VietNamNet Bridge – Tra farmers in the Cuu Long River Delta are struggling with rising interest rates that have doubled since February 20 and the price of their product is falling.

Attack of the killer interest rates

On February 29, the An Giang Fisheries Association sent a petition to the Governor of the State Bank of Vietnam, asking for help as local fishermen now face major difficulties. The association asked the central bank to instruct commercial banks to prioritize aquaculture in terms of loan authorization, otherwise, tra production and export will suffer heavy losses.

Truong Minh Duc, a tra farmer in Binh Thuy district in Can Tho City, related that the three last tra farming crops brought him profit, but this crop may fail as interest rates have become overly high for tra farmers.

Tu Duc, another tra farmer, said that previously, farmers had to spend VND1.3bil during their six month tra farming crop. The investment capital was sourced from bank loans with interest rates of 1% per month.

However, since February 20, banks all announced higher lending interest rates at 1.5-1.8% per month, overly high and unaffordable for most farmers

However, the increased interest rate is not the only difficulty farmers are facing now. While the interest rate and prices of food for fish are increasing, the sale price of material tra fish is decreasing. Seafood processing companies paid VND14,200/kg only on March 1 in Can Tho, down by VND300/kg over February 28, and VND1,000/kg compared to 10 days ago. Despite the low prices, the sale is going very slowly, as processing companies said they cannot arrange enough cash to collect material tra.

Nguyen Hoang Phong, 35, who has 1.5 ha of tra ponds in Thot Not district in Can Tho, said that he, like all other farmers, rely on bank loans, to farm fish. As the interest rate has increased by two times, all farmers are on the verge of making losses

Phong said that he was told that banks have to tighten credit in order to fight against the inflation

Chairman of the An Giang Fisheries Association Phan Van Danh said that tra cannot live without food even for one day, while banks have stopped disbursed money for more than one week, making tra farmers distressed.

Lower material prices

According to Nguyen Huu Khanh, Chairman of the Vietnam Fisheries Association, seafood processing companies suddenly lowered the purchase price by VND500-1,000/kg in the last week of February 2008, though the exports still go smoothly and the demand is still high on the world’s market

Khanh said that as the interest rate and material prices all are increasing, the production cost has soared to VND14,000/kg, while farmers can sell at VND14,200/kg only.

Explaining why they lower the purchase price for tra material, seafood processing companies said that they find it difficult to arrange enough money to collect fish. According to the Vietnam Fisheries Association, the total tra output is expected to rise to 1mil tonnes in 2008, which means that seafood companies will need VND14tril to purchase the 1mil tonnes of fish, if noting that the price is VND14,000/kg.

Danh said that before banks limited loaning tra farmers in February 2008, companies bought tra at VND15,000-15,200/kg, but after that began lowering the purchase prices gradually.

He said that not all companies lack money to collect tra materials. A lot of companies have enough cash, but still force the prices down, because they well know that farmers do not have capital and have to sell out fish at this moment.

Meanwhile, Buu Huy, Director of Aseafood, said that with such a high inflation rate and increased interest rate, both fish farmers and seafood processors are suffering. Higher interest rate may make fish farmers incur loss, while higher interest rate may make Vietnam’s seafood exports more expensive, thus weakening Vietnamese products’ competitiveness on the world’s market.

Vinh Kim