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Vietnam's H1 2016 rice exports may edge up despite output fall

Vietnam's H1 2016 rice exports may edge up despite output fall

Vietnam could export more than 3 million tonnes of rice in the first half of 2016, up 12 percent from the previous year, on rising demand from China and other Southeast Asian nations, amid supply concerns caused by drought, the government said on Friday.

Rice shipments in the three months ending June are projected at 1.6 million tonnes, including sales to China, the government reported on its website citing the Vietnam Food Association (VFA).

However, the VFA lowered their projection by 11 percent amid a drought in Vietnam's main rice-growing region, the government said.

Vietnam, the world's third-largest rice exporter after India and Thailand, shipped 1.55 million tonnes of rice in the January to March period, up 38 percent from a year ago, according to Vietnam Customs data released on Wednesday.

The Southeast Asian country has been fighting the worst drought and sea water intrusion in 90 years in its Mekong Delta food basket, brought on by climate change and El Nino weather pattern. The El Nino typically brings hot, dry conditions to Southeast Asia.

The drought conditions have led other countries in the region to bolster rice imports. Late last year, Vietnam sold 1 million tonnes of rice to Indonesia and another 450,000 tonnes to the Philippines for delivery by the end of the first quarter of 2016.

The disasters have lowered the first-quarter growth of Vietnam's agriculture sector, reducing the Delta's winter-spring paddy output while lifting the country's rice export prices to a five-month high in late March.

"Given the relatively high prices, VFA reckons that rice exports could lose their competitive edge and market share in the coming time," the government report said.

Vietnam's paddy output could fall 1.5 percent this year to 44.5 million tonnes due to Mekong Delta's crop losses, while the annual export would be 8.7 million tonnes, unchanged from a previous projection, the U.N. Food and Agriculture Organization (FAO) said in its April rice market report.

BMI Research forecasts global rice production to decline in 2015/2016, the first in seven seasons, and a global rice deficit of 13 million tonnes could emerge for 2015/2016 after consistent surpluses in the crop years from 2005/06 to 2013/14.

Vietnam could follow Thailand to restructure rice cultivation by reducing planting areas and switching to other crops which requires less water, said Le Anh Tuan, deputy head, Research Institute for Climate Change under Can Tho university.

"Scientists and the authority should reassess the direction for Delta and should not race into rice production," Tuan told Reuters.