The price of rice in July dropped unexpectedly to US$600-700 per tonne from US$1,100-1,200 per tonne in April and May, according to the VFA.

International experts attributed the shrinking rice price to the fact that many nations in the world have managed to expand their rice acreage to cope with the rising prices of agricultural products.

To guarantee food security in the context of the country’s galloping inflation, the Government earlier this year set quotas for rice exports, and last month, issued a decision to set high export tariffs on rice.

Under last month’s decision, this was the first time the grain had been subject to an excise (export) tax.

Rice will be taxed at eight levels, calculated from the free-on-board (FOB) price. The best quality rice, valued at US$800 to US$1,300 a tonne, will be levied from between US$48.5 to US$175.7 per tonne.

Rice worth US$600 to US$700 a tonne will face a US$30.3 levy, while rice worth between US$700 and US$800 a tonne will be levied at US$36.4 a tonne. Rice valued at less than US$600 per tonne will be waived from excise taxes.

Based on these levels of tax, the VFA also proposes that the Government raise the bottom rate subject to excise taxes to US$800 instead of the current US$600 a tonne.

Burden on farmers

In addition, the association urged the Government to permit rice exports to access commercial loans in US dollars instead of VND because the interest for the VND at the moment is rather high, therefore they don’t dare borrow money to purchase rice to reserve.

If they borrow money in VND, it will cost them an additional US$12-15 per tonne.

However, exporters are now afraid to increase rice purchases for reserves over concerns about a further decrease in prices on the global market. Meanwhile rice supplies on the local market are abundant because this is the summer-autumn rice harvest season. This also causes great difficulties for farmers.

Director of the Northern Food Corporation and deputy chairman of the VFA, Tran Ba Hoan said the new tariffs had triggered a number of disadvantages for both enterprises and farmers.

If exporters sign rice contracts for US$600-700 per tonne, they will have to pay VND500,000 in tax, therefore they will buy lower priced rice to increase the burden on farmers.

Price prices in the country’s rice hub – the Cuu Long (Mekong) River Delta have decreased by VND600-1,000 per kilo, now ranging between VND4,600-5,800 per kilo.

With the current trading prices, many farmers are losing out because input costs for rice production such as fertiliser, materials and labour have doubled or tripled since last year.

To help farmers overcome these difficulties, Phan Huy Thong, deputy director of the Ministry of Agriculture and Rural Development’s farming department, urged exporters to buy more rice.

“Enterprises should be purchasing more rice and if they are facing difficulties, they can petition the Government for help. In addition, companies that earned big profits earlier this year should share the costs with farmers,” Thong said.

Agricultural experts suggest that farmers should not be too worried because the downward spiral of rice prices on the world market is only temporary and has witnessed a recovery over the past few days.

According to a source from the Ministry of Agriculture and Rural Development, to balance supply and demand on the local market, concerned State agents are considering petitioning the Government to raise rice export quotas to a higher rate than the current 4.5 million tonnes for this year.

Vietnam expects to export 3.5 million tonnes of rice in the first nine months of the year with August’s volume estimated to hit 400,000 tonnes.