Top rice exporter Vietnam is struggling to replenish government reserves after consumers worldwide rushed to secure supplies of the food staple because of the worsening COVID-19 pandemic.
The Southeast Asian nation last month asked local traders to supply rice for state stockpiles, with those offering the lowest prices winning government contracts.
In usual years, traders would be given about three months to buy the rice from farmers and deliver it to the Vietnamese General Department of National Reserves. This year, the novel coronavirus upended those plans, and that could push Vietnam to further tighten rice export restrictions.
Rice prices, in Vietnam and abroad, have surged since the government tendered for supplies, and traders can no longer deliver the rice without making a loss.
Of the 28 traders that won contracts, 24 have either canceled or declined to sign the contracts, department data showed.
Phat Tai is one such company.
The exporter would suffer a loss of 1,500 dong (US$0.06) per kilogram if it fulfills its contract to supply 17,900 tonnes of rice for state reserves, said a company executive, who asked not to be identified discussing a sensitive matter.
That would be a total loss of more than US$1 million.
Similarly, state-owned Vietnam Northern Food Corp, which agreed to supply 4,500 tonnes of rice, has delayed signing the contract, said Au Anh Tuan, head of the division of customs management and supervision at the Vietnamese General Department of Customs, citing data from the reserves department.
A spokesperson for the food company, commonly known as Vinafood 1, declined to comment.
Wholesale prices of low-quality rice in Vietnam have soared to about 10,000 to 10,200 dong per kilogram, a 10-year high.
Thai white rice 5 percent broken, an Asian export benchmark, was last week up 30 percent this year to the highest since 2013.
Commitments for more than 46,000 tonnes of rice have had to be scrapped in the past few days, the reserves department said.
There were just 7,700 tonnes added to state reserves as of Tuesday, only 4 percent of the 190,000 tonnes planned for this year, it said.
Most winning bidders were found to have registered for rice shipments this month due to a turnaround in Vietnam’s rice export strategy, Tuan said.
The country had halted overseas rice sales for nearly three weeks on concerns over food security because of the virus.
On Friday last week, it lifted the suspension, but instead put a limit on how much can be exported.
With prices and the opportunity for profits high, traders rushed to apply for the quota.
Phat Tai has registered to ship more than 13,000 tonnes this month, the executive said.
Meanwhile, Vinafood 1 submitted customs declarations to export 7,200 tonnes this, Tuan said.
Vietnamese officials might try to force traders back to fulfilling the stockpiling target.
The reserves department is to hold another tender for rice soon, its representative said.
The Vietnamese Ministry of Finance, which oversees both departments, has proposed suspending low-quality rice exports until mid-June to ensure that stockpiles targets can be met.
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