate annually (including 30,000 tons of milled rice, 20,000 tons of un-milled rice and 30,000 tons of aromatic rice).

For rice from Vietnam, the EU will reduce the import duty rate to zero in the coming years. Taking advantage of the above, from September 2020, Vietnam started to sell rice to the EU at a much higher price than before. Specifically, before EVFTA came into effect, the prices of ST20 rice and Jasmine rice exported to the EU were US$800 and US$520 per ton, respectively, while now the prices are over US$1000 and US$600 respectively.

There are 3 reasons for the rise in Vietnam’s rice prices 
Firstly, the government issued an agricultural restructuring proposal, by which the rice structure has been strongly adjusted, changing the rice cultivation protocols, i.e., paying more attention to improving rice quality rather than increasing production. Around 2015, Vietnam's quality rice seeds accounted for only 35%-40% of the total seeds, while in 2020 the Chart reached 75%-80%, and even in some places, the usage rate of quality rice seeds is as high as 90%.

Secondly, Vietnam has signed many FTAs such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Europe-Vietnam Free Trade Agreement (EVFTA) with many countries, which creates conditions for a breakthrough in Vietnam's rice exports.

Thirdly, many industries were affected by the COVID-19 epidemic in 2020, but the demand for the food and beverage market has not decreased.

The Jiulong River Plain is the centre of rice cultivation in Vietnam, contributing 50% of rice production and 95% of rice exports to Vietnam's agriculture. In 2020, the Jiulong River Plain cultivated more than 1.5 million hectares of rice per season, with an average yield of 6 tons per hectare and an annual rice production of more than 24 million tons. Furthermore, its winter-spring rice production is expected to reach 10 million tons from 2020 to 2021. Vietnam's rice exports are expected to continue to rise in both volume and value in 2022-2030.

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