All eggs in a basket

Certain groups of farmers might as well find it agreeable when large volumes of farm produce are en route to China via the border trade, from rubber and pepper to cassava, from pork to fowls and eggs, and from shrimp and fish to sugar, almost all but the dragon fruit for now and certain other types in the recent past. Chinese traders are offering good prices for farmers, and then take all back to the neighboring country amidst outcries from local enterprises over the severe shortage of materials for their processing.

Local media puts the phenomenon on high alert, publishing scores of articles on the Chinese rush for farm produce, citing trade associations’ concerns over the huge damage to local processors as well as viewpoints from experts demanding better control of the situation.

For the immediate future, aggressive Chinese buying of farm produce is beneficial for farmers, as they can earn higher profits from their cultivation. From an overall perspective, however, national interests are at stake. And it needs remedy.

Thanh Nien says Chinese traders now skip local agents as they approach farmers directly, offering a better price. In several localities in Gia Lai Province for instance, the volume of pepper sold to Chinese traders accounts for half of output. That is also the case for eggs, whose demand is rising as the Mid-Autumn Festival is coming closer. Pham Thi Huan, CEO of Ba Huan Co. Ltd. as the largest supplier of fowl eggs on the local market, says on Thanh Nien that Chinese traders are fighting directly with local enterprises for eggs from farmers. Local traders say the volume of eggs bought from farmers in the Mekong Delta has tumbled by 30% to 40%.

Nguyen Thi Thu Sac, vice chairwoman of the Vietnam Association of Seafood Exporters and Producers (VASEP), complaints on Nguoi Lao Dong that Chinese traders have vied intensely with local processors for fisheries, besides other commodities.

Also according to the paper, Chinese traders have bought as much as 20% of Vietnam’s pepper output, 70% of natural rubber, and some 70,000 tons of sugar in the last two months alone.

Vietnamese enterprises are in an inferior position in competing with Chinese traders for farm produce, as foreign traders enjoy a zero tariff when exporting most agricultural commodities to China while local rivals are subject to taxes in their production.

Nguyen Thi Thu Sac from VASEP says that the shortage of raw fishery materials has pushed many local factories closer to bankruptcy. In the year to date, nearly 150 local processors have shut down business due to the problem, she notes on Nguoi Lao Dong. Furthermore, the national interest is also at risk as Vietnam may lose its export markets to rivals when local enterprises do not have materials for production to meet overseas orders, says Pham Tat Thang, an expert with the Trade Research Institute, on Dat Viet.

Local media also points the finger at local enterprises, saying they are partly to blame for the current shortage of materials due to the lack of cooperation with farmers.

“The key point is that farmers do not have trust in local enterprises, who also nurture a short-term vision, rushing to buy materials upon scarcity but pushing down prices upon ample supply,” Phap Luat quotes Vo Tri Thanh, deputy director of the Central Institute for Economic Management. He suggests that local traders work closely with farmers for mutual benefits, and the problem will be settled.

Farmers when selling their agricultural products to traders care the least about problems that may occur to local enterprises, nor do they mind how trade with China might bring about mishaps. But Vietnamese traders as well as State agencies should memorize the bitter lessons, and the most basic lesson in business is “never put all eggs in one basket,” say experts.

Nguyen Minh Phong of the Hanoi Institute for Socio-Economic Development says on Thanh Nien that if exports are concentrated on a single market, then risks will emerge.

Le Dang Doanh, a well-known economist, echoes the point, saying on the same paper that the concentration will result in both risks and disadvantages for the local economy. However, due to Vietnam’s big trade deficit with China, “we have managed to boost exports to this market and thus have led to this concentration.”

Nguyen Dinh Cung, deputy director of the Central Institute for Economic Management, observes that the heavy reliance on the Chinese market for Vietnam’s farm produce has existed for over ten years now, but the problem has not been properly attended to.

Big risks have repeated themselves, year in year out, especially when it comes to farm produce exported to China. Still fresh in Vietnamese traders’ memory are big volumes of vegetable, water melon, banana and other fruits that were sold to Chinese traders at extremely low prices or even were dumped as rubbish when long lines of trucks loaded with such farm produce waited in vain at border gates to enter China.

Still fresher in our mind is the dragon fruit, whose price in the key growing region of Binh Thuan has crashed to a mere VND4,000 a kilo now after staying high above VND20,000 last month, as Chinese traders learned of the bumper crop. The mishap may repeat soon with Vietnam’s litchi, as the harvest will peak soon.

“The story of cassava should serve as a lesson,” says Nguyen Tri Ngoc, head of the Cultivation under the agriculture ministry. “Chinese traders offered a high price, and farmers rushed to grow this crop en masse. And upon the bumper crop, Chinese traders refused to buy,” Ngoc is quoted on Phap Luat. – SGT

Tags: Vietnam agriculture