How to make a virtue of temporary stockpiles

Related story: Temporary stockpiling - an immediate or long-term solution?

In Hau Giang province, banks are willing to provide loans for businesses to stock up on rice. So, there is no big problem with them. However, Le Van Thanh, director of the Ha Tinh Salt Company, says that other businesses are running short of capital.

The reason is that the price of salt has dropped too low in recent months, making it difficult for them to get capital from the Northern Food Corporation, Thanh argues.

According to the Vietnam Coffee and Cacao Association (VCCA), it is necessary to enjoy the privilege of subsidised loans when the price of coffee is declining. However, offering loans in 2-3 months will not be much of an effective measure to help purchase coffee for temporary stockpiling.

The VCCA says that without getting loans in time businesses are unable to decide how much and when they need to purchase. Cumbersome lending procedures are hindering the purchasing power and causing losses for both farmers and businesses involved in export activities.

Another question is who are allowed to get loans for temporary stockpiling. Farmers or businesses?

Luong Van Tu, President of the VCCA, says that farmers are offered VND50 million loans each and provided with seeds and plants. In Vietnam, with a large number of people farming on a small scale, such a scheme is not paying off as expected. Other countries do not provide capital for farmers to store their products.

Nguyen Van Dong, Director of the Hau Giang provincial Department of Agriculture and Rural Development, argues that farmers can engage in purchasing for temporary stockpiling.

Farmers can store their rice temporarily in good condition and then sell to businesses when the price rises. However, they should think twice before deciding to invest in the drying system as it is rather expensive,” says Dong.

Vu Trong Binh, Director of the Rural Development Centre, warns that many businesses have used preferential loans for wrong purposes.

Farmers always need capital as they have to buy fertiliser in advance for their rice and coffee crops. After harvest they are forced to sell out products for loan repayment.

The Government should have measures to prevent forcible price gauging. Managers of the salt companies under the Northern Food Corporation say that purchasing prices must be fixed and made public.

Businesses need to have contracts with traders for the purchase of products at negotiated prices. At present, businesses are buying salt at a price of VND750-800 per kilogram, to ensure salt workers get a profit of 30 percent. However, only 70-80 percent of farmers can sell their products at stipulated prices.

There is also concern about the quality of products for temporary stockpiling as most businesses do not meet the requirements for storing salt, coffee and rice. In addition, market forecast and research work should be done regularly to prevent the surplus of products in stock.