Vietnam fragrant rice prices surge as new tax weighs on export markets

Vietnam's Fragrant 5% broken (DT8 5%) rice prices have surged by about $31/mt since July 1, following the implementation of a new tax policy by the government, which market participants say is adversely impacting the export market due to higher export costs.

Since July 1, the country has imposed a 5% value-added tax on exports of commodities, including rice, forcing sellers to pass the additional cost on to buyers and, ultimately, to consumers. Vietnam is the world's third-biggest rice exporter.

Platts, part of S&P Global Energy, assessed Vietnamese Fragrant 5% rice at $500/mt FOB on Aug. 1, up $31/mt month over month, at the highest level since June 3, when prices reached $504/mt.

"The rice market is dead now in Vietnam," said a Ho Chi Minh City-based trader, who deals in DT8 5%. "The market is slow. No business. Next quarter is also tough."

Another exporter based in the city said the 5% VAT burden is shifting directly to consumers. "The government will assess the situation as the Vietnam Food Association has requested that they exempt rice from the VAT list, but they [think] it is unlikely," the exporter said. "Exporters have increased offers by 5% in one month because of the VAT."

The Vietnam Food Association has urged the government to remove rice from the VAT list to ease the financial burden on exporters and stabilize market prices. The association did not respond to a request for comment on the matter.

A third Vietnam-based trader said DT8 prices have risen $30-$40/mt over the past month due to the tax, as well as stronger demand from the Philippines.

Market participants anticipate a slowdown in Vietnam's rice exports in the coming quarter.

Rice exports

Vietnam exported 519,784 mt of rice in June, up 1.2% year over year and down 33% month over month, preliminary data from Vietnam Customs showed July 7.

The Philippines remained the biggest buyer during the month, with 202,673 mt, surging from 109,080 mt in June 2024.

Vietnam is expected to export 8 million mt of rice in the 2024-25 marketing year (January-December), down from 9.04 million mt in MY 2023-24, according to Energy.