Vietnamese farmers in the southern Mekong Delta are facing with large quantities of unsold rice because expected purchases have not been made under the government's plan to build up temporary reserves.
According to the Ministry of Agriculture and Rural Development (MARD), output from the 20132014 winter-spring crop in the region reached about 4.3 million tons, of which 3.2 million tons have been harvested thus far.
To ensure stable prices and profit for the farmers, the government asked enterprises to purchase 1 million tons of rice 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, local Vietnam News daily reported Monday quoting sources from the Vietnam Food Association (VFA).
Farmers in southern Dong Thap province said the rice they had harvested are being stored in warehouses but trading enterprises are showing no interest, so they asked the government to take steps to encourage enterprises and boost price purchases soon.
Meanwhile, rice traders in An Giang province, said purchases depend on whether or not enterprises have rice export contracts and currently enterprises were finding it difficult to export rice.
According to Nguyen Minh Toai, director of the Can Tho City Industry and Trade Department, unstable import demand has directly affected the time and price of purchases by enterprises.
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.
Truong Thanh Phong, Chairman of the Vietnam Food Association ( VFA), said that in 2013 several enterprises purchasing rice had suffered losses because of difficulties in exporting the grain.
Based on their demand, the association has distributed purchase quotas to 133 members, but those 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, Vietnam exported 1.31 million tons of rice, worth 616 million U.S. dollars, a year-on- year decrease of 14.9 percent in volume and 10.4 percent in value, according to the Ministry of Agriculture and Rural Development ( MARD).
The ministry attributed the reduced export value to a fall in global prices of Vietnamese rice by 10-15 U.S. dollars per ton to between 355-505 U.S. dollars, depending on the variety and quality.
To solve the farmers' unsold rice, MARD asked relevant agencies, including the ministry of industry and trade, VFA and export enterprises, to expand consumption markets. It also instructed the trade ministry to closely monitor developments of the global rice market, including activities of other major exporters like Thailand and India, and importers like the Philippines. Promotion activities in China and Mexico should also be expanded.
Under the Prime Minister's direction, the State Bank of Vietnam instructed commercial banks to advance loans at preferential interest rates to enterprises making purchases under the temporary reserves program. The central bank itself pledged a credit package of 8 trillion VND (376 million U.S. dollars) for businesses involved in purchasing rice for reserves.
MARD expects the Mekong Delta to produce 8.6 million tons of rice this year, including 4.3 million tons from the 2013-14 winter- spring crop.
Vietnam exported over 6.6 million tons of rice in 2013, of which the Mekong Delta accounted for 80 percent. VFA forecast the country would export around 6.7-7 million tons of rice in 2014.
Vietnam is one of world's richest agricultural regions and is the second-largest (after Thailand) exporter worldwide and the world's seventh-largest consumer of rice. The Mekong Delta, comprising one centrally-run city of Can Tho and 12 provinces, is the heart of the rice producing region of the country. Its population is about 17 million people, 80 percent of whom are engaged in rice cultivation.