Low prices, farmers' plight blamed on rice glut

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Workers load bags of rice into containers for export in Saigon Port, Ho Chi Minh City

Vietnam should consider reducing rice production and switch to other crops like maize and soy bean that bring farmers higher profits, according to experts.

"If land under paddy is reduced by two million hectares, rice prices could go up 1.5-2 times and farmers could make profits," former deputy prime minister Nguyen Cong Tan said.

The land could be used for growing other crops, animal husbandry, and aquaculture, which offered farmers bigger profits.

Rice prices were too low, and many farmers made losses.

Exports were likely to become even harder in future since some countries which used to import the grain now produced it.

Besides, increasing rice production in India, Cambodia, and Myanmar would put bigger pressure on Vietnam's rice exports.

Vietnam needed only five million hectares of land to grow 30 million tons of paddy, which was enough to ensure food security. But it had over seven million hectares of land under rice and produced 43.7 million tons.

Echoing Tan, Trinh Van Tien of the Institute of Policy and Strategy for Agriculture and Rural Development, said: "We should set a goal of increasing farmers' incomes instead of rice exports.

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"Rice exports are now unprofitable. We have often exported rice at lower than production cost."

In 2012 Vietnam became the world's biggest exporter, shipping over 7.7 million tons, but its earnings dropped by nearly 2 percent to $3.5 billion.

"Our rice production cost has increased due higher prices of electricity, gasoline, and agricultural inputs. But our earnings have decreased," Tien said.

"We remain low-priced, which helps the world's consumers but puts our farmers at a disadvantage."

The average monthly income of farming households in Vietnam's rice basket, the Mekong Delta, is only VND535,000 ($25.5) per head, according to international NGO Oxfam.

Higher prices for poor

Asked if higher prices of rice would not affect the poor, Tien pointed out no policy can benefit everyone.

So policies that benefit a majority should be adopted, he said, and the government could have other policies to support the poor.

Vietnam should not worry too much about food security either since it could use the profits earned from other farm produce to import rice, he said.

"Many countries do it," he said, citing the example of the Philippines. The country, where 40 percent of the population works in agriculture, does not grow much rice and prefers to import it for local consumption, he said.

Its main farm products are maize, banana, coconut, eggs, pork, beef, and fish, which fetch billions of dollars from exports even after spending on rice imports, he said.

A reduction in Vietnam's rice production would affect the world market, but only for a short time, he said, citing the case of Thailand.

When Thailand changed its rice export policy in 2011, the world market was affected for only three or four months, he said.

"Importers quickly find ways to ensure national food security, while exporters adjust their shipments based on market changes."

Not easy

For several years now the government has been planning to replace rice with other crops in some areas with low yields. But it remains on paper due to lack of specific directions for farmers about what crops to grow, where to sell them, and technical and financial support for changing their crops.

Agricultural officials in the Mekong Delta provinces of An Giang and Dong Thap said many farmers continue to grow rice because they do not which other crops to grow.

Le Quoc Doanh, head of the Cultivation Department, said farmers in some areas could switch from rice to maize, sesame, and soy bean, which Vietnam now has to import.

The country spends $3 billion on buying 1.5-1.6 million tons of maize, 2.4 million tons of soya meal, and 600,000 tons of soy beans.

Mai Thanh Phung of the National Agriculture Encouragement Center said profits from maize and soy are higher than from rice, and conditions in the Mekong Delta are ideal for growing them.

In Dong Thap, farmers make a profit of VND25.3 million per hectare from sesame and VND16.6 million from soy bean compared to only VND2.5 million from rice.

But some agricultural experts said it is not easy to sell the items since Vietnamese production costs are much higher than import prices.

Nguyen Van Chuong of the Southern Agriculture Technology Institute said farmers can only make profits from soy bean at VND17,000-18,000 per kilogram, while import prices are only VND12,000-13,000.

But Nguyen Tri Ngoc, former head of the Cultivation Department, said production costs of maize and soy bean could be reduced if they are grown on large areas using advanced technologies.

 CUTTING TARGET

Vietnam has cut its rice export target for this year to 7.5 million tons from the earlier eight million tons due to increasing supply from Thailand.

According to the Ministry of Industry and Trade, Thailand plans to export its rice reserve of around 1.5 million tons every month from now until the end of this year.

To boost the export, the country is likely to reduce prices, putting pressure on Vietnamese exports.

The price of Vietnamese 5-percent broken rice on July 10 was $380 per ton compared to $475 for Thai rice.

Vietnam's export revenues in the first half of this year were $1.6 billion, down 7.4 percent year-on-year, according to the General Statistics Office.

Its main markets were China, the Philippines, and Malaysia.

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