Cash crops may fail to cash in

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Dark clouds are gathering over the brighter picture painted for exports this year for several agricultural and fisheries products

Vinacafe is the nation's biggest coffee exporter, and it has not signed any contract for nearly two months now.

This is abnormal, for demand for coffee is rising in the world market.

Nguyen Cong Hoang, Vinacafe's deputy general director, said the exporter did not want to incur losses, so it has suspended signing new contracts with customers.

Hoang said international importers were pressurizing local coffee businesses by offering low prices and setting prices for Vietnamese coffee through commodities exchange floors.

Coffee is Vietnam's first export commodity to be traded on London's commodities exchange.

Hoang said Vietnamese coffee was targeted by hedge funds which want to control the prices. And as a result they were falling sharply, he said.

Two years ago, the funds' control over prices of agricultural products engendered a food crisis in term of prices.

Do Ha Nam, deputy chairman of Vietnam Coffee and Cocoa Association, said current prices had dropped 44 percent from last year to US$1,180-1,200 a ton, worrying local coffee exporters.

"It is unbelievable Vietnam's coffee production will reduce due to harvest losses this year and prices go down in the markets at the same time," he said.


Though the growth in Vietnamese exports was only about 0.1 percent in the first two months, the real figure is over 19 percent. Volumes of crude oil and gold for export reduced as they were used for local factories. Difficulties faced by local exporters in agricultural products like rice, coffee or others were temporary and were solved by partners cooperating together. At first, the ministry supported associations in increasing stockpiles for rice and coffee and in decreasing volumes for export to stem the drop in prices. The practice also aimed to prevent importers from setting prices for Vietnamese export products like rice and coffee. Second, the ministry will ask the central bank to join our efforts to keep interest rates at a reasonable level for local businesses. Otherwise, Vietnamese export products will be less competitive than others. Vietnam has set a goal of a 6 percent increase in exports this year.

Nguyen Thanh Bien, deputy minister of Industry and Trade

He noted domestic production was predicted to drop by 20 to 30 percent, threatening a fall in Vietnam's coffee export turnover to $1 billion this year from $1.7 billion last year. Vietnam is the world's top robusta coffee exporter and second in terms of total volume after Brazil.

Nam said the association was buying 200,000 tons of coffee, raising the national stockpile in a move to stem the drop in prices.

Weather factor

Meanwhile, Vietnamese rubber businesses are praying that the weather does not worsen.

Tran Thi Thuy Hoa, secretary general of Vietnam Rubber Association, said local exporters had new clients in the China and India but were afraid they might not produce enough as bad weather has hit plantations throughout the country.

Matching last year's latex exports would be a challenge this year, Hoa said. Vietnam's rubber exports will drop nearly 40 percent to 700,000 tons this year from 730,000 tons worth $1.2 billion in 2009, she said.

For the fisheries sector, the dampener has come from new EU requirements and the US Farm Bill.

The Secretary General of the Vietnam Association of Seafood Exporters and Processors, Truong Dinh Hoe, said they have asked exporters to fight against illegal, unreported and unregulated fishing since early 2010.

The new EU requirements would affect 20 percent of the country's fisheries exports this year, he said, adding that farmers would need more time to adapt to the new stipulations after decades of doing things differently

Hoe said the bill, which will include Vietnamese tra, basa fish or pangasius under the catfish category and be subjected to stringent monitoring by US government agencies, has worried importers and exporters alike.


The bill could potentially cause a drop in Vietnam's seafood exports to the US market this year, he added.

The secretary general of Vietnam Cashew Association, Dang Hoang Giang, said local businesses were facing a shortage of capital and human resources this year.

Giang said the industry would need VND14.2 trillion or about $761 million to collect cashew nuts from local and international suppliers for their factories but it had become more difficult for local businesses to get loans from commercial banks that were following policies to limit credit and increase interest on loans.

Cashew businesses were facing increases in production costs of between 20 percent and 35 percent compared to 2008-2009 and 2007- 2008 fiscal years due to growing input costs while prices were falling in the world market, Giang said.

Tax, capital barriers

Vietnam is emerging as an electronic goods and high-tech exporter in the region, with the sector witnessing a growth of 30 percent in exports in the last two months.

Pham Thien Nghe, deputy chairman of the Vietnam Electronic Industries Association, said foreign businesses like Samsung and Cannon were contributing greatly to this growth and Intel would join the game later this year.

However, it was unfair for assemblers to be charged with higher import fees on unpackaged components and accessories than the whole unit, said Nghe, adding it was making local production costs higher than offshore factories.

The mobile phone was an example, Nghe said. Vietnamese electronic and high-tech assemblers who paid a 5 to 15 percent tax on unpackaged components while the phone as a whole was duty free if imported from China. The zero import tax is part of commitments under the ASEAN-China Free Trade Agreement that Vietnam has signed.


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