The price of paddy rice (unhusked rice) has fallen 20 percent month on month to VND4,000-4,200 per kilogram, while that of long-grain, better-quality rice remained at VND5,000-5,700 a kilogram.
Rice consumption was reported to be very sluggish and concerns increased as traders rejected the low-quality IR50404 variety. Farmers are worried that prices will continue to drop, even as they prepare for the next crop.
New situation, old reasons
Farmers need to sell off their rice crop immediately to pay off debts and prepare for the next season, Dr. Le Van Banh, Director of the Mekong Delta Rice Research Institute told Thoi Bao Kinh Te Sai Gon newspaper.
Hence, at this point in time, the government must buy up farmers’ stocks for temporary stockpiling, so as to assist them in cultivating the next crop.
But local farmers have also cast doubt on a plan by the Vietnam Food Association (VFA) to stock up on paddy, citing the continued free fall of paddy prices in the Mekong Delta.
Farmer Le Van Thang in Long An province’s Tan Hung District told Tuoi Tre his family could not start to harvest 6 hectares of mature IR 50404 paddy rice since he could not find any traders ready to buy after a week of searching.
Trader Tran Thi Diep in the same locality said prices are on a free fall with lessened demand from rice exporters.
“I have hundreds of tons of IR 50404 paddy rice stockpiled without knowing when I can sell it, so now I cannot buy more,” Diep said.
“I have even abandoned some deposits paid for some farmers as I cannot maintain this situation any longer,” she added.
As a result, rice traders are now focusing on buying fragrant and long-grain rice only.
Traders at Ba Dac wholesale market attributed the present poor paddy demand to the prevalent wait-and-see, Thoi Bao Kinh Te Sai Gon newspaper reported.
The chance for any IR 50404 farmers to sell their stocks is 20-30 percent now, said another trader in Tien Giang Province’s Cai Lay District, adding that the only choice for them is to dry all the unhusked rice and bring it home.
The Department of Crop Production under the Ministry of Agriculture and Rural Development told Tuoi Tre that it has given warnings on surplus supply many times this year, recommending provinces in the region to set aside only 20 percent of the rice-growing land for IR 50404.
But the real IR 50404 growing areas have recently accounted for 50 percent in many places, and in some areas that ratio reaches over 70 percent.
The rate in Dong Thap Province is 50-60 percent, though farmers have already been well informed about the situation, said Duong Nghia Quoc, director of the provincial Department of Agriculture and Rural Development.
The average rate in An Giang Province is about 27 percent, while the rate in remote areas surges to over 50 percent, said Doan Ngoc Pha, deputy director of the municipal Department of Agriculture and Rural Development.
When the exports of such low-quality rice were well enough for the Summer-Fall and the Fall-Winter crops, farmers began to stick to it for this crop, said experts.
The high-yielding rice variety, which is easier to cultivate compared to the other, higher-quality ones, brought farmer great profits when prices stayed above VND7,000 a kilogram for the last two crops.
State-run rice exporters and the Vietnam Food Association (VFA) must have responsibility over the current situation with their past announcement, said Dr Le Van Banh, head of the regional rice institute.
The exporters then said the quality of the current IR 50404 variety had been improved so that it can be used to proves medium and high quality rice for exports. VFA said IR 50404 would only face stagnancy in consumption in the Summer-Fall crop, while the coming Winter-Spring crop would see good sales for the rice variety.
As the price of IR50404 was as high as higher-quality one, more farmers picked it as their ultimate choice for this crop, Banh said.
The imbalance in rice growing strategy has led to the situation in which low-quality rice faces surplus supply.
The lack of high-quality rice
VFA deputy chairman Pham Van Bay said though world demand and prices of fragrant rice is still very attractive, local supply cannot keep pace with it.
Many rice exporters said they could not find high-quality rice for processing 5 percent broken rice for export to Hong Kong, Taiwan and the Middle East.
“We have spent a month in vain trying to find supply for future contracts for such high-quality rice,” said Bui Trung Chinh, deputy director of Kien An Phu Trading Co in Kien Giang Province.
With the new structure of the world rice market, Vietnam cannot keep using low-quality rice for head-on competition with that from India and Pakistan, said experts.
So, the country needs to reorient its rice making and exporting sectors and focus on developing high-quality varieties and reallocating rice-growing areas for specific varieties to raise the value of the export rice , they said.
Restructuring of rice-growing sector in need
Department of Crop Production vice head Pham Van Du said only 15-20 percent of rice-growing areas should be set aside for low-quality rice paddies, while the remaining will be used for higher-quality ones.
“The department is working on new varieties that can replace IR50404 in terms of cultivation practices, yield, and grain quality so that they will be mass-produced as soon as possible,” he said.
There must be a restructuring of the rice-growing sector, he added.
"Businesses and people have to link together, for example in the larger paddy field model implemented in many areas. Once enterprises find stable demand sources for certain rice varieties, they will ink deals with famers to mass produce the varieties in large areas to ensure the quality of the rice," Du said.
Dr Banh of the Mekong Delta Rice Research Institute said that though some varieties are ready, they need time to be adapted and widely grown by farmers.
“The most important task is changing the way we manage the structure of rice varieties for the region,” he said.
“There must be regulation for the compulsory use of rice varieties with accredited origins so that we can manage the rice-growing areas for them.”
The agricultural agencies have never banned farmers from growing the IR50404, and that should be changed, said Huynh The Nang, deputy chairman of An Giang Province government.
VFA and its subsidiaries will enhance their overseas operations to seek out and negotiate with the markets that offer the largest contracts and biggest values. VFA encourages more companies to examine new markets and adapt to raise their competitiveness in the current markets.
For the aromatic rice market, VFA will send a delegation to survey in China and Hong Kong, set up a center to promote high-end rice, and participate in trade fairs of the world's largest rice companies in the U.S. and Dubai (UAE) in March and May, respectively.