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Exporting rice at low prices, a bitter lesson
Vietnam plans to export 400,000 tonnes of rice in August at $600-700/tonne. The export price proves to be much lower than $1,100-1,200/tonne in April and May, which will cause the loss of $200mil. Prof Vo Tong Xuan calls this a bitter lesson for Vietnam.
The Cuu Long River Delta has had a bountiful summer-autumn crop, but farmers are unhappy as the paddy price is decreasing, and not enough to cover expenses. What would you say about this?
The things that happened in 1995 are now happening again. In that year, Japan had a very cold summer, and the country’s output decreased by 1mil tonnes. As a result, the country had to import rice from the north of China at the very high price of $2,000/tonne.
China never could sell rice at such a high price, and they sold all the rice they had to Japan. However, they did not have rice to eat, and they had to buy rice from the south at high prices. Southern China never could sell rice at such high prices, and they also sold all they had. And southern Chinese then lacked rice to eat, and they had to buy rice from Vietnam.
1995 was the golden age for Vietnamese farmers as they could sell rice at high prices to Chinese.
However, the situation was quite different in 1996, as Japan did not have a cold summer. Southern and northern Chinese farmers did not see Japanese buying their rice, while Vietnamese farmers did not see Chinese buying their rice. As a result, the rice price dropped dramatically.
In early 2008, when the US applied the new energy policy, the food crisis broke out, which pushed rice prices up. The rice price saw the sharpest increase when the Philippines’ President asked to buy Vietnamese rice at $700/tonne. Vietnamese exporters decided to stop signing export contracts because they hoped the prices would go up further. Thailand became the only rice exporter, and earned $1,100-1,200/tonne.
As the state ordered exporters to stop signing new export contracts when the world’s prices were high, people tried to speculate rice, causing a rice shortage, and prices skyrocketed to VND20-30,000/kg. Farmers thought they could earn a lot of money with rice, and rushed to cultivate rice fields.
However, as the Philippines, Indonesia, Malaysia and Thailand are also rushing to cultivate rice, the rice output has become profuse and the demand for importing rice has been decreasing.
As such, the spontaneity in cultivation of Vietnamese farmers and the shortcomings in the distribution network were the main factors that have led to difficulties in consumption?
Vietnamese farmers are the most spontaneous people in the world. They decide what to grow and which animals to feed, and they don’t know to whom to sell and how much to sell them for.
The tragedy of Vietnamese farmers will continue if we do not change the current way of investment. Food, seafood and fruit exporters do not have their own material areas. In order to improve the situation, farmers will have to gather in modern cooperatives, which can give them more power in defining prices, while export enterprises have to develop their own material areas.
In an interview with VietNamNet in April 2008, you said that Vietnam should export rice at that moment, because the rice prices may go down when countries harvest their crops. In July, when Vietnam resumed exports, the world’s price began going down. In other words, Vietnam stopped exports when the price was high, and resumed exports when the price went down. Is it because we didn’t know our inventory volume, or because we had wrong predictions about the world’s market?
This is really a bitter lesson for Vietnam.
VNN
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