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Rice stockpile policy harvests all-round gains

Update: May, 20/2013 - 08:36

by Tran To Nhu

The Government purchased one million tonnes of winter-spring rice from February 20 to May 20 for temporary stockpiling in the Mekong Delta. The Government also covered 100 per cent interest rate on loans for businesses to buy rice for a three-month term.

However, experts are calling for a new mechanism that could create incentives for rice export and consumption as some provinces reported that the Government policy was not strong enough to lift the buying price.

Viet Nam News examines the situation.

How do you rate the effectiveness of the Government's stockpiling programmeto buy 1 million tonnes of rice in the Mekong Delta?

Nguyen Trong Thua, head of the Agro-Forestry Processing and Salt Industry Department, Ministry of Agriculture and Rural Development

Nguyen Trong Thua

It's estimated that the rice export volume for the first four months in the area was 2.5 million tonnes and rice inventory was about 2 million tonnes. At the same time, world inventories are forecast at a record of 171 million tonnes as supply beats consumption for an eighth season, according to the Food and Agriculture Organisation.

Compared with the beginning of 2013, rice export price dropped about US$20-30 per tonne in the Asia markets, for example Thailand's 5-percent broken rice was offered at around $570-580 per tonne in March.

In Viet Nam, in February, the average price was $451 per tonne, a decrease of about $80 compared with the same period last year. Therefore, the Government's stockpiling programme to buy 1 million tonnes contributed to bringing up dry rice field price to VND5,100-5,300 per kilo, higher than previously VND100-200 per kilo. The price level is 38-46 percent higher than the average production cost announced by the Ministry of Finance at VND3,616 per kilo.

However, the benefits are different among provinces, also depending on the situation in each province and the rate that farmers can sell rice directly to export companies.

Truong Thanh Phong, chairman of Viet Nam Food Association (VFA)

Truong Thanh Phong

By the end of the programme, 116 businesses had been assigned to participate in the stockpiling effort. The quantity target has been achieved. Most of the farmers in the Mekong Delta were able to sell off their rice in the fields. We estimate that 97 per cent of the rice was sold out.

It's true that the buying of jasmine rice in some provinces was difficult, such as in Kien Giang and Hau Giang provinces, due to the quality not meeting technical standards and mixing up different varieties. Some farmers want to keep their rice to wait for higher prices. Localities are reassessing whether rice are still left to help farmers get ready for harvesting the summer-fall crop.

In the race with Thailand and India, Viet Nam is not at the same level in the sense that the Government cannot buy the entire stockpile but only part of it at the peak of harvest time. Thailand still has 17 million tonnes of rice unsold.

The policy here is to stimulate the market, not to provide direct assistance to the farmers. In terms of direct support, farmers already can benefit from many Government decrees to lower taxes or support buying mechanic equipment.

Dinh Thi Nuong, head of the Agro-Forestry-Aquaculture Section, Pricing Department, Ministry of Finance

Dinh Thi Nuong

During the stockpiling programme, rice was sold at the level that could guarantee farmers some profits and stabilise the situation. Through this programme, we have managed to keep the premises of rice export price amid competitions in the rice market get deeper.

In terms of setting a direction, the average production cost announced by the Finance Ministry at VND 3,616 per kilo was based on the data from finance departments and agriculture and rural development departments from the 13 provinces in the Mekong Delta.

Phan Van Chinh, director of the Industry and Trade Ministry's Import-Export Department

The trade ministry highly recognises the effectiveness of the programme. The difference here between Thailand and other neighboring countries is that the Government would buy rice amid production. The rice export of Viet Nam is about 12 million tonnes per year, which is about one fourth of the total production volume, the stockpiling has somewhat helped elevate the market.

The trade ministry is working to expand rice export markets to Africa and North and Central America, along with our traditional rice export markets.

The Deputy Minister Vu Van Tam said that not all localities could get a 30-percent profit level. Does that mean farmers do not benefit much from this programme? What do you think are the shortcomings of the stockpiling programme?

Thua: The stockpiling volume is only about 15 per cent of the volume that must be consumed in the area and the harvest and consumption time also differs accordingly to each province. The allocation of businesses participating in the program also affected the stockpiling program not meeting the specific needs.

In 2013, price increased about VND100-200 per kilo after the stockpiling policy took effect and if it did not happen, prices would drop lower, which negatively affect the farmers.

Phong: The stockpiling policy was meant to stimulate the market at peak harvest time and farmers can only expect the indirect benefits. The goal is to keep the rice price at high during the temporary inventory period.

Phan Van Chinh

The policy contributed to the farmers escaping the situation of price dropping in bumper crops. We cannot say that this policy do not benefits farmers but the effects are not as high as expected.

The finance, trade ministries and VFA all agreed that the Government's move to spend VND200 billion ($9.6 million) to prop up interest rates for three months to support businesses in the programme was necessary. We have to put it into account that the buying of 1 million tonnes would positively affect the rest of the 85 per cent rice output of the crop.

However, the Agriculture and Rural Development Ministry already admitted that the allocation of volume and businesses in the provinces incurred some unexpected results.

The public has been under the perception that farmers are losing out even when rice export is high, and it's mostly because they must rely on traders. Can this be changed?

Phong: Considering our situation, the Government cannot have the money to buy the entire stockpile rice of farmers when prices drop like in Thailand and India. In Thailand, for example, 90 per cent of rice is also traded through middlemen.

Currently, all of Viet Nam's foodstuff products are not sold directly to businesses but must go through traders. Our businesses are not competitive enough to organize a business chain that buy on the fields. The farmers also cannot dry the rice and transport to companies. The Government also requested VFA to work with and assess the operation of rice traders but we have not been able to do so.

Relevant ministries and the Government are working on finding a mechanism that can increase the benefits of farmers directly. That means they can sell rice at a price competitively with the world market. The VFA is suggesting to allow provinces to calculate and monitor the output crop in their respective area and the capacity of businesses, thus tightening the task of production, consumption and export.

However, localities can coordinate with relevant agencies and ministries. We hope that the upcoming regulation on rice stockpiling would help reduce the shortcomings of the policy in recent years. The bottom line is to benefit both farmers and businesses.

Thua: The Ministry is working with ministries and other agencies to establish the regulation on rice stockpiling and submit for Government approval soon. The goal is to connect all of the supply chain, from production to consumption and export so that we can be pro-active in ensuring that farmers can get the benefits, adjusting with the marketing situation and boosting up the domestic consumption and rice export.

I think there must be a long-term solution to increase the farmers' production level, quality of rice and reducing the cost by limiting the use of pesticides and fertilisers. The plant department of the ministry is working with other partners to issue a circular to encourage the diversification of rice varieties.

The Government is also working on the regional integration and integrating the farmers, the scientists, the businesses and the banks, evidently in the model of "major rice fields" that some provinces are implementing. Besides, instead of buying stockpile rice every season, it's necessary to adjust decree 109 issued in 2010 on rice trading to encourage rice exporting firms to invest in material areas.

In addition to requiring rice firms to have at least one warehouse with a storage capacity of over 5,000 tonnes and milling lines of at least 10 tonnes per hour, Decree 109 should also require exporters to have stable rice material areas.

Viet Nam currently has more than 100 rice exporting companies and if all of them invest in material areas, the Mekong Delta would have more than 500,000 hectares with expected output of about 3 million tonnes under the management of businesse

Chinh: The trade ministry and other relevant agencies all agree that maintaining the price for farmers is very important, which spurs the motivation for production. The trade sectors will continue monitoring the production level, the situation of demand-supply to suggest necessary adjustments. — VNS

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