demand and supply of the vietnamese rice market

COLLEGE OF BUSINESS MAJOR: BUSINESS ADMINISTRATION Essay: DEMAND AND SUPPLY OF THE VIETNAMESE RICE MARKET Group Members: - Dinh Hoang Anh - Truong Dinh Manh Duy - Phan Tan Anh Khoa - Nguyen Tran Bao Thien - Nguyen Van Trung Group Table of Contents INTRODUCTION DEMAND AND SUPPLY OF THE VIETNAM RICE MARKET I Theoretical background Demand of goods Supply of goods Market equilibrium: II Empirical evidences VietNam's agricultural in recent years Advantages Disadvantages III The general situation of VietNam's rice export: CONCLUSION 12 Group Introduction _ Agriculture is a vital economic industry and a source of employment in Viet Nam, contributing significantly to the country's GDP and providing employment to the majority of the population Our country is still primarily agricultural in nature After China, we are ranked second in the world Agricultural items, particularly food crops like as rice and maize, make significant contributions to the economy due to their diversity and abundance of high-quality, low-cost products The number of agricultural exports, particularly rice, is steadily expanding year after year, bringing in significant revenue to the government Agricultural items, particularly food crops like as rice and maize, make significant contributions to the economy due to their diversity and abundance of high-quality, low-cost products The number of agricultural exports, particularly rice, is steadily expanding year after year, bringing in significant revenue to the government However, we need not be frightened if the economy experiences several ups and downs in 2012, hurting the entire world's agriculture That is also true in our own country, Viet Nam Agriculture in our country is likewise beset by problems: The rising USD price, along with the ever-increasing price of gasoline, has had a significant impact on agricultural product output and production: staple commodities such as rice, rubber, coffee, coconut, and so on have all experienced price drops, making production and export difficult The topic "Demand and Supply of the VietNamese Rice Market" was chosen by a group of three of us based on the practical role and impacts of rice on people's lives as well as the development of the country's economy We addressed this topic together in order to have a better grasp of the characteristics as well as price variations, as well as the evolution of the rice market over time Group DEMAND AND SUPPLY OF THE VIETNAM RICE MARKET _ Chapter I Theoretical background Demand of goods: The definition: The demand of goods is the number of productions and services that buyers are affordable and they willing to buy at any price in a certain period of time The quantity of Demand (Qd) is the number of productions and services that buyers are willing to buy and affordable at the given Price in the time There are factors that affect the Demand of goods including: +) The income of buyers: This is an important factor, which affect the quantity of Demand in a certain time Incomes affect directly to the ability of buying of consumers When incomes rise, the ability of buying also rises and either the consumers’ demand, the reverse is also true +) Changes in price of related good: Demand of goods is not only rely on the price of its’ own but also depend on other related goods When the sales of a shop fall also leads to the fall in other goods’ demand, we called them “substitutes“  Substitutes usually a concept of similar products which can be used in place of another  Substitutes play an important part in the marketplace and are considered a benefit for consumers They provide more choices for consumers, who are then better able to satisfy their needs such as: fuel, moto, cars, computers +) Tastes and preferences of consumers: When we like something obviously we would go for it at any price! On the other hand, the quantity Demand for the productions that we are not used to is low However, the act of researching the trends of consuming a product is complex for the reason that tastes and preferences are not visible Hence, economists have put a theory: If demand remains unchanged or its’ change happens slowly then demand is independent to other factors of supply +) Consumers’ expectations with regard to future prices: Our expectations for the forthcoming market may impact the demand in reality Moreover, if we expect a price of one good will fall in the future so we wouldn’t buy it now +) The numbers of consumers in the market: This factor plays such a core in the function of demand When the popularity rise so does the demand of goods goes up, especially for the essential commodities that it would rise to any price due to the change in number of consumers +) Government policies: Government’s legislations at times have a strong impact to the incomes of consumers and the price of productions and services Hence, affecting the demand of goods either The law of demand: The demand for goods and services have a negative-correlated to price of goods (P) If the price of goods falls, other factors doesn’t change then consumers will buy more and the reverse is also true Group We can sum up that: P ↑ ➔ Qd ↓ P ↓ ➔ Qd ↑ Supply of goods: The supply of goods show the quantity of productions or services that the producers are able to sell and willing to sell at any different prices in a certain period of time The quantity of supply (Qs) is the numbers of goods and services that the sellers willing to sell and they have the right to sell at any prices at times Factors that affect the supply of goods: (1) The market prices: Market prices is one of the top factors reflect the numbers of productions that a company can produce and supply If the price goes up (other factors remain unchanged) then the business will gain higher profit when selling their productions (2) Cost of productions: To produce a good, businesses have to use inputs such as: employment, technology, factory, materials… If the price of any inputs rises then it will lead to the fall of profit per good In this case businesses must cut the quantity they produce and the supply to the market will fall, eventually Remaining in the upstream elements decreases, the profit per unit product will increase from which enterprises can expand production scale, increase supply to the market (3) Technology: In nowadays civilized world technology is the element that influents the supply most affectively A closed production line with cutting edge lines will increment labor efficiency, production costs will be lower, the quality will be higher, from which businesses will make more profits and the sum of items they will supply to the market increased (4) Expectations: The amount of products a commerce offers to the market nowadays can too be affected by its desires within the future In case it is anticipated that the selling price of items within the close future will increase, the endeavor will store a portion within the stockroom (not offer), the supply of items on the market will too diminish (5) Government policies: Government policies will too have a certain impact on supply, such as high charges causing input costs to extend, corporate profits to diminish, from which businesses will decrease production scale, making market supply less costly, market field is diminished When the government has numerous charge incentives, businesses will increase their profits, in this manner creating more and the supply within the market is additionally more plenteous The law of supply: The supply of goods have a positive – correlated with price, if the price rises and other factors remain unchanged the business will provide more and the reverse is also true We can sum up that: P ↑ ➔ Qs ↑ P ↓ ➔ Qs ↓ Group 3 Market equilibrium: Market equilibrium is an economic state where the supply and demand curves intersect and suppliers produce exactly the amount of products and services that consumers are willing and able to consume Market equilibrium may be a state where the amount of products and services that buyers are willing and able to purchase is precisely rise to to the amount of products and services that sellers are willing and able to sell At market harmony, the equilibrium cost is determined The equilibrium cost may moreover be called the cost that equilibrates supply and demand since at this cost everybody within the market is satisfied Buyers bought everything they needed to purchase, and sellers sold everything they needed to offer The change in market equilibrium: The market equilibrium will be broken when the supply curve or demand curve or even both shift The price and quantity will change until it generate a new market equilibrium, when there is no impact to change the price There are circumstances:  The supply curve shift, demand curve remain unchanged: The chart outlines the case of a alter in equilibrium within the motorcycle market since supply increases when the Government subsidizes production, coming about in a diminish in equilibrium price and an increase in equilibrium quantity On the other hand, in case within the rice advertise, severe climate causes a diminish in supply, the supply curve will shift to the left, causing the equilibrium cost to extend and the equilibrium quantity to diminish  The demand curve shifts, supply curve remain unchanged: The chart outlines the case where the alter in equilibrium within the Dove scented soap market after a tv commercial increases request, the demand curve shifts to the right causing the equilibrium price to extend and the equilibrium quantity to increase Alternately, in case within the bike market when buyer wage desires drop, the demand curve shifts to the left, causing the equilibrium cost to diminish and the equilibrium quantity to diminish Group  Demand curve and Supply curve both shift: The figure illustrates the case where both the supply and demand curves shift On the chart, the supply curve shifts to the left and the demand curve shifts to the left either In this case we know for beyond any doubt the alter in quantity, that the equilibrium quantity diminishes, but the equilibrium price can increase, diminish or remain the same depending on the changing relationship between supply and demand We can moreover outline three other cases: both supply and demand increase; supply diminishes demand increases and supply increases demand diminishes so that changes in equilibrium cost and equilibrium quantity can be seen Chapter II Empirical evidences Vietnam's agricultural in recent years In the third quarter of 2021, the country's winter-spring rice yield this year reached 68.6 quintals/ha, an increase of 2.2 quintals/ha compared to the winter-spring crop in 2020, the output reached 20.63 million tons, an increase of 755.1 thousand tons The share of agriculture in the economy has declined in recent years, while other economic sectors have increased In 2020, about 35.4% of employees will work in the fields of agriculture, forestry, and fishery Agricultural export output accounted for about 23.54% in the first nine months of 2021 The liberalization of agricultural production, especially rice production, has helped Vietnam become the second country in the world in terms of rice exports Other important agricultural products are coffee, cotton yarn, peanuts, rubber, sugar, and tea According to a report of the Ministry of Agriculture and Rural Development, despite being affected by the Covid-19 pandemic, the total AFF export turnover in the first months of 2021 still increased sharply, exceeding the set plan, achieving a high result of 24.23 billion USD, up 28.2% over the same period in 2020; in which main agricultural products are 10.40 billion USD, up 13.3%; seafood 4.05 billion USD, up 12.5%; forestry products $ 8.7 billion, up 61.5% over the same period last year: Specifically, the export estimate of some agricultural products in June is as following: rice 700 thousand tons, bringing in 362 million USD, coffee reached 825 thousand tons, worth 1.52 billion USD, rubber 70 thousand tons, worth 220 million USD The price of Vietnam's export rice offered for sale on the world market on October 28 remained at $433-437/ton for 5% rice, $408-412/ton for 25% broken rice, and $338-342/ton for rice with 100% broken rice In particular, Vietnam's Jasmine rice is priced at 583-587 USD/ton Group Nearly months ago, the price of summer-autumn rice was around 5,200 VND to 5,400 VND/kg, although the Vietnam Food Association (VFA) was purchased and temporarily stored by the Government, the price still did not increase When VFA bought to fulfill the temporary storage target , the rice price jumped to 7,500 VND / kg With the unusual fluctuations of the market , the government is currently having many policies to stabilize the prices of agricultural products in Vietnam Advantages - Favorable natural conditions help: + Diversifying agricultural products + Applying measures of intensive farming, increasing the crop, shifting the crop structure + Basing on the terrain, the land has different forms of cultivation - Investment in agricultural science and technology, combined with the acquisition and application of scientific and technological achievements in rice of countries in the region and the world are increasing - The system of mechanisms and policies of the State to encourages and creates conditions for the development of agricultural production - Vietnam has joined the WTO, this is a great opportunity to create favorable conditions for rice and other agricultural products to have equal rights to participate in the world's agricultural trade market - Our country is effectively exploiting tropical agriculture: + Focused mainly on two factors: soil and climate In agriculture, people still have a saying: “What kind of land does that plant or potato plant strange fields?” and “Until March, when the rice flowers fall, apply sesame seeds” + In the past, our ancestors had learned from such experiences and today, the distribution of crops and livestock is more and more noticed by economic efficiency Disadvantages - Irrational structure of agricultural production: The structure of agricultural products has not been suitable with market demand and with effective exploitation and use of land and water resources for production, high distribution, productivity and quality of crops and livestock are still low - Strong and sustainable agricultural product value chains have not yet been established: The objective and subjective factors for the creation and development of the agricultural commodity value chain are very primitive and have not been fully formed; popularizing the lack of organic linkage mechanism between agricultural production and processing , packaging and consumption of agricultural products; The policy to encourage the production and consumption of agricultural products through contracts under the Prime Minister's Decision No 80/2002/QD-TTg dated June 24, Group 2002 is not strong enough to create close links between farmers and businesses and agribusiness organizations - Policies to support the development of domestic production have not created a strong enough incentive to overcome the current weakness of agricultural production Specifically: + Policy on agricultural land has not been directed towards the same level of concentrated agricultural production areas has not yet promoted the creation of large-scale production units; + Policies to support taxes, freight, and other fees have not been fully applied and are not attractive to investors to invest in agricultural business; + Preferential credit policy in terms of loan amount, lending conditions, and loan period is not flexible to effectively support large-scale production of goods + The investment policy is also not large enough to create infrastructure to meet the requirements of large-scale commodity agricultural production development, especially infrastructure in concentrated production areas of industrial crops, fruit trees, etc large cattle breeding areas + The policy on development of agricultural human resources is slow to be implemented and is ignored, making agricultural human resources unable to meet the requirements of modern production, being cooperative and strictly complying with regulations on hygiene and safety food safety according to WTO commitments; + Agricultural science and technology policies have not had enough impact to improve productivity, quality and competitiveness of agricultural products Many agricultural product industries such as split, mulberry, vegetables, fruits, poultry and pig raising lack competitive technology in breed, cultivation and harvesting processes which limit the value enhancement increase - Other weaknesses: + The industry has not yet focused on serving the needs of suitable machinery and equipment with high labor productivity in agriculture Most of post-harvest and agricultural product processing equipment must be imported at high prices and there is no service manual or warranty, causing many difficulties for agricultural producers + The quality control system for agricultural products and agricultural inputs has not yet been established to create a healthy market for agricultural products and agricultural inputs The backlog of residues of pesticides, antibiotics banned from being used in agricultural products, and the status of harmful agricultural materials without instructions for use, which can be freely imported, are common causing many difficulties and pressing difficulties for agricultural producers and consumers about the situation of reduced quality goods, which not meet the requirements for quality and safety for health Group Chapter III The general situation of Vietnam's rice export: - Affected by the 4th Covid-19 wave, there is a drop in strength Vietnam's export price has fallen to the lowest level in the past year Data number: - According to statistics from Reuters on August 10, the price of 5% broken parboiled rice at the world's leading exporter, India, decreased by 354 - 358 USD/ton last week; The price of ThaiLand 5% broken rice increased slightly from 385 - 408 USD/ton in the last week of July, the lowest level since years - Meanwhile, Vietnam's (VN) 5% rice price was unchanged, staying at 390 USD/ton last week the lowest level since February 2020 So that the same time of this year with the price as a center averaged 485 USD/ton, rice came in at nearly 100 USD/ton lower - On August 10, the price of rice purchased in a number of provinces in the Mekong Delta region went sideways after a period of reduction in the depth of the impact on Covid-19 services, unfinished trading and production activities Specifically, the price of IR50404 rice is purchased from 4,600 5,000 VND/kg, OM 9582 rice is priced at 4,600 - 4,900 VND/kg, OM 6976 is priced at 5,100 - 5,200 VND/kg, ST24 is from 6,100 - 6,200 VND/kg At the same time in this year's crop, the price of rice purchased this year is about 1,000 VND/kg lower - In the first months of 2021, Vietnam's rice industry grew in production due to favorable weather and a number of trade agreements opening up advantages and export prospects for rice In addition, the complicated developments of the global COVID-19 epidemic may make the demand for food consumption and food reserves expected to remain high By May 2021, before the COVID-19 epidemic occurred, the situation of domestic rice consumption and export market was stable Accumulated rice exports in the first months of 2021 reached 2,598 million tons, worth 1.410 billion USD, compared with the same period in quantity decreased by 15.39%, compared with value decreased by 5.31% The average export price reached 542.81 USD/ton, up 57.74 USD/ton over the same period last year - However, from the beginning of June 2021 until now, when the COVID-19 epidemic spread throughout the southern provinces, traveling to harvest, transport and consume rice for the summerautumn crop with an area of nearly 1,780 thousand with an estimated output of 10,152 thousand tons, faced many difficulties and challenges In the condition of applying Directive 16 of the Prime Minister, continuously for many months, the ability to move people and equipment, and transport agricultural products between provinces bordering the provinces are hindered by many obstacles regulations on epidemic prevention such as rapid testing, PCR testing, isolation so the lack of businesses, traders purchasing the same means and workers involved in harvesting and transporting Group to the place of consumption On the other hand, the purchase price of fresh rice decreased from 500 to 800 VND/kg compared to the same period last year Evaluation: - According to the Ministry of Industry and Trade, import and export activities may be negatively affected because the world and Southeast Asia are the epicenter of the epidemic, with the number of new Covid-19 infections rapidly increasing Domestically, the Covid-19 epidemic broke out in many localities which are large commodity production areas, have the largest scale of import and export turnover of the country, and the implementation of "social distancing" under Directive 16 has disrupted the process of circulation and transportation of goods In addition, the lack of empty containers and high freight rates are also obstacles for import and export activities in the last months of this year - Mr Nguyen Van Don, Director of Viet Hung Co., Ltd (Tien Giang), said that the price of rice purchased to reduce the world price of rice decreased The amount of rice that companies have not been able to export is very large, so many businesses not buy it anymore Reason: - So even though the price of rice bought in the market today is 1,000 VND/kg lower than the same time last year, the company did not buy it “There are two reasons that are causing the situation of the rice production and export market to slow down and decrease sharply, which are: + Output is too slow due to high prices Vietnam's 504 white rice now offers a higher price than the same type of Thailand Due to the impact of the Covid-19 outbreak, Thailand's export prices for many agricultural products have dropped significantly, including rice So many customers flock to buy Thai rice instead + The epidemic situation in the southern region is too severe, production activities with the criteria of "3 on the spot", who stays where they are makes the rice market in the growing season but quiet The mill was closed, and it was too difficult to move rice from one province to another Economic forecast: - The recently published USDA May 2021 Global Rice Situation Report for 2022 forecast that global rice production in the 2021-2022 crop year will reach a record 505.4 million tonnes (rice milling), an increase of 1.9 million tons compared to the crop year 2020-2021 And the countries that account for most of the increase in rice production include Bangladesh, Malaysia, Cambodia, China, Ivory Coast, South Korea, Paraguay, Taiwan, and Thailand In contrast, Colombia, Ecuador, India, Iraq, Madagascar, Philippines, Sri Lanka, the US and Vietnam are forecast to have lower output in the 2021-2022 crop year 10 Group - The Department of Crop Production (Ministry of Agriculture and Rural Development) said that in the Southern provinces, it is estimated that the rice seeding in October 2021 will harvest rice in January 2022 At this time, businesses The industry is at the end of the year, with limited operations with a sudden increase in the amount of commodity rice It is estimated that about million tons of rice, equivalent to million tons of rice, need to be consumed IV Solution of - Solution 1: Accept rapid tests at hamlets and communes, register information and travel schedules with state management agencies in hamlets and communes, etc get on the boat Particular consideration should be given to giving priority to "green channel" manure (quick testing at the quarantine checkpoint on the river) for vehicles transporting fresh rice from the field to the satellite drying plant system in the nearest area (same commune, district) to ensure the required quality of stored paddy - Particularly, the transportation of paddy and rice between factories that are not located in the same province or from the factory to export ports and domestic consumption areas is in great demand: Quarantine checkpoints on major rivers in areas bordering It is necessary to arrange an accompanying testing facility within the nearest distance to meet the testing needs of public transport during longterm inter-provincial transportation - Solution 2: in case the trader agrees to support the provision of rapid testing kits for checkpoints on the river, when the merchant's boats and barges move through, it is recommended that the staff responsible for the checkpoints proceed rapid testing and passport stamps for vehicles to take advantage of moving forward - For this option, it is suggested that local leaders give flexible direction, only requiring a certificate of negative for COVID-19 (PCR) when the vehicle leaves the wharf, ashore (first point) and during the transportation process River travelers are allowed to use the certificate of rapid test at the checkpoints to pass to the next checkpoint as well as to dock at the shore (end point) of the route; send key personnel to quick training at the nearest functional health agencies to meet working needs - In addition, rice businesses need to refer to the experience of supermarket systems and businesses to stabilize the market to take the initiative in removing difficulties and obstacles in the domestic circulation and distribution of goods The Special Working Group of the Ministry of Industry and Trade also suggested businesses to directly contact the units, departments, agencies of the Department of Industry and Trade, ministries, branches and local authorities when having difficulties and need support 11 Group CONCLUSION In conclusion, based on the study of articles and some of the case studies or research empirically, I believe that the demand of rice in Viet Nam is dependent on few factors such as areas whether urban or rural, this will indicate the lifestyle changes of the society mainly on the concentrated cities such as Ho Chi Minh, Ha Noi and Da Nang Consumer tends to consume more meat due to the change in quality of living Consumer prefers to dine in a nice ambience restaurant around the cities with attractive western cuisine offered to all their customers In cities with lost of development, I found that people who are working in the cities where development is highly concentrated then most of the people has a higher income level compared to the rural areas (b) Consumer are more healthy conscious (reduce in taking carbohydrates food such as rice substitute it by cereal which has more fiber concentrated) However, rice is still a major staple food in Viet Nam in which studies from the past had shown that the demand of rice is inelastic The result concluded that consumer is not price sensitive in comparatively to income This further concludes that rice is still a necessity despite the price had increased over the years Furthermore, it is proven and further supported by the fact that Viet Nam government had further increase their focus in term of investment such as subsidies to the increase in rice productivity The price ceiling of rice is also controlled down by Government even with the increase of price internationally due the cost increase in production due to globalization and technology emergence prior to innovation as not to further burden the consumer and local suppliers Finally, I will like to summarize my findings that more local researchers need to constantly details analysis studies on the demand and supply of rice in Viet Nam This is to ensure that in the future, we could help come out with the statistic analysis of the studies up-to-date in term of price, income, elasticities based on supply and demand in order to help the government to reduce their subsidies on rice productivity in country due to globalization or competition pressure from larger international rice exporter such as China which is offering a lower cost for their rice supplies The fact that recently VietNam had diversified a lot more investment and increase trading with China, Malaysia, Philippines, 12 ... as the evolution of the rice market over time Group DEMAND AND SUPPLY OF THE VIETNAM RICE MARKET _ Chapter I Theoretical background Demand of goods: The definition: The demand of goods is the. .. affecting the demand of goods either The law of demand: The demand for goods and services have a negative-correlated to price of goods (P) If the price of goods falls, other factors doesn’t change then... coconut, and so on have all experienced price drops, making production and export difficult The topic "Demand and Supply of the VietNamese Rice Market" was chosen by a group of three of us based on the