Nation’s rice strategy a success

18:02' 02/05/2008 (GMT+7)
The rush to buy rice ended across the country on the back of falling rice prices, following moves by food companies and market regulators to defuse the worst panic buying in many years.
Official figures show that Vietnam currently has 1.23mil tonnes of rice available in stock, which authorities say testifies that the price rises and rush buying was a result of rumours, speculation and distribution impediments rather than a rice shortage.
The Ministry of Agriculture and Development (MARD), in an official report released to the public on Tuesday, forecast that Vietnam is well on track to producing 36.55mil tonnes of paddy (unhusked rice) this year, if there are no adverse weather conditions.
"If there are no serious natural calamities, Vietnam’s 2008 rice output could reach or even surpass the 36-million-tonne target, ensuring national food security as well as rice exports," said deputy minister of MARD Diep Kinh Tan.

Prices fell to VND16,000-17,000 per kg of premium quality rice yesterday. Rice prices started to climb from VND11,000-13,000 last week to around VND20,000-22,000 per kg over the weekend.

Prime Minister Nguyen Tan Dung sent an urgent notice on Sunday, affirming that Vietnam is fully able to provide food for domestic consumption while ensuring some rice exports.

The Viet Nam Food Association asked members to transfer more rice to stabilise the HCM City market, while the Northern Food Corporation has ensured its outlets all listed prices at VND11,000 for a kilo of export-standard rice. After feverish buying in anticipation of further price rises, business is back to normal at rice shops, with very few buyers yesterday.

The Government on Tuesday issued an official letter asking the Ministry of Industry and Trade (MOIT) and MARD to closely observe and ensure smooth production, distribution and export of rice as planned.

The Prime Minister also asked the two ministries, as well as the ministries of Public Security, National Defence and Information and Communications, to review and draw lessons from last week’s rice market instability.
Authorities were required to more closely regulate the rice market against smuggling, speculative hoarding and false rumours.
Official figures
With paddy output predicted at 36.5mil tonnes, domestic consumption of paddy in 2008 is forecast at 27.8mil tonnes. That includes 1mil tonnes reserved for breeding, and 5.8mil tonnes in animal feed and post-harvest loss.
The remaining 8.75mil tonnes of paddy, equivalent to 4.5mil tonnes of rice, will be available for export, the report shows.
The Government’s export target of 3.5 to 4mil tonnes was feasible, while still ensuring national food security.
MARD’s official statistics show that Vietnam produced 19.8mil tonnes of paddy in the last six months. Five million tonnes of paddy output, equivalent to 2.8mil tonnes of rice, is earmarked for export.
The General Department of Customs reported that Vietnam exported 1.6mil tonnes of rice in the first four months of 2008, earning US$775mil in revenue, up 73% on the same period last year.

Weak distribution systems

Mekong region countries consider ‘rice cartel’

BANGKOK — An organisation of rice exporting nations similar to the Organisation of Petroleum Exporting Countries (OPEC) is set to be established by countries in the Mekong region as global prices of the grain surge.
Cambodia, Laos, Myanmar, Thailand, and Vietnam have agreed in principle to form a rice cartel, Thai Prime Minister Samak Sundaravej told a meeting in Bangkok on Wednesday.
Cambodia, Laos, and Vietnam had agreed to join the Organisation of Rice Exporting Countries (OREC), he said.
Myanmar has also agreed to join, he said, though the country is not a large rice exporter.
Thai Foreign Minister Noppadon Pattama said the organisation should begin meeting soon.
Thailand is the world’s largest rice exporter, shipping some 9.5mil tonnes last year.
Global rice prices have soared this year, a trend blamed on higher energy and fertiliser costs, greater global demand, droughts, loss of land to biofuel plantations, and speculation.
Global demand for Thai rice has soared after Vietnam and India imposed limits on exports to ensure domestic supply.
Thailand has repeatedly insisted it will not limit exports, but on Tuesday the Government announced it was releasing its stockpile of 2.1mil tonnes into the domestic market to keep prices stable.

MOIT deputy minister Nguyen Cam Tu attributed the temporary shortage to current distribution systems.

Vietnam currently has two rice distribution systems. One is used for supplying rice for export, while the other is reserved for the domestic market. The former was being handled well by the Government and operating smoothly. However, the latter is still at the mercy of the market’s whims.

"We now lack major commercial companies that can be used as effective tools by the Government to regulate the market for rice and other food items," Tu said.

Current food and foodstuff distribution systems are organised unprofessionally so they develop independently without close co-operation, according to Hoang Tho Xuan, director of the MOIT’s Department of Domestic Market.

"Consequently, the market has many distributors but none of them are strong enough to hold enough sway over the market when fluctuations like the last price hike occur," said Xuan.

"Worse still, most activities carried out by current food and foodstuff distributors are out of the control of authorised agencies. In particular, people sell to merchants and then merchants sell to merchants, following their own principles."

With that kind of organisational style, the domestic food market does not have major distributors to support the market and protect it from fluctuations. This created opportunities for speculative practices to arise, he said.

Not only rice, but many other essential commodities, such as fertilisers and steel products, also face distribution problems, he added.