VietNamNet Bridge – Why did the prices of consumer goods increase sharply last year and why have they been galloping since the beginning of the year? Because of the skyrocketing prices of food and foodstuffs. Well, why have the food and foodstuff prices been increasing, then? 

Rice price rising – to sell or not to sell?

Statistics show that the increases of food and foodstuff products were consistently bigger than the average increases of products and services in the first quarter of the year. For example, food and foodstuff prices rose by 10.5% in March, while the average increase was 2.99% only. The figures were 17.91% and 9.19%, respectively, for the first three months of the year.

Analysts have attributed the high prices to low food output due to bad weather (prolonged cold that damaged 170,000 ha of winter-spring crop paddies and 12,000 ha of rice seeds in the north).

However, the argument proves to be unreasonable. Despite the crop failure in the north, southern provinces have had a bumper crop. The winter-spring crop in the south is estimated to have yielded 9.4mil tonnes. Meanwhile, Vietnam’s rice exports only saw the increase of 43,000 tonnes of rice in the first three months of the year.

Nevertheless, food prices are still increasing and expected to go up further. It is, according to experts, because of two main reasons.

First, the sharp increases of input material prices. The price of imported fertiliser has soared by nearly 75%, which made Vietnam spend VND2,560bil ($160mil) more on fertiliser in the first quarter. The pesticide price has surged by over 50%, which means that Vietnam had to spend an additional sum of VND1,280bil (80mil) on pesticide. The two products alone made agricultural expenses increase by VND4tril, or 16.5% of GDP, in the first quarter of 2008.

Farmers also had to spend more on fuel to run irrigation stations and for transportation.

Second, the increases of food prices in the world have brought about the domestic price increases. The export rice price in the first quarter of the year rose by 35.4% over the same period of last year, while the wheat price saw the even sharper increase of 56.2%.

In fact, the domestic price increase in the first quarter of 2008 in comparison with the first quarter of 2007 was still lower than the world’s increase (21.5% vs. 35.4%).

This means that domestic food prices may go up further to come closer to the world’s prices.

There are many reasons behind the sharp food price increases in the world: higher demand for food for humans and cattle, higher oil prices, greater demand for cereals to produce bio-fuel.

In Vietnam, the cassava plantation area has been sharply increasing in the last few years. Millions of tonnes of cassava have been exported to serve the production of clean energy. Sources say that some scientists in Vietnam are also researching using cassava to produce clean energy.

However, scientists have also warned that the expansion of the cassava plantation area will exhaust soil.

Moreover, food prices have been increasing also because in many other countries, farmers have been abandoning their fields to take other jobs which can bring in more income.

(Source: TBKTVN)