Time to reaffirm Vietnamese rice's stability and long-term viability: Loc Troi Group CEO

India, which accounts for 40% of global rice exports, the UAE, and Russia, respectively, have banned rice exports. Why are countries taking these actions?

Even though India produces more than 40% of the world's rice, it is a volatile rice exporter. India has twice imposed export restrictions on specific rice-related items over the last three years. In addition to ensuring food security for 1.4 billion people in the most populated nation on earth, this action aims to reduce domestic food and grain price inflation.

Due to the effects of its conflict with Ukraina, Russia has suffered production shortages and export limits. The country intends to ensure food security, stabilize rice prices, and assist the nation's processing industry.

For the UAE, which imports about 90% of the locally consumed food, the restriction aims to temporarily guarantee domestic supply.

How are the global market and Vietnam's rice exports impacted by these export bans?

The position of rice in Asia and Africa has not changed following the export bans imposed by India, Russia, and the UAE. Recently, other countries have imposed bans primarily to safeguard their domestic markets.

For Vietnam, we are likely to sell more rice based on how much our plantations expand, especially during this autumn-winter crop. The Mekong Delta is expected to increase its rice plantations by 50,000–60,000 hectares and add 100,000–150,000 tons of rice to the international market.

This is a chance for Vietnam to reaffirm the stability and long-term viability of Vietnamese rice.

Many people believe that business prospects are opening up as a result of global market developments. Is this true from your perspective, and what are the opportunities and challenges facing rice exports?

Vietnam’s rice enterprises have numerous opportunities. Rice prices have reached their highest level since 2008. This price increase is projected to last longer because market demand is exceeding supply, particularly for high-quality rice produced in Vietnam and Thailand.

With this demand, Vietnam plans to maintain a steady supply of good quality rice for export. This will attract international consumers that buy huge volumes of rice to Vietnam, ready to look for serious, long-term prospects and eager to collaborate with Vietnam to provide stable supplies to the world.

But Vietnamese firms also face challenges.

Firstly, the worldwide market price is determined by the common supply, which is primarily India, Thailand, and Vietnam. Only Vietnam and Thailand have remained stable for many years. Big customers always want steady pricing, and Loc Troi, in particular, is searching for a solution to collaborate to secure a constant selling price over the long term so that the entire chain from farming to manufacturing is ensured.

The second problem is ensuring farmers' commitment when market prices change because Loc Troi provides credit to farmers during their crops.

The third difficulty is that firms lack credit capital to collect rice from farmers, despite the fact that supplies of fresh rice are consistent.

What should Vietnamese businesses do to take advantage of this opportunity?

According to Loc Troi's experience, firms can take advantage of this opportunity by engaging in the following actions.

Firstly, businesses must extend planting areas in order to boost export output and create material areas in order to provide appropriate supply based on the seasonal schedule of seed sources, medications, fertilizers, agricultural services, and output consumption.

Secondly, firms must diversify rice varieties suited for foreign markets in order to meet the standards of exporting rice to high-end markets such as the EU, the U.S., Canada, and Australia.

Thirdly, it is necessary to develop high-quality rice with strict requirements on pesticide residues and well-operated quality management systems (SMETA, BRCGS, FSMA, HACCP, etc.) to build a global rice brand.

How did the group respond to market movements as a significant enterprise in the rice industry with a revenue of more than VND4.2 trillion ($176 million), accounting for 67% of Loc Troi's total revenue in the second quarter?

Loc Troi always prepares for market volatility and keeps enough supplies on hand to fulfill signed orders. Loc Troi's stockpile is currently 200,000 tons of rice, and we have new contracts available to ship from now through mid-November 2023.

Summer-autumn and autumn-winter rice in Loc Troi's raw material area has been processed, and farmers have collaborated to plant harvest-ready rice. Loc Troi is currently earning VND50–70 billion per day ($2.9 million), and this amount of rice will continue to arrive continuously during the autumn–winter crop until the middle of November 2023.

The company's profit in the first half of the year was VND 343 billion ($14.4 million), up 147% from the same period last year and equivalent to 86% of the target. What elements have contributed to these results?

When global demand and prices soar in 2023, Loc Troi group will have many options because it owns the entire value chain, from research to export. To consistently meet the demand that is expected to increase in the future, Loc Troi has made active investments, developed human resources, modernized infrastructure, widened its network of alliances, and supported the enterprise's digital transformation process.

Firstly, in terms of human resources, Loc Troi has assembled a group of more than 3,400 officials and workers to ensure a huge production capacity to provide the market with over 2 million tons of rice annually and export rice to more than 40 nations.

Secondly, the group has invested in and developed a system of 16 owned and connected production factories (seeds, fertilizers, drugs, and rice) and over 270 agricultural machines to enhance synchronous mechanization activities for 1 million hectares of raw material areas. Loc Troi also has nearly 200 unmanned aerial vehicles (drones) to seed and fertilize, spray pesticides, and help farmers manage their crops effectively.

Lastly, Loc Troi is continuing to support digital transformation efforts in its management, production, and business operations.

Loc Troi has bought Loc Nhan Food JSC. What is the role of Loc Nhan in Loc Troi's ecosystem? Why did Loc Troi buy Loc Nhan?

In order to improve rice production capacity for Loc Troi, which will account for more than 70% of total income in 2022, as well as to widen its network of rice purchasing partners, the group welcomes Loc Nhan into the group's agricultural ecosystem.

As a result, there are now eight rice factories overall, up from five, with an enhanced capacity for fresh rice drying of 10,000 tons per day, milling of 5,000 tons per day, and storage of 300,000 tons of rice.

Stock prices of rice enterprises, including Loc Troi, have increased sharply in recent days. With Loc Troi, the stock is around VND39,000 ($1.64), up about 50% compared to the beginning of this year. How does Loc Troi benefit from this?

Shareholders will benefit from an increase in the share price, and the company will see a more positive picture of its performance.

What is the status of Loc Troi's orders right now?

Loc Troi has seen a surge in orders. However, in order to ensure progress, production, and quality as committed with partners who have previously signed contracts, Loc Troi always prioritizes the execution of these orders, then considers resources to continue signing more orders to ensure the corporation's reputation with its partners.

What strategies does Loc Troi have in place for market fluctuations?

Loc Troi has a clear strategy for rice development that is based on identifying major consumer markets and then planning an appropriate planting area. The group also analyzes and develops farming methods, trains farmers, processes according to registered standards, and ships goods to the relevant markets that have been signed for sale before the crop.

Loc Troi honors its promises to environmental protection, rice farmer health protection, financial assistance and mechanization services, and compliance with rice growing legislation and guidelines to reduce greenhouse gas emissions.

Besides, Loc Troi has an annual budget for scientific research in order to constantly have the most up-to-date agricultural solutions and match market demands. Loc Troi works with farmers to develop innovative methods and practices.