|
Paddy left unsold as businesses short of cash
Farmers in the Cuu Long River Delta have been moving heaven and earth to find enterprises that will buy their paddy. However, exporters are not hurrying to buy paddy at this moment, because they cannot arrange enough capital.
Truong Thanh Phong, Chairman of the Vietnam Food Association (VFA), who has returned from a trip to Cuu Long River Delta provinces, said:
The summer-autumn paddy price has been decreasing dramatically. Farmers now are selling paddy at VND4,200-4,300/kg, while the production cost is VND3,500/kg. A big volume of paddy has been left unsold, because a lot of farmers will not sell paddy at low prices, while enterprises do want to buy paddy at this moment because they cannot afford high bank loan interest rates.
Farmers say that the paddy price has been decreasing because enterprises are not collecting paddy though export activities have been resumed.
Since the government approved the resumption of rice exports in early July, enterprises have signed contracts to export 900,000 tonnes of rice, raising the total export volume to 3.4mil tonnes so far, or 100,000 tonnes lower than the export quota through the end of September.
Meanwhile, bank loan interest rates are now overly high, and it costs enterprises $15/tonne to store rice for one month. As a result, enterprises have decided that they will only collect rice when ships arrive in order to save up expenditures.
However, I have to say that this is not the main reason for the paddy price decrease. The main reason is the sharp price falls in the world’s market. 25% broken rice (the worst quality) was once sold at $1,200/tonne, while 5% broken rice (the best quality) is now selling at $620-630/tonne. The supply is now profuse as big rice importers are harvesting their crops, while African countries, which have the highest demand for rice, are not purchasing in big quantities due to the high prices and high transport fees.
Do you think that enterprises can find ways to consume all the farmers’ paddies?
It is really a difficult-to-settle problem. If farmers cannot sell paddies, they will become very miserable as a lot of them had to borrow money at high interest rates to invest in the crops.
Meanwhile, if enterprises push up rice purchases now, they will face three big problems. First, the high interest rates will push production costs up. Second, if the export prices are not high at the end of the year, they will suffer losses. With the export prices now at low levels, it is not likely that enterprises can sign contracts at high prices. Third, rice exporters now have to pay a rice export tax, VND500,000/tonne for the export price of $600/tonne, and the tax rate increases in accordance with the export price. Enterprises do not want to purchase rice now partially because they are still awaiting guidelines on export taxation.
What will VFA do to help farmers and enterprises settle the current difficulties, to ensure that farmers can live with their rice fields?
Farmers can ‘live’ only when they can sell paddies at VND5,000-5,500/kg. Therefore, VFA is going to gather its members in some more days, and call on them to collect paddies from farmers at the acceptable price of VND5,000/kg. Enterprises which obtained high profit earlier this year should share difficulties with farmers.
VFA is also going to propose that the government raise the threshold of rice price for export taxation to $800/tonne or remove the export tax. The taxation, in fact, hurts farmers. Besides, it is now not a suitable moment to impose export tax, as the rice price in the world’s market is decreasing, while input material prices are skyrocketing.
VNN
|
