Investing in technology to improve the efficiency of Vietnam's rice value chain

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Investing in technology will create significant opportunities for Vietnam's rice industry to increase its value. Photo: N.H

Risk due to high prices

According to the Ministry of Industry and Trade's estimates, rice exports in Vietnam are projected to reach 700,000 tons in October 2023, equivalent to US$433 million, maintaining the quantity and increasing 27% in value compared to October 2022. In the first ten months of 2023, Vietnam was expected to export approximately 7.1 million tons of rice, worth nearly US$4 billion, reflecting a 17% increase in quantity and a 35% increase in value compared to the same period in 2022.

According to the Vietnam Food Association (VFA), as of November 1, Vietnam's rice export prices have reached their highest level among major rice-exporting countries worldwide, with a price of US$653 per ton for 5% broken rice, while Thai rice is priced at US$560 per ton and Pakistani rice at US$563 per ton. Meanwhile, 25% broken rice from Vietnam is traded at US$638 per ton, Thai rice at US$520 per ton, and Pakistani rice at US$488 per ton.

Talking at the seminar "Solutions to improve the efficiency of Vietnam's rice value chain" held last weekend, Nguyen Viet Anh, the CEO of Phuong Dong Grain Co., Ltd,, stated that the continuous increase in export rice prices in the global market has paralyzed many transactions. As a result, many Philippine companies have shifted to buying Thai rice due to its reasonable prices.

Do Ha Nam, Deputy Chairman of the VFA, also mentioned that the soaring rice prices in Vietnam have led to some companies incurring excessive losses, causing them to cancel contracts, especially those with weak economic capabilities. Larger companies that are close to completing their deliveries have been forced to purchase rice at high prices to fulfill their contracts. This is the primary reason for the sharp increase in rice prices. Moreover, Vietnamese companies are accustomed to signing contracts for remote delivery. At the present time, most of them are buying rice to deliver to their partners.

Based on this situation, Nam believed that excessively high rice prices in Vietnam might not be an advantage. When prices are high, customers tend to seek markets with better prices and rice quality equivalent to Vietnamese rice, especially Thailand, which poses a risk of losing the aromatic rice market (DT8 and OM 5451) to Thailand companies.

Specifically, most tenders from Bulog (the Indonesian National Logistic Agency) were not won by Vietnamese companies due to the high domestic rice prices, and the type of rice Bulog tenders, which is ordinary 5% broken rice, has been currently scarce.

Pham Quang Dieu, the Chief Economist of the Vietnamese Market Analysis and Forecast JSC (Agromonitor), predicted that Vietnam's rice exports this year might reach eight million tons. Therefore, in 2024, the rice inventory will be very thin, and companies need to be extremely cautious when deciding on long-distance delivery contracts; otherwise, there will be significant risks. Besides, it is also worth noting that India may return to the market, leading to a reduction in rice prices. Currently, Vietnamese rice prices are very high, but they are hardly being sold, which also limits the competitiveness of Vietnamese rice compared to other rice-exporting countries.

Attention to technological investment

The recent rice price fluctuations have shown that the potential for increasing the income of farmers and businesses in the rice value chain lies in technology. Investing in technology will reduce losses and ensure the quality of rice remains fresh and delicious, maintaining its quality from harvest to the consumer's table.

According to the United Nations' statistics, agricultural production in Vietnam experiences losses ranging from 14-35%. In this, the rice sector faces around 14% in losses annually. These post-harvest losses occur at all stages, with drying being the most significant loss point. Even though the number of drying machines meets 80-90% of the demand, many drying kilns in Vietnam are not automated and depend on the operator's skills. If the operator lacks skills, the high drying temperature and speed may lead to cracked rice, significantly affecting the company's profits.

A survey of the agricultural sector in Tien Giang also showed that losses due to harvest, drying, and storage not meeting requirements amount to 10.8%. Therefore, in Tien Giang alone, farmers could lose hundreds of billion VND each year. On a national scale, the loss after harvest can reach thousands of billion VND.

Reducing these losses will optimize the costs in the rice processing process, thereby improving the efficiency of producers. Pham Van Tan, former Deputy Director at Southern Institute of Agricultural Engineering and Post-Harvest Technology (SIAEP), proposed several solutions to minimize post-harvest losses. Specifically, in post-harvest technology, solutions should be considered both before and after the harvest. Pre-harvest factors include seed selection, fertilizer, and pesticide use, while post-harvest factors include drying, preservation, and milling. It requires an organization of production, not only within the technological chain but also in the relationships with units involved in the rice supply chain.

For the post-harvest stage, the application of technology in each step to minimize losses and improve the quality of Vietnamese rice is necessary. Simultaneously, there should be a consideration for management organization, which includes enhancing the efficiency of technology, optimizing the effectiveness of technology devices. Additionally, linking farmers with rice processing and exporting companies to better control the quality of rice from the input to output stages, reduce production costs, and increase the efficiency of technology investment.

Jena Vinther Jensen, CEO of Denmark's FTT Agriculture Solutions Company, also emphasized that Vietnamese rice was of high value, but there was untapped potential. Consumers in developed countries demand high uniformity in product quality and product availability on the market, along with the ability to trace the product's origin. Therefore, investing in technology, from post-harvest to storage and drying stages, ensures the best possible quality of Vietnamese rice for both consumption and production.