Workers stock rice at the Vinafood2 warehouse in Can Tho City. — VNA/VNS Photo

HA NOI (Biz Hub) — Farmers in the Cuu Long (Mekong) Delta need help in dealing with large quantities of unsold rice because expected purchases have not been made under a plan to build up temporary reserves.

The Tin Tuc newspaper reported last week that ever since farmers in the region began harvesting the winter-spring crop last month, prices in the local market have fallen, except for a brief five-day surge.

The Ministry of Agriculture and Rural Development (MARD) estimates output from the winter-spring crop in the region to reach 4.3 million tonnes, of which 3.2 million tonnes have been harvested thus far.

To ensure stable prices and profit for the farmers, the Government had asked enterprises to purchase a million tonnes for temporary reserves from March 15.

Rice prices surged on the announcement but since March 20, they have continued to drop because enterprises have not purchased enough, although they have been given quotas.

Farmer Le Van Long of Tan Hong District in Dong Thap Province said the rice he has harvested is being stored in warehouses and several parts of his house because trading enterprises are showing no interest. He has only been able to sell his rice to individual traders so far, he said.

Long as well as other farmers in Tan Hong District are hoping the Government will take steps to encourage enterprises and boost price purchases soon.

Vo Van Hung, a rice trader who is a supplier for rice exporters in Thoai Son District in An Giang Province, said purchases depend on whether or not enterprises have rice export contracts. He noted that enterprises were finding it difficult to export rice.

Hung's observation was echoed by Nguyen Minh Toai, director of the Can Tho City Industry and Trade Department, who said unstable import demand has directly affected the time and price of purchases by enterprises.

Toai said the failure of allocation of purchase quotas and disbursement of loans that enable rice purchases to keep time with the harvest has not helped matters. Cumbersome loan procedures have only worsened the situation, he added.

Thai, India factors

Truong Thanh Phong, Chairman of the Viet Nam Food Association, said that last year, several enterprises purchasing rice had suffered losses because of difficulties in exporting the grain, so they were wary this year.

Based on their demand, the association has distributed purchase quotas to 133 members, but these exporters are also worried by information that Thailand is about to sell its rice reserves, which would make export prices drop further.

In the first quarter of this year, there has been a year-on-year reduction of 14.9 per cent in rice export volume to 1.31 million tonnes and a 10.4 per cent reduction in export value to US$616 million, according to the Ministry of Agriculture and Rural Development.

It attributes the reduced export value to a fall in global prices of Vietnamese rice by $10-15 per tonne to between $355 and $505, depending on the variety and quality.

Solutions sought

While Trade and Industry Minister Vu Huy Hoang has said his ministry is studying solutions to deal with the current impasse, MARD has asked the MoIT, VFA and export enterprises to expand consumption markets.

It has said the trade ministry should closely monitor developments the global rice market, including activities of other major exporters like Thailand and India and importers like the Philippines. It should also carry out promotion activities in China and Mexico.

The agriculture ministry has also noted that under the Prime Minister's direction, the State Bank of Viet Nam has asked 14 commercial banks to advance loans at preferential interest rates to enterprises making purchases under the temporary reserves programme.

Phong of the VFA said that if the Government continues this programme, enterprises can make their purchases and not suffer losses if they are unable to sell, as has happened earlier.

More banks join

Meanwhile, the State Bank of Viet Nam (SBV) has accepted two more commercial banks to join the rice reserve purchase programme to buy one million tonnes of rice from the 2013–2014 winter–spring crop.

The Tien Phong and Sai Gon joint-stock banks will provide low-interest rates on loans to members of the Viet Nam Food Association, who will in turn buy paddy from Mekong Delta provinces under the national rice reserves scheme.

The banks provide loans with a maximum term of six months at an annual interest rate of seven per cent between March 20 and April 30.

Besides, the State exchequer will subsidise 100 per cent of the interest rate for loans used to buy paddy or rice from March 20 to July 20. Beyond this period, customers have to pay the higher interest rates required by commercial banks.

Earlier, the central bank had 14 commercial banks join the paddy and rice reserves purchase programme for the 2013 – 2014 winter – spring crop.

The banks are Agribank, Vietinbank, Vietcombank, BIDV, MHB, Techcombank, SHB, Oceanbank, OCB, Eximbank, MB, LienVietPostBank, ACB and HDBank.

The plan to purchase one million tonnes of rice for reserves was approved by Prime Minister Nguyen Tan Dung at a conference in Can Tho on March 15.

At the conference, the central bank pledged a credit package of VND8 trillion (US$376 million) for businesses involved in purchasing rice for reserves.

It also planned to offer loans at preferential interest rates (7 per cent per annum for two- to three-year loans) for enterprises involved in large-scale rice production, seafood processing and exports, and to those applying advanced technology.

According to the deputy director of Dong Thap Province's Department of Agriculture, Phan Kim Sa, 11 businesses in the province taking part in the rice reserve programme plan to purchase 85,000 tonnes of rice from the 2013– 2014 winter – spring crop. These firms have fullfilled over 50 per cent of the rice purchase targets.

However, in some remote areas, businesses were reluctant to purchase paddy from farmers, causing paddy prices to fall slightly last week.

The Ministry of Agriculture and Rural Development expects the Mekong Delta to produce 8.6 million tonnes of rice this year, including 4.3 million tonnes from the 2013-14 winter-spring crop. — VNS