Farmers will suffer if rice price overly high, expert warns

A close relationship exists between the rice price, export volume and inflation. If rice prices are overly high, farmers suffer instead of profiting, according to Dr Vo Hung Dung, Director of the Vietnam Chamber of Commerce, Can Tho Branch.

Statistics show that when the rice export volume increases, the inflation rate decreases. In 1995, Vietnam exported 1.988 million tons and the inflation rate was 12.9 percent. In 1996, when the export volume jumped to three million tons, the inflation rate decreased to 4.5 percent. Back in 1989, when Vietnam had surplus rice for export (1.42 million tons), the inflation rate dropped sharply.

By extension, when the rice export price increases, so does the inflation rate. According to Dung, when the rice export price increased to $614.8 per ton in 2008, the inflation rate also rose to 19.9 percent. In March, April and May of 2008, the sharp price increases brought about high inflation.

The World Bank believes that farmers benefit when the rice price increases. However, if the rice price goes up past a certain level, the consumer price index (CPI) jumps. As the result, farmers pay more for daily necessities.

Currently, the rice price has climbed to nearly 6,000 dong per kilo, meaning means higher revenues for farmers. Yet, they are paying higher prices for fertilizer and pesticides. The fertilizer price has increased by 15,000-20,000 dong per pack.

The Ministry of Agriculture and Rural Development’s recent survey of farming households in eight provinces concluded that average profits have decreased by 8-31.2 percent due to the higher costs of pesticides and fertilizer. 54 communes reported that consumption of meat and fish has decreased by 25 percent.

At the 2009 conference, the Food and Agriculture Organization (FAO) warned that the number of hungry people worldwide had reached 1.02 billion, up by 10 million since 2008, because of sharp food price increases.

Meanwhile, Dung acknowledges that Vietnam, although a big rice exporter, cannot profit. Intermediaries, who undertake only 10 percent of the labor in the rice production chain, enjoy 67 percent of the added value. Farmers, who provide 50 percent of the labor, gain smaller profits.

To date, blame is placed on these middle-men, who collect rice from farmers to sell to processors and exporters.

Saigon Tiep Thi newspaper, quoting anonymous sources, reported that there are some two million such intermediaries. When the rice price goes down too far, the middle-men are criticized for “controlling the rice purchase price” and making small profits for farmers.

Dung admits this is a common problem in many other developing countries, but pointed out that it is not feasible to cut out the intermediaries, who are necessary elements in the market. They go to every farm to collect rice, since farmers cannot build up a large enough network to do the job.

He concluded that intermediaries will exist until small-scale production and rural transport infrastructure conditions are improved.

VietNamNet/TBKTSG

Tags: Vietnam agriculture, Vietnam rice price