After losing most of its locally grown crop to drought and irrigation restrictions, national rice business SunRice now faces a worrying freeze on exports from its backup operations in Vietnam.
As coronavirus panic spreads worldwide causing a run on rice stocks in Australian supermarkets, the Vietnamese government has banned rice exports, possibly until June.
Vietnam, the world's third-largest rice exporter, wants to ensure it has adequate stocks to ride out any food shortages or disruptions to global trade caused by the pandemic's economic turbulence.
SunRice said it had also observed increasing instability and risk from both a supply and demand perspective across its key markets, primarily due to COVID-19.
The Vietnamese decision was evidence of nervousness in the trade.
For the past three years SunRice has relied increasingly on international sourcing to grow and process Japonica style rice to help meet the company's rising export orders, and to backfill Australian market needs.
With headers poised to start stripping the current Australian season's paltry 40,000 to 50,000 tonne crop and faced with the prospect of more crop water availability uncertainty in the southern Murray Darling Basin next summer, SunRice is now lobbying for its growers to receive allocations ahead of next planting season to ensure future supplies of locally-grown rice.
This harvest will be the second smallest in the modern industry's history, despite offering farmers big prices of $750/t to $1500/t.
Consumer shopping patterns have exacerbated the current shortage of Australian rice and caused SunRice group to increasingly supplement supply through international sourcing
Managing director Rob Gordon said drought and water policy restrictions meant the local crop, mostly grown in the Riverina and Murray Valley, had shrunk to less than 25pc of annual domestic rice consumption needs.
The company's Vietnamese business, based around its Lap Vo mill in the Mekong Delta's Dong Thap Province, largely produces contract-grown rice similar to Australia's popular medium grain which sells world-wide.
Lately, the coronavirus-fuelled surge in Australian shopping habits had put intense pressure on SunRice to keep up with demand for its market leading brand at home.
"This has exacerbated the current shortage of Australian rice and caused SunRice group to increasingly supplement supply through international sourcing," Mr Gordon said.
He believed Vietnam's ban may be in place until at least May 31.
However, Vietnamese authorities are reviewing their timeline after millers said they were already holding ample stocks which would more than satisfy local demand.
The Australian farmer-owned company, which also has processing businesses in the US, the Middle East and Papua New Guinea, would be flexing its international supply capability to meet key market demands which otherwise would have been supplied from Lap Vo.
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However, given Australia was not currently self-sufficient in rice at a crucial demand point domestically and globally, SunRice was worried about the longer term outlook for water availability and water prices between now and the 2020 planting window in October and November.
Despite optimistic signs of changing weather patterns, southern irrigation storages are still lower now than when drought conditions were fast deteriorating a year ago.
Water allocation request
SunRice has begun water allocation talks with the federal government, discussing the potential for special allocations to rice growers to ensure continued local supply security.
No change to the current outlook for water allocations and prices would there was likely to be another "extremely small Australian crop", Mr Gordon said.
Meanwhile, SunRice has not forecast any material change to its guidance for its full-year group net profit after tax because of the Vietnamese ban or market tensions.
However, the company said global uncertainty caused by COVID-19 meant it was too early to predict the impact of such developments on 2020-21 financial year results.
Vietnamese agricultural sector commentators, including the Vietnam Food Association, have warned their government's export bans may cause panic buying in global markets.
They believed Vietnam could export 3m tonnes of rice while still maintaining normal food supplies with almost 200,000t in reserve - similar to last year.
Analysts pointed to the market disruption caused when India stopped exporting rice in 2008, when Australian exports were also well down, triggering other export bans overseas despite overall global supplies being in surplus.
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