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Why is Vietnamese rice the cheapest in the world?
Although Vietnam is the world’s second biggest rice exporter the prices of exported rice are nearly the lowest in the world. A VOV reporter talked with Dr Le Van Banh, director of the Mekong Delta Rice Institute about the situation.
The Ministry of Agriculture and Rural Development has proposed a ceiling price of VND3.800 per kilogram and the Vietnam Food Association (VFA) are purchasing around 400,000 tonnes of rice from farmers. However will these measures help to keep the selling and export prices at reasonable level?
Mr. Banh: Vietnam harvests its summer-autumn crops at the same as with other countries’ which leads to glut in the market. This is a natural thing. However, farmers do not have the facilities to store rice so it goes rotten and they have no capital to plant the next crop. When the market price keeps decline sharply proposing a ceiling price of VND3.800 per kilogram is a good measure.
If farmers want to sell rice they must pay service fees for traders and they find it difficult to earn VND3.800 per kilogram. In addition, the traders are hesitation to go to remote areas to buy rice.
Are current selling and export prices reasonable?
Mr. Banh: It is really difficult for farmers to sell rice at VND3.800 per kilogram to traders. The estimated production cost for the summer-autumn crop is VND2,800 – 3,000 per kilogram. If the Government finances 30 percent of the production costs the ceiling price is still too low. Meanwhile traders purchase rice from farmers at a lower rice.
Why does Vietnamese rice sell for US$100 a tonne lower than Thai rice?
Mr. Banh: Firstly, Vietnam must tender to sell its rice. If we win contracts we will sell rice. Vietnam does not have many regular customers so when the rice price on the world market falls, importers force Vietnamese producers to sell at a lower price. Secondly, Vietnamese does not have an established trademark. Lastly, when farmers harvest rice they bag it at home. They do not have stores or warehouses and neither do rice traders, so only when businesses sign contracts can they sell the rise. This leads to a decline in rice prices. In short, the trading strategy is full of snags.
What measures could increase the purchasing and export prices to a reasonable level?
Mr. Banh: If we have adequate warehousing we can stock up rice when the price is low and sell it later when the price is high.
By doing this we can keep purchasing and export prices at a reasonable level?
Mr. Banh: Earlier, the export price of Vietnamese rice was US$20-40 a tonne lower than Thai rice. Now it hits a record low in the world, even lower than Pakistani rice which is poor quality. Is there any problem with management?
The management of the VFA and corporations is not good. Every year, Vietnam exports around 4-4.5 million tonnes but this year we may export 6 million tonnes because of too large volume of rice to keep in store. Foreign clients are aware of this and are forcing Vietnam to sell at a lower price.
Thank you very much.
vov
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