Story around rice for export

VietNamNet Bridge – There are two pieces of information about rice that we must be interested in.

The first: Bloomberg on September 13, cited Thai Deputy Prime Minister, Kittiratt Na-Ranong, as saying that Thailand is willing to give up its position as the world’s top rice exporter to implement the new plan on purchasing rice. He said Thailand is not proud to be a big rice exporting country, but it is proud that Thai farmers can plant and sell their products at reasonable prices, with smiles.

Under this plan, Thai government will buy rice from its farmers at the price of 15,000 baht per ton, equivalent to US$446. As a result, the price for Thai rice for export will increase to $750 per ton, 25 percent over the current price. This plan will start on October 7, 2011, in order to implement new Prime Minister Yingluck Shinawatra’s policy to raise income for the poor, particularly farmers.

The second: according to experts, the Asian rice market, including Vietnam, will increase, to the highest price in the last three years. However, rice price in Vietnam’s Mekong Delta fell for two consecutive weeks in early September.

Rice traders in Tien Giang province said: “In August, rice exporting firms took advantage to stock rice to wait for the price in the world market to increase when Thailand applies the new price of nearly $500 per ton.

Previously, Deputy Minister of Industry and Trade, Nguyen Thanh Bien, in a press conference on August 24, said that Thailand would increase rice price in November. However, local rice trading firms did not believe in Bien so they took advantage of the harvest season to force farmers to sell rice at low price.

The two pieces of information reflect the different attitudes to farmers, which also helps clarify many people’s wonder: Why farmers in the Mekong Delta have not escaped from poverty.

There is a big gap in thoughts about rice for export between the product maker (farmers), traders (food companies) and state management agencies and finally, farmers still suffer losses.

Perhaps many people still remember the export rice management policy in mid-2008, which hurt farmers a lot.

At that time, price in the international rice market rose to $975 per ton but the government instructed food firms to stop exporting rice in order to ensure food security. However, in the farmers’ eyes, that was the way to prevent rice prices in the local market from increasing in the same pace with the world market. This thought was confirmed when the Ministry of Industry and Trade stated that curbing inflation is very important at that time so the rice management policy could not only aim to ensure high profit for farmers. At that time, the Vietnam Food Association (VFA) sold rice for VND6,432 per kilo, but it bought from farmers at the price of VND4,000 per kilo.

For many years, many agricultural experts and farmers have kept complaining of the monopoly of VFA in buying and selling rice. As the association of food traders, which aims at profit, VFA often fixes prices that benefit itself.

The question is because of this monopoly that the price for Vietnam’s export rice in 2001-2005 was equivalent to the world’s average? In 2009 and 2010, Vietnam sold its rice $100-150 per ton cheaper than the similar type of rice of Thailand. This shows that farmers are always the sufferers. The most effective “weapon” of VFA and the Southern Food Corporation is purchasing rice for temporary store while they do not invest in building warehouses, rice husking plants or developing brands for Vietnamese rice. Some years, farmers did not have money to celebrate the New Year while the New Year bonus of food companies were very high.

Recently, Hoang Kim from the southern province of Dong Thap wrote on a prestigious website about some reasons that make farmers living in difficulties while the rice productivity keeps increasing and Vietnam exports more rice.

Apart from the control of rice prices to benefit food firms, the article mentioned reasons that hinder farmers from getting rich. These reasons are very clear and they have existed for a long time but they are not solved, as follows:

-    The government does not have policies to develop agriculture effectively, specifically: not building an industry to serve agriculture, giving seed assistance to farmers, not actively mechanizing harvest and post-harvest activities, resulted in high loss.

-    Investment in agriculture has been falling in the past five years. In 2009, total capital for agriculture accounted for 6.26 percent of the total investment, lower than 2008 while this sector contributed 20.91 percent of the GDP and Vietnam was still a backward agricultural economy.

-    The monopoly of the Vietnam Fertilizer Association and pesticide producers has pushed up the prices for agricultural materials, but the government has never implemented a price stabilization policy.

-    The Farmers’ Association is not the association of farmers, so it cannot protect farmers’ interests. The evidence is that during difficult moments of farmers, the Association did not raise their voice to defend farmers’ interest.

-    The government’s management is loose. The article cited Le Phuoc Tho, former Politburo member, former head of the Central Agricultural Committee and former Party Secretary of Soc Trang and Hau Giang provinces, in the Mekong Delta, on VietNamNet “The Mekong Delta is too far from the central government. If the government does not change its management manner, the southwestern region will not be able to escape from poverty”.

The above analysis shows that the fruits of agricultural development will not be meaningful if farmers cannot benefit as much as their contribution.

In inflation and stagnation, Vietnam’s agriculture has not been affected much and the rice output has kept increasing. But we should not delude ourselves as the second world largest rice export. We need to have policies to harmonize the interests of both rice producers and traders. The income of people in the Mekong Delta, Vietnam’s rice basket, is only $800/person/year while the country’s average is $1,200.