Spring Rice Harvest 5.19.96

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Clair Cummings, "Spring Rice Harvest 5.19.96", Aprenet, May 19, 1996, https://nautilus.org/aprenet/spring-rice-harvest-5-19-96/

MekongĀ River BasinĀ Development Issues

____________________________________________________________________

The Rice Paper -- A Viet Nam Journal

Spring Harvest Issue 
Volume 2, Number 2  --  May 19, 1996
_____________________________________________________ 
Features in this Issue:

Winter-Spring Rice Harvest 
Effect of Prices and Policies on Farmers 
World and Regional Rice Market 
Changes in Vietnam's Agriculture 
Eighth Party Congress 
Organic Farming in Vietnam
Japan's Frequent Flyer Onions
_____________________________________________________ 
Spring Rice Harvest

The winter-spring rice crop is in and it was another prosperous
year for Vietnam.  At the beginning of the year, it looked as if
last year's record prices and restraints on exports would be
repeated.   In January, a typical newspaper headline cried "Rice
Prices Soaring!" (VNS 1/30/96) By May, however, headlines said
"Paddy Low Price Causes Difficulty for Farmers." (STD 5/10/96)
This year's main harvest ended up somewhere in between, with
increased supply and prices lower than last year, but still higher
than the historical average.

At the beginning of the year, paddy rice prices in Vietnam rose
from 1900 dong per kg (equivalent to US $172 per ton) to over 2100
dong per kg for standard 15% moisture rice.  These prices were
higher than the usual price of 1200 dong per kg at the beginning
of harvest.  By late March, the price had dropped to 1700 dong per
kg, which was still well above prior years.  Currently the price
in the Mekong Delta is as low as 1,300 to 1,500 dong per kg, 
still higher than in years past when it usually
falls to about 1000 dong per kg at the end of harvest.

When supplies began to pile up and prices started to fall earlier
in the spring, the government took action and bought paddy rice at
1800 to 2000 dong per kg, shipping some 300,000 tons to the north, where
milled rice prices had risen to 4,300 dong per kg, and putting the
rest in reserve.  Preferential loans were made to government food
companies to buy rice in an effort to stabilize the price.
Vietnam negotiated government to government sales and shipped rice
as repayments against the national debt.  These actions helped
maintain domestic prices through mid March.  However, when the
full impact of the bumper winter-spring crop began to be felt,
prices began to decline rapidly, although they remained above
price levels in previous years.

Effect of Prices and Policies on Farmers

The factors that influence prices have not changed: demand, supply
and credit availability for farmers and processors.  But rising
rice prices early in the season in Vietnam only benefitted those
farmers that could harvest early.  Most farmers faced having to
sell their rice in a declining market.  This year, the Central
Bank severely restricted credit lines in an effort to control
inflation.  Processors were not able to get credit to buy rice.
Farmers were not able to pay their debts.  Panic selling then
forced the prices down.  Even with production at record levels,
fewer farmers are reaping the profits of this harvest.  Some are
unable to pay the government tax on their rice, others are not
able to repay their production loans and borrow to invest in the
next crop.

In the north and central areas it is worse.  Crops already planted
for the summer-autumn season were devastated by bad weather.  They
have suffered an extended cold spell which was the worst in 40
years, as well as a drought which caused water levels to drop by
half in some areas.  Farmers have not replanted damaged crops,
despite pleas from the government to do so.  All over Vietnam,
rice blast and insect damage are destroying rice crops.  This
years floods in the Mekong Delta could hurt the next harvest.  As
a result of these repeated hardships, many rural households are
giving up farming or turning to other crops.

The volatility of the commodity market in Vietnam's planned
economy also adversely affects farmers.  It is difficult for the
government to be responsive enough and act quickly to cushion
extreme swings in pricing.  Often, the damage is being done faster
than the corrections can take place.  The farmers are the most
vulnerable.  They watch prices fall and then are forced to sell in
a declining market to pay off their bank debts, which can involve
interest rates of over 2% per month (the equivalent of 24% per
annum) or more from private lenders.  The Vietnamese rice farmer
is still riding a government constructed roller coaster in this
economic transition into a market economy.

The traders and middle men, meanwhile, are able to exploit this
system.  They have the liquidity to buy low, hold inventory, and
sell it later when demand rises.  The way in which the government
implements its laudatory goal of stabilizing prices, controlling
inflation and guaranteeing food security, often plays into the
hands of the traders.  Unless some effort is made to address this
profiteering though, farmers will not reap the benefit of their
increased productivity.  Inevitably, then, farms will be
consolidated, fewer farmers will till larger areas, and
unsustainable industrialized farming will take over in Vietnam,
leaving countless small farm households without their way of life.

Rising rural migrations are already documented.  In Vietnam, the
gap in income between farm and industry is growing and a greater
percentage of farmers are becoming landless.  Farmers per capita
income remains at $200, below the rising national average of $300.
(VET) Changes in labor practices is the fastest growing trend in
rural life in Vietnam.  Hiring labor is becoming much more common,
with 5.6 % of households in the Mekong Delta now earning their
living working for hire under contract, rather than farming for
themselves.  The Mekong Delta Development Research Center
predicted 2.8 million displaced farmworkers in the Delta will be
moving to the cities by the year 2000. (ST)

Vietnam has now consolidated all rice exports under two state
owned corporations.  Rather than loosening its grip on rice trade,
Vietnam is exerting more controls.  The new export monopoly has
put dozens of local and regional exporters out of business.  These
smaller exporters dealt directly with the farmers, who may
eventually be able to grow and export higher quality rice. Farmers
should be able to hold crops in an unstable market, and not be
forced to sell to traders when they are caught in a credit
squeeze.  Currently, a major part of Vietnam's rice exports are
government to government sales of very low quality rice (25%
broken) such as sales to the Philippines and Cuba.  Exports of low
quality rice do not provide farmers with the kind of profit that
provides them with an incentive to store, process and ship rice in
ways that enhance quality, not to mention the effect of shipping
such low priced low quality rice on farmers in the importing
countries.  Farmers who provide massive quantities of low quality
rice through industrialized farming methods are simply becoming
the outdoor equivalent of factory workers.

When low quality rice exports dominate the market, farmers get
only the lowest price.  Money is made by traders as the rice
changes hands on its way to the port. Overseas, low quality
exports compete at the bottom of the world market on the basis of
price.  And world trade in low quality rice is weak, somewhat
volatile and subject to major disruptions, such as last year when
India suddenly exported over 4 million tons of low quality rice.
Last year, Vietnam's farmers were able to sell everything that
looked white, even 25-35% brokens, due to massive smuggling to
China.  This year, since farmers like to plant what sold well last
year, they planted high yield low quality varieties again. But it
did not pay off as well for Vietnam's farmers this harvest.

World and Regional Rice Market

Last year was a record breaker for world trade in rice, with 20.5
million tons traded, up from 16.3 million in 1994 and 15 million
for the two prior years.  Forecasters were predicting lower prices
this year due to a stable supply and lower demand in Asia, so
buyers held off purchasing rice, waiting for lower prices.  Demand
in Asia is declining, as some of last year's importing countries,
such as China and Indonesia, increased their own production.  FAO
has predicted 1996 world rice production to rise to
557 million metric tons, and world trade to amount to about 18 mmt
of that total.  Although unpredictable weather may affect these
predictions, they indicate continued increases in worldwide
production of rice.

Earlier in the year, it appeared as if last year's trend of
growing food needs in Asia would continue to drive up prices and
demand for rice, especially when China began importing through
official and cross-border trading.  But that trend soon slowed and
then reversed course.  High prices did not materialize and demand
decreased.  China even exported a small amount of high quality
rice, and production is up in the south, where China had to import
such great quantities last year.  Rice prices were in a steady
decline in April, ending speculation that 1996 would continue the
dramatic prices of 1995.  Overall, rice prices continue to
increase from year to year, as does production.

Food security at any cost?  Indonesia has had to import rice the
last few years due to land loss from its fast growth and drought
conditions.  Now, it has decided to increase its rice production,
but at a tremendous social and environmental cost.   Indonesia
announced plans to convert over a million hectares, almost 3
million acres, of peat marsh and rainforest in Borneo into rice
paddy over the next 10 years.  Funding for this $200 million
project will be taken from money initially earmarked for
Indonesia's reforestation.  Migrant workers will be brought in
from Java to farm the newly cleared land. (IHT)

Last year, India edged out Vietnam as the world's third largest
exporter of rice, selling to the Middle East and the Philippines.
The overthrow of the ruling party may change the liberalization
trend and reduce the country's export of food grains.

Laos still has not recovered its food security.  For five
successive years its rain fed crop has been damaged, by severe
floods in 1995, and by drought and pests.  The areas hardest hit
are the traditional "rice bowls" of Laos.  Rice accounts for 75%
of the caloric intake of Laotians, and with a major shortfall
occurring again this year, food aid is already needed.  No stocks
were maintained for food security at national or local levels and
the lack of transportation and distribution channels contribute to
the problem of feeding all parts of the country. (VIR)

Two formerly food dependent Southeast Asian countries, Cambodia
and Burma, are exporting rice this year,   Last year's floods had
badly damaged Cambodia's rice crop.  But not only is Cambodia
becoming food self sufficient in 1996, it began exporting a small
amount of rice from a bountiful spring harvest.  (Indochina
Digest)

Fifty years ago, Burma was the world's top exporter of rice.
Burma's military regime (SLORC) seems intent on reclaiming some of
that status.  For the past several years Burma has been using
slave labor conditions and repressive tactics to extract higher
production and greater "contributions" from its farmers.  It is
increasing production and expanding its role in the export of
rice. (FEER) Farmers are required to sell some of their rice to
the government at below market prices.  (Asiaweek) SLORC has also
completed many infrastructure projects by "conscripting" labor -
using forced labor for irrigation projects and expanding the
amount of land in production. Except for a small amount that goes
to Cuba, all the low quality rice being exported currently from
Burma is going to Africa, to compete with the African farmer in
their low price market.  While foreign investment in agriculture
is low, agriculture is expected to fuel Burma's economic growth.

The ASEAN Food Security Board said that its members reached an
agreement on the amount of rice to be contributed and held by each
country.  Vietnam will set aside 14,000 tons, Thailand 15,000,
Indonesia 13,000, Malaysia 12,000, Philippines 7,000 and Brunei
3,000 tons of rice.  These stocks will be available for emergency
use if any country in the group has a shortage. (VET 2/96)

Will rice shortages continue to threaten food security in Asia?
Perhaps, but if so, it will be felt by the poor, who continue to
depend on rice for their food.  More affluent Asians are turning
to pizza, hamburgers, western style prepared and imported foods,
reports Inter Press Service in Manila. Mirroring the world wide
trend away from self-sufficient home grown and prepared meals, the
changing diet of Asia includes less rice.  South-east Asia is the
fastest growing market for wheat, most of which comes from the US,
Canada and Europe.  Aggressive marketing, of both processed foods
and animal feed by western companies is having an effect.  In the
last ten years, wheat imports in the Philippines, for instance,
grew over 10% per year, while rice consumption fell from 303 grams
per day in 1987 to 282 grams per day in 1993. (VNS/IPS)

The increase dependence on globally traded foods, and away from
regional production is a trend which could result in food
insecurity, and further vulnerability to volatile markets.  Food
may not be cheaper to buy than to grow in the future. The gamble
being made by some Asian economies, that their growing money
supply can always purchase sufficient food, may not pay off.
Meanwhile the livelihoods of millions of farm households are in
jeopardy.

Changes in Vietnam's Agriculture

Vietnam expects to dramatically increase its agricultural
productivity, by bringing more land into production with new
irrigation and flood control projects, expanding agro-forestry and
aquaculture, increasing livestock production and industrializing
food processing.  The new five year plan for Vietnam makes
increasing agricultural output a top priority.

This goal will need to be reconciled with other rapid changes
taking place in rural areas. Farm land loss, due to population
growth and industrialization, continues in Vietnam. (See
"Landslide" TRP Vol 1, No.4)  Although the percent of people 
in Vietnam engaged inagriculture is declining, still, 70% of 
the people contribute to the country's food production.  
But internal migration is increasing as farm families seek 
new areas to cultivate or go to work in urban areas.  
Some families do both, by working in the cities between harvests.  
But rapid industrialization is eliminating much of the marginal 
work that provides them with the extra income they need to 
continue farming.

When the government allocated land to farmers, it failed to
provide title certificates in time so that some farmers who needed
to borrow against their land rights could obtain mortgages and
start production.  Farmers have subsequently lost their land and

 


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