Export drop hits prices for Vietnam rice farmers

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 A farmer stands nearby as long columns of rice dry out in Phu Nhuan district, Vietnam

Over-production and lower exports have left rice farmers in Vietnam's Mekong Delta holding on to their stocks in the face of lower prices, analysts say.

Vietnam is the world's second-largest exporter of rice and the Delta accounts for more than half of the country's production.

But surpluses, the beginning of the wet season, and a shortage of places for drying wet rice are adding up to heavy potential losses, says Vo Tong Xuan, an internationally-recognized rice expert.

He fears Vietnam will lose one million tons of the grain this season.

The country hopes to sell about six million tons on the international market in 2010, a figure similar to last year's, but shipments fell in the first half. Between January and June Vietnam exported more than three million tons, down 8.76 percent on the same period a year earlier, according to official statistics.

Export value for the period fell only 1.32 percent, which Xuan said indicates that shippers received a good price. The farmers, however, did not fully benefit from those proceeds.

Xuan, based in the Delta province of An Giang, said farmers may have over-produced this year on an expectation of earnings after state-owned VinaFood assured them the Philippines would buy in bulk.

But the Philippines had not yet confirmed all its purchases, Xuan said, while other buyers like those in Europe were betting on fresh falls in the price and delaying their orders.

Le Van Banh, director of the Mekong Delta Rice Research Institute, notes that competition from other exporters including India and Pakistan leaves less room for Vietnamese grain abroad, while at home "we have an abundance of rice so the prices are relatively low."

Bags of rice piled on the porch of Dang Thi Bay's house in Tien Giang province symbolize the problem.

With prices down she is not rushing to sell her 15 tons (16.5 tons) of stock.

"If we take into account the fertilizer price and the costs of production, selling now would bring a loss. It is too cheap," says the mother of five.

"We're waiting for the price to go up, but don't know how long that will be," Bay says at her home in Phu Nhuan commune.

For one kilogram (2.2 pounds) of paddy unmilled rice she can get between VND3,200 and 3,300 (about 18 cents) from a local processor. That is a drop from VND4,000 to 4,200 last year.

Bay has started growing a new crop and says she can keep her current stock for two months before rainy-season humidity could take its toll. She fears losing her harvest.

To help farmers, the government has announced preferential loans to local businesses for buying up to one million tons of rice. They have been asked to purchase one kilogram at a minimum price of VND3,500, according to Vietnamese media.

In Phu Nhuan, just down the road from Bay's house, Ngo Thi Thanh Thuy works in a family trading business, buying paddy from neighboring farmers, milling it and selling to markets.

"We are still buying because certain families in difficult situations keep selling, but we are having problems reselling it," she said.

In normal times the paddy is milled in the morning and resold in the afternoon but lately four or five days pass before the business can resell.

Xuan, the professor, says too many farmers plant three crops of rice annually. He would like to see lower production in the Delta to assure them better prices.

"It's very easy to ramp up production but difficult to increase (their) revenues," he said.

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