Rice price fever and a fruitful harvest for agricultural production chains

Farmers broke agreements with traders as a result of rising rice prices

The current price for one kilogram of fresh rice purchased on-field ranges from 8,000 to 9,000 VND,  depending on the type. This unprecedented level of rice prices have filled the rice farmers in the Mekong Delta with joy.

Rice farmers in Bac Lieu province are currently harvesting the main summer-autumn rice crop. The story of skyrocketing rice prices has been discussed widely throughout local towns.

Mr. Doan Van Kha in Trung Hung 1A hamlet, Vinh Hung A commune, Vinh Loi district, Bac Lieu province shared his experience: "I have been a rice farmer for over 40 years but I have never seen such high prices for rice. Within the last few days, I have received multiple calls from rice brokers; some of whom visited my house to request a deposit but I refused. A broker also visited me two weeks ago to offer a deposit of 7,000 VND per kilogram for the OM18 rice variety, but I also refused. When the price rose to 8,000 VND per kilogram, I received a similar deposit offer".

Mr. Kha added that the summer-autumn rice crop has only been sown for one month, and the rice brokers have visited to offer a deposit for young rice. However, he has refused all deposit offers for this year's crop because traders only purchase rice on time when the prices are favorable. Otherwise, traders would wait until the rice degrades, causing considerable losses for farmers.

The high rice prices are also an invisible barrier that prevents many businesses and traders from purchasing rice despite prior deposit contracts.

According to a rice broker in Bac Lieu province, he frequently visits the field to pay a deposit for one-month old rice with the prices ranging from 6,500 - 7,000 VND per kilogram for ST varieties and 7,000 VND per kilogram for OM18 and Dai Thom 8 varieties. The average deposit with rice farmers is approximately 300,000 VND per labor. Before this year's harvest season, he received multiple calls from farmers informing their cancellation of the contract and willingness to pay the deposit compensation amount.

According to a trader's calculation, for every 100 households that received a deposit for rice this year, more than half of them demanded to cancel the contract and pay the deposit compensation amount. Other households refrain from breaking their contracts due to their long-term partnership and reputation. Despite not breaking the contract, these households still requested a higher selling price requested a higher selling price due to the discrepancies between the current price and the price at the time of their deposit.

Mr. Nguyen Van H., a farmer from Vinh Hung A commune, Vinh Loi district, Bac Lieu province, shared his story of contract cancellation: Before harvesting the summer-autumn rice crop, his family received a deposit of 300,000 VND per labor, and the rice (OM18 variety) was sold for 6,500 VND per kilogram. When the price of rice surged, Mr. H. proposed to cancel the contract and pay the deposit compensation amount. "The current market price for rice is 8,000 VND per kilogram. If I cancel the contract and pay the compensation amount, I will still earn double the deposit amount", explained Mr. H.

Rice farmer Tran Thi Ut from Trung Hung 1B hamlet, Vinh Hung A commune shared: "Traders often buy rice on time when the price increases. Some even urge the field owners to harvest their crops early. On the contrary, when the prices fell, these rice brokers would avoid the farmers. With no one purchasing the rice, some family had to sleep in the field to cultivate the rice. So when the price of rice skyrocketed this year, farmers are more likely to cancel their contracts and pay the compnesation amount.

Stable agricultural production chains

As an association-scale cooperative specializing in rice off-take agreements since its establisment in 2016, Vinh Cuong Cooperative in An Thanh hamlet, Vinh My A commune, Hoa Binh district, Bac Lieu province has 5,000 member households, with a production area of ​​roughly 17,000 hectares. Vinh Cuong cooperative has earned the trust of farmers in the Mekong Delta after participating in the production chain in An Giang, Kien Giang, Hau Giang, Ca Mau provinces and Can Tho city for nearly eight years.

During the 2023 summer-autumn rice crop, Vinh Cuong Cooperative agreed to off-take approximately 30,000 hectares of rice in Bac Lieu province, with over 3,000 hectares harvested to date. Mr. Trinh Van Cuong, Chairman of the Board of Directors and General Director of Vinh Cuong Cooperative commented on the recent surge in rice prices and sharing profits with farmers: "Vinh Cuong Cooperative's aims to reach a 50 - 50 ratio when participating in the production chain and signing rice off-take contracts with farmers, which means that any increase or decrease in rice prices will be borne by both parties".

"The price of rice rose to a record high level during this year's summer-autumn crop. The cooperative expected that it would be very difficult to buy rice from farmers. We initially made a deposit of only 6,000 to 7,000 VND per kilogram, compared to the market price of 8,000 VND per kilogram. If farmers cancel their contracts and pay the deposit, they can still make a sizeable profit. However, we were pleasantly surprised to find that they accepted to split the profits from selling rice to the cooperative", Mr. Cuong added.

Phuoc Long district in Bac Lieu province sowed 13,700 hectares of rice for the 2023 summer-autumn crop. 60% of this area has been harvested, with an average yield of 6 tons per hectare.

Mr. Tran Van Liem, Vice Chairman of Phuoc Long District People's Committee shared: "The high prices of rice is extremely beneficial for farmers. Accordingly, the district's agricultural sector recommended farmers to not accept deposits too early. Deposits are usually settled within five days before harvesting based on the market prices. This will help prevent price conflict between households and businesses".

Mr. Luu Hoang Ly, Director of Bac Lieu province's Department of Agriculture and Rural Development commented on the lack of a legal binding mechanism for the issue: "With several years of experience in the rice production chain models, the province has drawm many lessons to ensure mutual interests between parties. To this extent, it is necessary to involve the collective and the community".

Traders who purchase rice directly from small-scale farmers will suffer from a lack of sustainability. As a result, traders and farmers should join cooperatives and cooperative groups to conduct trading on a larger and more sustainable scale. In addition, cooperatives and cooperative groups will help farmers reduce input costs and stabilize output.

Mr. Pham Van Thieu, Chairman of Bac Lieu Provincial People's Committee, reported that he has received multiple complaints from local rice-purchasing businesses enterprises regarding the cancellation of contracts due to rising prices. The contract cancellation rate is estimated at 20%, which has greatly affected the completion of rice export contracts with international partners.