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Worries about rice prices   2008-09-30 - TBKTSG

Rice prices didn’t stably increase VND5,000 per kilo to ensure 40% profit for farmers, admitted Huynh Minh Hue, acting Secretary General of the Vietnam Food Association (VFA), at a conference on rice production in 2008 in An Giang last week.


In the fourth quarter, Vietnam will ship an additional 900,000 tonnes of rice, according to VFA Secretary General, Huynh Minh Hue.


Rice surplus – price falls


After the Prime Minister instructed rice exporters to buy more rice from farmers, by September 15, they had bought 660,000 tonnes of rice and paddy: 132% of the Prime Minister’s assignment and 90.4% of VFA’s expectation.


However, Hue said rice traders were not directly supported by the state so they had to borrow money from banks at annual interest rates of 19-20 percent to buy rice, so the risk is great if they don’t timely export rice.


The floor price for export set by VFA is $600 per one tonne of 5% broken rice but actually importers only paid $550 per tonne (Free on Board price) so the implementation of new contracts is affected.


According to VFA, the rice price has decreased in the international market since July because the demand has fallen while sources of supply are quite abundant. On the other hand, major rice importers have bought rice enough for stock. At the same time, rice outputs in both rice exporting and importing countries have increased because high prices for rice stimulated the expansion of rice planting areas.


The rice market is now in oversupply. For Vietnam, customers have tried to force prices down because Vietnam’s rice output is high and the rice price in the local market is still lower than the international market.


“By September 15, Vietnam had signed contracts to export 3.95 tonnes of rice and in the January-September period, the country’s rice exporting volume is estimated at 3.6 million tonnes. In the fourth quarter, Vietnam will ship an additional 900,000 tonnes of rice,” said Hue.


The Ministry of Industry and Trade has proposed that the government instruct VFA to actively ship rice in the remaining months of the year and not fix the volume of rice exported on a monthly basis to ensure total exports of 4.5 million tonnes of rice for the whole year.


According to Hue, besides rice exporters’ rice volumes in stock and the volume of summer-autumn rice held by farmers, there is a quantity of autumn-winter rice, so the amount of rice available for export is higher than expected.


Obscure situation?


According to VFA, in the remaining months of 2008, sources of supply of rice will be abundant in the world rice market so rice prices will continue to decrease. Thailand will still be the major source of supply and put great pressure on other rice exporters when its inventory volume of rice hits 2.1 million tonnes and it has to sell to prevent the quality of its rice from degrading and to buy more rice for farmers under its rice subsidy (around 2.3 million tonnes of rice).


It is estimated that by September 30, Thailand’s rice volume in stock will have reached 4.4 million tonnes. However, the Thai government has announced it will continue buying rice of the main crop at a high price, which will help set Thai export rice price at $700 per tonne for 100% B rice.


According to rice exporters, many customers want to buy Vietnamese rice and they hope that rice prices will recover in the coming months. Thus, farmers should not hurriedly sell paddy. But farmers currently want to quickly sell paddy to get money to pay for fertiliser, pesticide and bank loans.


VFA’s Secretary General Huynh Minh Hue said as Vietnam lacks conditions to keep rice to wait for high prices like Thailand, Vietnam may have to sell rice at low prices to sell out its stock of commercial rice.


Deputy Minister of Agriculture and Rural Development Bui Ba Bong admitted that the shortage of a qualified warehouse system is the biggest weakness in exporting rice for Vietnam.


Bong said the Ministry of Agriculture and Rural Development assigned the Mekong Delta Rice Institute to research methods to maintain rice at farmers’ homes for 2-3 months.


However, the thing that farmers need now is not to stock more rice but to sell what they have quickly to get money for the upcoming winter-spring crop. Many farmers said the state needs to have rational credit policies before assisting them in the storage of rice.


“Hau Giang’s farmers have around 123,000 tonnes of paddy in stock. The situation is very tense,” said Nguyen Van Dong, Director of the Hau Giang Department of Agriculture and Rural Development.


Recently two big companies in Hau Giang planned to buy rice from farmers but they couldn’t because the paddy quality was too low. This situation also exists in other provinces like Soc Trang, Can Tho and Kien Giang.


According to rice traders, in the recent summer-autumn crop, most farmers grew IR 50404 rice variety, which is easy to plant and yields stable productivity, but breaks easily.


Duong Minh Hoang, Director of the Soc Trang Provincial Agricultural Promotion Centre, said though farmers were warned about this still around 30% of rice area in Soc Trang has this rice variety.


Professor Bui Chi Buu, Rector of the Southern Agricultural Sciences and Technology Institute, said IR 50404 rice accounts for up to 40-60% of the total rice areas in some provinces.


“The third rice crop in the Mekong Delta is about to be harvested and most of the area is also planted with this variety so the situation will become more difficult because farmers have a great stock of this rice from the previous crop already,” said a rice trader.


It is the mistake of farmers but agricultural management agencies must be blamed because they didn’t intervene to prevent farmers from growing this low-quality rice variety.

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