Prevention of price risks before news that Indonesia increases rice imports in reserve

There is an opportunity when Indonesia increases the need to purchase rice. Source: Internet.

Indonesia imports 2 million tons of rice for national reserve

According to the Import-Export Department, as one of the traditional and key rice import markets of Vietnam, information on policy moves and production situation, the Indonesian rice market will partly have an effect on the rice export activities of Vietnamese traders to this market.

In the first two months of 2023, Indonesia was Vietnam's third-largest rice export market after the Philippines and China.

In particular, the Indonesian Government recently announced some information related to the national rice reserve in 2023. The Indonesian government has decided to import 2 million tons of national reserve rice in 2023, of which 500,000 of tons will be made as soon as possible.

According to the Indonesian Government, the national reserve of imported rice will be used for the program to stabilize rice prices, support rice for 21.53 million poor households and use it for other purposes. The National Logistics Agency-Preum Bulog continues to be designated as the import focal point.

Regarding the national reserve rice in 2023, Indonesia has decided to increase the amount of rice purchased in reserve to 2.4 million tons instead of about 1.2 million tons at present to ensure food security.

Indonesia plans to buy 70% of the total 2.4 million tons of rice during the main harvest (February to April). According to the Indonesian Statistical Office, the country's rice harvest in January-April 2023 was estimated at 23.82 million tons, equivalent to 13.79 million tons of rice, up 0.56% over the same period of 2022.

According to the Indonesian Ministry of Agriculture, in 2023 the country strives to set a target of producing 54.5 million tons of paddies, equivalent to 32.07 million tons of rice, equivalent to the 2022 target. However, the Indonesian Ministry of Agriculture forecasts it is reported that EL Nino phenomenon may occur causing drought in May-July, 2023, so it is likely to affect the area and yield in the July-August crop of 2023.

Although it is in the main harvest season, the situation of purchasing rice for domestic reserves is currently facing many difficulties. According to the National Logistics Agency, this agency has only purchased 60,000 tons while the amount of rice in stock (as of March 25, 2023) is only about 280,000 tons.

Experts said that the difficulty in purchasing stems from the scarcity of domestic supply due to the lower-than-expected rice harvest and the impact of rainy weather in the first months of 2023, the lack of accurate statistics on the planted area as well as the purchasing mechanism fixed inadequate price by the state without following the market mechanism. Meanwhile, the retail price of rice in the market in March 2023 is still trending up.

Market optimism but prevention of price risk

In response to demand signals from key markets such as Indonesia and the Philippines, the Import-Export Department suggested that rice exporters actively monitor the market situation, fully assess opportunities and risks develop a transaction plan, sign appropriate contracts, ensure export efficiency and contribute to the consumption of paddy and commodity rice for farmers at a favorable price. Besides, the plan of preventing risks in price, payment and delivery in the context that the world trade situation is under many impacts.

In addition, the Import-Export Department suggested that rice export traders regularly update the situation to the Vietnam Food Association and the Ministry of Industry and Trade to serve the management of rice export business as well as promptly take measures to support traders.

Regarding rice export and business activities, recently the State Bank of Vietnam (SBV) has issued a written request to credit institutions and branches of the State Bank of provinces and cities in the Mekong Delta region to implement a number of contents to promote lending for purchasing and trading of paddy and rice.

Accordingly, the SBV requires credit institutions to proactively balance, fully ensure and promptly meet capital needs for production, purchasing, processing, and temporary storage of paddy, rice, business and rice export, especially the Winter-Spring harvest in the first months of 2023.

Credit institutions need to step up reforms, simplify internal processes and procedures, shorten loan approval time; diversify appropriate credit products; improve the efficiency of appraisal, and assess customer credit and risk assessment in order to increase secured loans with assets formed from loans or unsecured loans on the basis of managing cash flow; actively work directly with traders, enterprises, rice and rice producers and traders to have solutions to remove difficulties and create favorable conditions for customers in order to access capital for production and purchasing, processing and temporarily storing paddy and rice, especially lending for temporary storage and export of rice.