VietNamNet Bridge – Food has become scarce all over the world, making rice import countries struggle with food shortages. The rice price keeps skyrocketing, from $300/tonne to over $700/tonne now, and is forecast to hit the $1,000/tonne threshold. Will Vietnam benefit from the food price storm, as the second-biggest rice exporter in the world?

Rice farmers have no more merchandise

The rice field in My Loc commune in the southern province of Vinh Long these day is brilliantly verdant. Nguyen Van Nam, a local farmer, who has 10,000 sq m of field, said that he will harvest the summer-autumn crop in two months; however, it is thought that the summer-autumn crop will not be as bountiful as the winter-spring crop. If the latter could provide 6-7 tonnes/1,000 sq m, the former will yield 5-6 tonnes/1,000 sq m at maximum.

“Most farmers have sold all paddy at the field. The paddy price is skyrocketing, but we don’t have more paddy to sell,” Nam said.

He related that the summer-autumn crop always requires heavier investment and care than the winter-spring crop, as farmers have to pump a lot of water to help rice fields struggle against drought. Farmers also have to spend more money on fertiliser and pesticide, while the prices of these goods are escalating day by day.

The price of DAP, for example, has soared to VND1.2mil/50kg pack, while China-sourced urea is now selling at VND460,000/pack, Phu My-made urea at VND440,000/pack. Meanwhile, the pesticide price is now double that of 5-6 months ago.

When asked how much paddy he was keeping to sell later when the price went up further, Nam smiled and said that he had sold all his paddy in order to pay bank debts and buy pesticide and fertiliser.

“We keep only several tens of bushels of rice (every bushel is equal to 20 kg) for use in the between-crop period.

Nguyen Thi Kieu, a farmer who has 12,000 sq m of field in Thanh Tri hamlet, Hoa Hiep commune, was regretful about selling all his rice last month.

Kieu related that her family had 350 bushels of paddy last month. She was so happy that some trader asked to buy paddy at VND80,000/bushel, and she agreed to sell paddy in order to get money to pay bank debts.

The sale brought Kieu the profit of VND1.5mil/1,000 sq m, which she had never dreamt of before.

However, if Kieu had not sold paddy, she would have got VND6-7mil more in profit as the paddy price has soared to VND100,000/bushel.

However, with the current food price storm, farmers are ‘happy today and worried tomorrow’. Kieu said that though farmers get more money from selling paddies, they have to pay more for fuel to run water pumps, ploughs and paddy harvesting fees. Moreover, they have to pay more for expensive pork, beef, sugar, vegetable oil and many other basic needs.

Additionally, most farmers now have to borrow money from banks to maintain production. Previously, they had to pay 1%/month of interest rate, while they now have to pay much more.

Luu Hoang Son, Deputy Director of Tam Binh Agribank, said that the lending interest rates range from 1.35%-1.5% per month, and the maximum loan is VND1mil for every 1,000 sq m. Farmers have to pay bank debts when they finish harvesting crops, and they can only get other loans if they pay their previous debts.

With such a procedure of getting loans, no farmer dares keep paddy in store to sell later when the price goes up. That explains why the paddy price has soared, and there is not paddy to be found.

Rice price will rise further

According to the Food and Agriculture Organisation (FAO), in 2007, Thai-sourced rice had the average export price of $334/tonne. Meanwhile, Vietnam now can export rice at VND610-700/tonne, or double that level. The rice price is now at the highest peak since 1974.

Opinions still vary about if Vietnam should boost rice exports now to earn money from the food price storm, or reduce exports to ensure domestic food security. However, if Vietnam pushes up exports, it would get twice the volume of foreign currencies it earned in 2007 for the same volume of export.

According to Nguyen Van Nhuong, Chairman of Thanh Phong Cooperative in Can Tho city, merchandise paddy has nearly run out. The price of paddy for export has soared to VND5,200-5,400/kg, while 25% broken rice has soared to VND7,300/kg, 10% broken rice at VND7,900/kg, or VND1,000-1,500/kg higher than one month ago.

The price of rice for domestic consumption is also increasing very rapidly. Ba Tu, the owner of the Tan Phat husking workshop in Tan Phu commune, said that the rice which workers and urban labourers use has soared from VND7,000/kg to VND10,000/kg.

A rice sale agent in Tan An Ward in Ninh Kieu district in Can Tho city said that the rice price is increasing by VND300/kg every day. The cheapest rice is now selling at VND8,000/kg, while most expensive VND12,500/kg. He said that the domestic market is heating up following the world’s market.

Who most benefits from rice price increases?

Analysts say that rice is now being kept in the storehouses of big speculators. Anticipating the rice shortage, the speculators spent money to buy paddy and keep it in store, planning to sell later, when the price increased further.

Since early March 2008, the paddy price has soared from VND4,300/kg to VND5,700/kg, which has brought about fat profit for speculators.

According to Tu from Tan Phat, if speculating 100 tonnes of paddies two months ago, one would get the profit of over VND100mil. That explains why traders keep rice in store, and are not selling rice to the market now, making the rice shortage more serious.

Vinh Kim