Last update 2/15/2012 12:09:00 PM (GMT+7)

Vietnam’s low grade rice unsalable

VietNamNet Bridge – Vietnamese rice exporters have signed the contracts on selling 430,000 tons so far this year. However, importers only ordered high grade rice, fragrant or sticky rice, while no ton of low grade rice (25 percent broken rice) has been sold.

All businessmen well understand that they need to sell the things that the market needs, not the things that they have. In the past, Vietnamese farmers once cried because they could not sell low grade rice. In 2008, farmers in Mekong Delta saw hundreds of thousands of tons of IR 50404 rice left unsold, which put farmers under big debts and losses.

However, it seems that they have not learnt the lesson. For the 2012 winter-spring crop, Mekong Delta’s farmers still chose to cultivate low grade rice varieties.

The Vietnam Food Association (VFA) has warned that the low salability of low grade rice would not only cause loss to farmers, but would be a burden to the state and the association.

Of the 430,000 tons of rice, 250,000 tons would be exported to Malaysia (200,000 tons) and Indonesia (50,000 tons) under concentrated contracts (the export under the framework of the agreements signed by the governments). Meanwhile, the remaining 180,000 tons are sold under commercial contracts, mostly fragrant rice, sticky rice and high grade rice (5 percent broken rice).

Meanwhile, low grade rice still has not been sold, because of the lack of the markets.

There are 130,000 hectares of land for cultivating the 2012 winter-spring crop, while 50 percent of the cultivated land has been reserved for low grade rice. Duong Nghia Quoc, Director of the Dong Thap provincial Department for Agriculture and Rural Development, said that the department advised farmers not to cultivate low grade rice varieties, but the advice has been ignored.

The problem is that the same advice was given in the last years. However, the farmers, who grew low grade rice varieties, still could earn much money. Therefore, farmers nowadays do not have high confidence on the advices.

However, the warning may turn realistic this year. VFA has informed that in African markets, Vietnamese enterprises could only sell high grade rice, while low grade rice remains unsalable, because it has to compete with Indian rice.

According to Tamnhin, it’s now really difficult to compete with the products from India and Pakistan in terms of price. The countries can offer to sell the products at low price of 350 dollars per ton. Meanwhile, Vietnam needs to sell at 390 dollars per ton to ensure profits for farmers.

In fact, Vietnamese exporters hope that they can export low grade rice products to the Philippines and to China (across the border). However, to date, there has been no optimistic sign from the two markets.

VFA said it gave alert about the lack of market for low grade rice right in late 2011. It also said that it is focusing on the Filipino market to obtain the market. Meanwhile, the low grade rice export to China should be encouraged.

As for African markets, enterprises still have to wait, because if Vietnam lowers the sale prices to too low levels, this would cause loss to farmers.

An official of VFA said that it is really very difficult to find the outlets for low grade rice products in the 2011/2012 winter-spring crop in the context of narrowed markets. Especially, VFA has warned that a big volume of low grade rice has been carried from Cambodia to Vietnam, which would lead to the increase of supply.

The Ministry of Finance has announced the average production cost for the winter-spring crop rice at 3400 dong per kilo. This means that farmers should sell rice at 5000 dong per kilo at least to ensure the minimum profit of 30 percent.

Source: TBKTVN