Growing tensions in the South China Sea in recent months is leading China to shun Vietnam for its rice imports, opening the door for Myanmar exporters, according to traders.
Much of Myanmar’s official exports currently go to African countries, but with Thai exporters dropping prices in those markets since the May 22 coup, Myanmar exporters are looking to grow market share closer to home.
China’s demand for Myanmar rice through the Muse border crossing has increased about 30 percent this year on previous levels, said U Myo Thura Aye, a rice trader and former joint secretary of the Myanmar Rice Federation.
“I think this trend will continue for some time,” he said.
China represents “the largest export opportunity” for Myanmar’s rice traders, a June 11 World Bank report titled “Myanmar: Capitalising on Rice Export Opportunities” said.
The rice trade with China is legal from Myanmar’s point of view, but generally unofficial from China’s standpoint.
For Myanmar to be able to sell rice directly to importers in southeast China in addition to exporting informally over the border, it needs to negotiate a sanitary and phyto-sanitary agreement (SPS) with Beijing, the report said.
China imported 41.75 percent of Vietnam’s total rice exports in the first four months of 2014, according to a May 6 report from Xinhua news agency, but Myanmar rice traders said they have seen an increase in orders from China as South China Sea tensions rise and the world’s second-largest economy shuns importing from its adversary Vietnam.
Myanmar ought to move quickly to reach an agreement allowing official rice exports to China, said U Chit Khaing, chair of the Myanmar Rice Federation (MRF).
“The MRF urges the Ministry of Agriculture and Irrigation to discuss with Chinese officials to make the market legal … but we need to be able to produce quality rice at a standard accepted by the Chinese government,” he said.
Some experts say access to the Chinese market is quite complicated, and not just a matter of national agreements.
Ministry of Commerce economics advisor U Maung Aung said the ministry has been in discussions with China to legalise rice exports, but the process is complicated by different Chinese provinces having their own standards, rules and regulations.
U Myo Thura Aye said Myanmar exporters are now selling about 3500 tonnes a day, whereas it had been about 2500 tonnes a day before the recent South China Sea spat.
“As China’s demand has increased, rice prices have also gone up. But transportation costs are rising too, so it is difficult to make a profit from it,” he said.
Standard 25pc broken rice is fetching $443 to $449 a tonne at the border, while higher quality 5pc broken is selling for $490 to $497 a tonne.
U Thauk Kyar, central executive member of the Muse Rice Traders Association, said that the recent increase in volumes and prices is likely to stay for the time being, as he sees sustained interest from four or five southern China provinces.
Myanmar was once one of the world’s largest rice exporters, but has been hampered by poor production and trade links in recent years, focusing generally on low-quality exports. Thailand, the US, India, Vietnam and Pakistan make up the world’s largest exporters.
Myanmar exported 1.6 million tonnes of rice in the 2012-13 fiscal year, more than it has accomplished in 46 years, according to insiders. Myanmar has big ambitions to increase its exports to 4 million tonnes by 2019-20, but is currently limited by production capacity.
U Myo Thura Aye said that if Chinese buyers were to increase its demand to 5000 tonnes a day, Myanmar would not be able to meet it with current capacity.
“Myanmar is not in a position to export much more rice because it cannot produce much more,” he said.
Still, experts say that though there may be a temporary reduction in China purchasing Vietnamese rice because of political problems, it is unlikely to translate into a permanent situation.
World Bank economist Sergiy Zorya said that Vietnam is a competitive exporter and China is a price-sensitive market, so “the Chinese government will think pragmatically in this regard”.
Source: Myanmar Times