Falling rice prices, contracting domestic consumption, sluggish exports and ineffective Government-backed stockpiling policy have caused thousands of farming households to fall into hardship. Currently, the average export price of Vietnamese rice is only US$380 per tonne, the lowest ever.
Since June 15, the Government of Vietnam has enacted a policy that backs traders to buy one million tonnes of rice for temporary storage to support farmers to alleviate hardships. However, according to an interdisciplinary report released by the joint inspection panel and the Vietnam Food Association (VFA), as of July 31, purchased rice for temporary storage in accordance with the Prime Minister’s Decision 850/QD-TTg only met 80-85 percent of the plan (equivalent to 800,000-850,000 tonnes). Additionally, in August, some Mekong Delta provinces are still harvesting rice (estimated at 3.74 million tonnes of unhusked rice or equivalent to 1.51 million tonnes of husked rice). The bumper crop is likely to affect rice price in the Mekong Delta. Thus, on July 30, the Ministry of Agriculture and Rural Development asked the Prime Minister for permit to extend the deadline for temporarily stockpiled rice purchasing till August 15 to store one million tonnes of rice as decided by the Prime Minister, as well as support the rice price.
In fact, the rice stockpiling policy is not really effective. According to the report by the Ministry of Planning and Investment (MPI), food is the only decliner in the consumer price index (CPI) basket. Mr Vu Duc Dam, Minister and Chairman of the Government Office, said: This temporary stockpiling does not mean that traders or the State buy the entirety of rice from farmers. Every year, the Government will, based on output and market development, decide the purchasing time and quantity.
In the past one and a half months, traders purchased rice much more slowly than last year. This is one of the reasons why the rice price could not go up. The temporary purchase only helped solve part of the summer-winter rice output in 2013. Traders could only help farmers to avoid suffering from losses, not help them to gain high profitability. Temporary rice stockpiling has been carried out for eight years, aiming to push up rice prices to a level where farmers will have a profit. Unfortunately, the price sharply drops whenever farmers have bumper crop.
Minister Dam noted that Vietnam must review the entire agricultural sector to have necessary changes. Vietnam has become a leading rice exporter of the world. Currently, Vietnam exports some 7 million tonnes of rice a year. For the time being, rice shortage is no longer a threat for the country. Many rice exporters like Thailand, India and Myanmar have started to change rice cultivation practices as we did 10 years ago. Rice production costs have been slashed sharply. So why does the Government still buy rice for temporary stockpile while prices do not go up or go down? If all farmers sell en masse, prices will go down. The stockpiling policy prevents prices from falling. One month ago, when prices dropped sharply, the policy propped up and stabilised prices. If the policy pushes up the price to the level that is profitable to farmers, traders will face selling pressure. This is a big unbalance.
He emphasised: “We must find a regulatory mechanism that ensures profitability for farmers, stability of export markets, and rising price. There is two sides to this story. Farmers and local authorities very much want a mechanism that allows rice exporters to be directly or indirectly engaged in rice cultivation investment. If they do not make direct investment, they must guarantee to purchase rice from farmers. But, if exporters are allowed to grow rice with farmers, this becomes a different business field.”
He cited the sugar industry. Previously, sugar producers invested in crops, capital and technical support with the guarantee from the farmers that they would sell products to the investors, but they then sold to other companies for higher prices. This vicious cycle in fact undermines sustainable development. Recently, the Prime Minister hosted a meeting with Mekong Delta provinces and relevant ministries to ensure the stability of the rice market. In some years, rice exporters will be allowed to directly or indirectly invest in material zones.