Rice storage scheme unprofitable for farmers
By Hong Ngoc in HCMC
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| Bags of unmilled rice pile up at a farming household in Can Tho City in the Mekong Delta - Photo: Anh Khoi |
For many years a government scheme has supported farmers when rice prices are low by purchasing their rice for temporary storage. Rice farmers this harvest have not benefited as much by the scheme because of a change in the way the buying price is set.
Price problems
The Government in late June issued a decision asking provincial enterprises under the Vietnam Food Association (VFA) to buy one million tons of rice from farmers at market prices. Interest-free loans for purchasers would be available between July 15 and November 15. This was in contrast to previous years when the Government had assigned the Ministries of Finance, and Industry-Trade to cooperate with VFA to set buying prices that would ensure a minimum profit of 30% for farmers.
According to Can Tho City’s Department of Agriculture and Rural Development, local enterprises under VFA have so far this summer-autumn harvest bought 190,000 tons of unmilled rice (equivalent to 95,000 tons of rice), paying as little as VND3,500 per kilo, while city traders, who often export to Cambodia or Laos, have bought nearly 60,000 tons of unmilled rice at VND3,000-3,300 per kilo. The average production cost for farmers is VND2,950 per kilo.
As a result farmers’ profits have dropped to as low as 1.6% or 3.1% in unmilled rice sales to traders and 15.8% to enterprises. For farmers, profits from sales of high-quality unmilled rice were even less, as the average production cost was VND3,200 per kilo.
Summer-autumn rice is generally is lower quality than winter-spring crop rice due to seasonal problems, making it less attractive to enterprises.
During the summer-autumn crop, farmers in the Mekong Delta experience prolonged hot weather and saltwater intrusion. Rains during harvesting also cause problems that impact rice quality.
Provincial authorities said the Government should instruct enterprises to buy unmilled rice for a minimum of VND4,000 a kilo, so farmers can earn a 30% profit and prepare them for the next season.
Farmers disadvantaged
After the VFA instructed its 48 member enterprises to buy summer-autumn rice under the new “market-price” scheme, the provincial governments asked VFA and the relevant ministries to reset the buying prices to protect farmer’s profits.
VFA general secretary Huynh Minh Hue says the association only gave suggestions for the minimum price this year and was still waiting for Government advice, as a specific price was not mentioned in the decision.
“The Government regulated us to buy rice at market prices and we should follow it,” Hue says. “VFA announced the buying price of VND3,500 a kilo in the last winter-spring harvest. But it is no longer reasonable, because the production costs for this summer-autumn crop are higher,” Hue says.
Meanwhile, local farmers have been selling unmilled rice to traders at far lower prices than the VFA’s suggestion.
The changes in pricing have left many enterprises confused, because they are required to buy at both market prices and above the VFA’s minimum rate of VND3,500 a kilo.
While the provincial authorities bemoan the low prices, the enterprises complain about the problems of exporting low quality rice.
Both enterprises and farmers are still waiting for the Government to fix the pricing problems, as there was no mention of the pricing at a recent meeting of Ministry of Industry and Trade and VFA.
The Saigon Times Daily