assignment subject microeconomics topic examining supply and demand of the rice market and the governments price policy of vietnam in 2023

According to the Ministry of Industry and Trade, in the year 2022, the country’s rice export volume has reached nearly 7.11 million tons, equivalent to over 3.45 billion USD, an increase

ASSIGNMENT SUBJECT: MICROECONOMICS TOPIC: EXAMINING SUPPLY AND DEMAND OF THE RICE MARKET AND THE GOVERNMENT'S PRICE POLICY OF VIETNAM IN 2023

Batch - Class :_ K49 - 23CIECO50109705

Phan Hang Minh 31231027665 Đỗ Minh Anh 31231023722 Phạm Nguyễn Minh Sơn 31231023635 Nguyễn Thị Thanh Xuân 31231023799 Trần Minh Xuân 31231024156

INTRODUCTION Agriculture is an important economic activity and source of employment in Vietnam, contributing considerably to the country's GDP and employing the vast majority of the population Our country's economy is still predominantly agricultural

Agricultural goods, particularly food crops like rice, contribute significantly to the economy due to their diversity and quantity of high-quality, low-cost products Agriculture exports, notably rice, are continuously increasing year after year, generating considerable cash for the

government According to the Ministry of Industry and Trade, in the year 2022, the country’s rice export volume has reached nearly 7.11 million tons, equivalent to over 3.45 billion USD, an

increase of 13.8% in volume and an increase of 5.1% in quantity turnover Compared to 2021, the average price reached 486.2 USD/ton, down 7.7%

There are several difficulties plaguing our country's agriculture in 2023: The India's plan to stop rice exports and the appearance of El Nino Staple commodities like rice have all seen price fluctuations, making production and export challenging

Five of us selected the topic "Demand and Supply of the Vietnamese Rice Market" because of the practical function and effects that rice has in people's lives as well as the nation's economic growth We discussed this subject in order to have a better understanding of the traits, price fluctuations, and long-term development of the rice market

For these reasons, from now until the end of the year, Viet Nam should ensure production and

stabilize the supply of exported rice The authorities also need to take measures to stabilize the market At the same time, factors involved in the rice production, supply, and export chain also need to maintain prestige and responsibility for rice procurement contracts signed in the country and seize the opportunity to boost exports and affirm our country's rice products in the world

market

I Introduction to the topic 1 Reasons to choose the topic:

Rice is one of the world's staple food commodities, feeding about half of the world's population In many countries, rice serves as the main source of calories However, rice prices on the world

market have risen to their highest level in a decade, marking a 14% increase in the last six months

India — the world's biggest rice exporter — has imposed an export ban on non-Basmati white rice, exacerbating food insecurity for many countries The ongoing conflict in Ukraine, which led to Russia's withdrawal from the grain deal, has limited global supplies of wheat and corn, increasing demand for rice as an alternative food The return of the El Nifio phenomenon is also forecasted to exacerbate food insecurity These have raised the concern that disruptions in the global rice trade could exacerbate an already endangered food security situation in many

countries

Sudden changes in global supply or the threat of food insecurity will cause many countries to secure their domestic markets by "shutting down" This makes it more difficult to access world supply and pushes prices even higher According to rice exporters, in recent days, export rice prices have leveled off and the increase and decrease are negligible When export rice prices continuously increase, it leads to a sharp increase in domestic rice and rice prices, affecting the rice supply chain However, the export price of rice in the world has decreased slightly In the general context of the food situation and the trend of restricting rice exports in some countries, the world rice market will still fluctuate in the trend of increasing again These are the conditions that make promoting stable rice trade and signing in new rice export contracts easier

Therefore, Viet Nam has to take suitable measures to hold national food security steady, stabilize

the national rice market price and seize opportunities to maximize the country's profit 2 Objectives and mission of the topic

* Objective: Examining the supply and demand of the rice market and the government's price policy in Vietnam 1n 2023,

Mission: Research the current situation and causes of Vietnam's rice market due to the worldwide situation On the basis of research and theoretical application to analyze and evaluate the current situation, maintain good aspects and propose policy directions to achieve the goal of maintaining a stable domestic rice supply chain and taking advantage of market opportunities to promote Vietnamese rice brand in the world market

3 Subjects of study

The research object is the Vietnamese rice market in terms of domestic production,

consumption, export, investment policy, etc

Content: Research the Vietnam rice market Scope: Focus on researching Vietnam's domestic rice market Time: Analyze and evaluate the current situation of Vietnam's agricultural market in 2023

4 Research Methods: Information collection method: the information in the topic mainly uses the method of collecting data from many sources, such as: Internet; e-books; online newspapers;

reference essays; etc Data processing methods: synthesize descriptive methods; refer to reliable information

sources; present data, evaluate, compare, and synthesize to analyze data 5, Research Content:

The international rice market is experiencing a shortage of supply in 2023 due to the highly volatile and multifaceted state of the rice market This presents a great opportunity for Vietnam's economy as a major exporter of rice to the world However, Viet Nam has encountered many challenges and difficulties with regard to the quantity and quality of rice in order to benefit from exporting it to the world in such circumstances The rice market in Viet Nam has also been more

or less impacted by the world general rice situation; therefore, the Vietnamese government has

implemented regulations with the aim of stabilizing domestic rice prices, supply, and demand while simultaneously making efforts to encourage exports within allowable capacity

6 Scheme Contribution:

Theoretical aspect: ¢ Increase the applicability of supply and demand theory to the international and especially

domestic rice market ¢ Clarify the relationship between factors related to the law of supply and demand in the

research article to illustrate their mutual interaction

Practical aspect: ¢ The study provides valuable insights into the world rice situation in general and the

Vietnamese rice market in particular, along with factors affecting the global rice market « Providing an objective perspective with evidence of data on rice production activities in

Vietnam and rice export to gain more profits from exporting rice to the world in the current context

TABLE OF CONTENTS

L Introduction to the topic cccscssccssssssssssssesscsssssscssnnscesscscensasssnnsecsesesananscessnsnnesesssssseaes 3

1 Reasons to choose the topic: 2 Objectives and mission of the topic

2.1 Determinants of demand: 10

production in Vietnam 13 1.3 Rice export in Vietnam 15 P cv 1v/.00)00)00 0n -á3ä11/jÄẶẦẦĂ 20 2.1 Domestic rice consumption market: Although the world market fluctuates, Vietnam is stable in the consumption market 20 2.2 World rice consumption market: Demand is increasing worldwide cv 20 3 Government”s policy in 202: Q0 2n HH 2101012011112 1110 1011 11 1119111 g1 T1 1xx hưệt 22 3.1 Policy to stabilize domestic rice prices 22 3.2 Vietnamese state policy on export rice: 23 3.3 Policies of countries around the world in 2023: 24 F90) 6 L 24 4.1 Overview of the rice market in 2023: LH HH HH Hà Hà Hà Tà HH HH nh HH 24

II Theoretical basis

1 Supply and demand theoretical basis

1.1 Demand: Concept: Demand is the quantity of a good or service that buyers are able and willing to buy at

different prices in a certain period of time, with other conditions remaining unchanged Demand Curve:

The demand curve shows how price affects quantity demanded, other factors remaining constant

Quantity Demanded: The quantity demanded of a good is the amount of goods that buyers are

able and willing to buy

Pr = (Qo) | PL = — (Qo) T

Factors affecting demand:

© Number of buyers

e Buyers’ Income:

® Price of Related Goods:

other

other e Taste

¢ &xpectations: a specific expectation in something relating to the consumers’ buying decisions may change its demand

Elasticity of Demand: Concept:

Elasticity measures the response (sensitivity) of consumers through changes in the amount of goods purchased when factors such as commodity, prices, income, and related ones change Classification of demand elasticity:

¢ Price Elasticity of Demand

¢ Income Elasticity of Demand ¢ Cross Elasticity of Demand

1.2 Supply:

Concept: supply is the quantity of a good or service that producers are able and willing to supply at different prices during a certain period of time, with other conditions remaining unchanged

Quantity Supplied: The guantity supplied of any good is the quantity that sellers are able and willing to sell

Factors affecting supply:

Number of Sellers

Input Prices

Technology Expectations: a specific expectation in something relating to the price of a product may lead sellers to adjust the supply

Income: consumers shift towards more diverse and expensive food choices as their

incomes increase, leading to a decrease in rice demand Price: as the price of rice increases, consumers switch to alternative food sources or

reduce their rice consumption

Substitutes: if substitutes, such as bread or noodles, are easily accessible and affordable,

consumers may choose to consume less rice Government policies: government policies, such as subsidies, tariffs, and trade restrictions, can impact the demand for rice Subsidies on rice production may increase the rice supply, leading to a decrease in price and an increase in demand

2.2 Determinants of supply:

Land availability: the availability of arable land is a crucial determinant of the supply of rice in Vietnam Therefore, policies have been implemented to encourage rice cultivation, such as offering incentives to farmers who expand their rice fields

Technology and infrastructure: modern technology, such as fertilizers and irrigation

systems, can boost rice yields and productivity Good infrastructure, like roads and

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storage facilities, can ensure transportation and storage, increasing its availability and reducing losses

Weather conditions: climate conditions, such as rainfall, humidity, and temperature,

significantly impact rice production Government policies: policies, like price subsidies and export quotas, can impact the supply of rice by influencing farmers’ planting decisions and affecting the price of rice Global demand: as a major rice exporter, global demand for rice can significantly impact the country's supply Changes in demand, such as a decrease in demand from major importing countries, can lead to a surplus of rice in Vietnam

2.3 Elasticity: Substitutes: rice is a staple food in Viet Nam, and there are limited substitutes available

Thus, the demand for rice is relatively inelastic Even if the price increases, consumers

may continue buying it as they have just a few alternatives Income: If the price of rice increases, low-income consumers may switch to cheaper

substitutes, such as noodles or potatoes However, higher-income consumers may continue to purchase rice regardless of the price, making the demand more inelastic

Time period: the demand for rice is relatively inelastic since consumers cannot quickly adjust their consumption habits in the short run However, rice demand may be more

elastic in the long run as consumers adjust their diet to include less rice Availability of rice: The elasticity of supply for rice can also vary based on the availability of rice If there is a surplus of rice, farmers may be willing to sell it at lower prices, making the supply more elastic, and vice versa

III Actual State 1 Rice production

1.1 Favorable context for Vietnamese rice: Shortage of supply in the world India's plan to stop rice exports: India accounts for nearly 40% of the world’s supply On

July 20, it officially banned the export of non-basmati rice to reduce domestic prices Not

long after, the United Arab Emirates (UAE) and Russia respectively announced to stop

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exporting rice abroad With the ban from India, world rice prices are expected to increase Global wheat prices rose more than 10% in the following week This is the largest weekly increase in more than 16 months Another source, the world's 6th largest source, Myanmar, is still leaving open the issue of temporarily suspending rice exports ¢ The El Nino phenomenon continuously changes the weather, making it difficult to supply

rice on a large scale: The World Meteorological Organization said El Nino has developed in the tropical Pacific for the first time in 7 years, causing drought in Southeast Asia, especially Thailand and China - two major sources of rice in the world According to the Rice Producers Association in Thailand, the appearance of El Nino and the impact of heat waves in September and October will make rice production difficult According to the China Meteorological Administration, temperatures can rise to 40 degrees Celsius in Hunan and Jiangxi, the country's top rice-growing provinces The agency also warned of a “high risk" that hot weather will cause rice in these places to ripen prematurely ¢ In its October report, the US Department of Agriculture (USDA) lowered its global

production forecast for the 2022-2023 crop year to 513.7 million tons, compared to 514.3 million tons in the previous crop year

700 USD/ tắn

600 500 400 300 200 100

1.2 Vietnam rice production market: Unprecedented price fever, "golden" opportunity for

rice production in Vietnam

1.2.1 The current status of rice production is stable in Vietnam

Vietnam has quite favorable weather so, productivity is high This year, Vietnam produced more

than 43 million tons of rice, the total rice market could reach 9 million tons

According to preliminary reports, the country’s Winter-Spring rice yield is estimated at 68.4 tons/ha, an increase of 1.6 tons/ha compared to last year's Winter-Spring crop Although the cultivated area decreased, productivity increased, so the country's Winter-Spring rice output this year increased compared to last year's Winter-Spring crop, estimated at 20.2 million tons, an

increase of 231.9 thousand tons

Along with the harvest of the Winter-Spring crop, as of mid-June 2023, localities across the

country have sown 1,789 thousand hectares of Summer-Autumn rice, equal to 98.7% of the same

period last year, of which the Delta region Mekong River (Mekong Delta) reached 1,418

thousand hectares, equal to 97.9%

Vietnam's rice industry is gradually shifting to reduce quantity, increase quality, and increase selling prices after many years of continuously holding the leading export position in the world

1.2.2 The "price" fever of Vietnamese rice when the supply market fluctuates strongly

¢ Vietnamese rice prices are increasing, according to experts, due to increasingly high quality and large world market demand Domestic rice prices are higher than export prices; this is also the reason why Vietnam's export rice prices are going against the world tide Low supply and escalating prices make many Vietnamese businesses hesitate to sign new export contracts

¢ According to VFA, Vietnam's 5% broken rice price is higher than the historic peak of the price fever in August 2023 and far ahead of competitors such as Thailand and Pakistan by 93 USD and 90 USD per ton, respectively Vietnam's 25% broken rice is also trading at 638 USD/é/ton, higher than similar products from Thailand and Pakistan at 118 USD and

150 USD/ton, respectively

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¢ Domestic rice prices are also reaching record highs In particular, in the North, rice prices increased very sharply Specifically, Dai Thom from large domestic enterprises is priced at 21,000 VND/kg, an increase of 1,000 VND (5%) compared to September 2023 and an increase of 3,000 VND (16%) compared to the same period in 2022 Other rice also increased from 500 - 1,500 VND/kg compared to 1 month ago For example: Long An

Jasmine 21,000 VND/kg, Go Cong 22,000 VND

1.2.3 Strength: Vietnam is facing too many advantages The world food supply is in short supply, rice-growing areas in many countries are damaged, and drought due to the appearance of El Nino has pushed rice prices to a 10-year high Every year, India exports over 20 million tons

of rice to the world Therefore, when they issue a ban, the world is at risk of lacking 50% of

output from India, or nearly 10 million tons This is an opportunity for Vietnamese rice to increase prices and earn long-term contracts Vietnam has the advantage of early supply from the Winter-Spring rice crop; Rice output and quality are stable, so it is predicted that in the short term, Vietnamese rice prices will still be at a good level In general, this year's rice export market has lower supply than demand, so output is favorable This year, Vietnam's rice industry needs to pay attention to production and production links so that there are rice varieties suitable to market

needs

1.2.4 Weakness: Vietnamese rice still has many challenges in terms of quality and small scale In particular, people do not have access to high-quality seeds, so rice productivity has not reached the optimal level Farmers’ farming and care techniques are limited, so when planting, they waste seeds and use a lot of fertilizers and pesticides, affecting quality and harming the environment In addition, the large-scale operating capacity of Vietnam's rice industry is still limmrted

1.2.5 Opportunity: Vietnamese rice needs to improve quality and increase traceability to create trust with consumers and management agencies; environmental protection for sustainable production; closely link the stages in the production and business chain to reduce costs

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