April 22, 2008

 

Inflation hurts Vietnam's tra farmers

 

 

Increasing fish material prices, strict bank regulations and a fluctuating dollar are troubling Vietnam's tra catfish industry and fish farmers have already lost VND200 billion (US$1.24 million) in the last month. 

Duong Ngoc Minh, director of Hung Vuong Company, which processes 20,000 tonnes of fish every day, said that it is exporting catfish to new markets in the Middle East at a low price of US$3 per kilogramme. If the dollar keeps depreciating, Minh says exporters will definitely have a hard time keeping up with production cost hikes.

 

Duong Van Nhiep, Deputy Chairman of Dong Thap Seafood Association, said tra catfish have become bigger which makes it difficult to sell. Nhiep said that with the escalating prices of food for fish, production costs will have to rise to VND16,000/kg (US$0.99) by the third quarter of the year.

 

In 2007, Vietnam exported over US$1 billion worth of tra fish where major operations take place in Cuu Long River Delta. It is estimated that the production cost for breeding one tonne of tra fish was VND13mil/tonne that year.

 

In early 2008, the material price hovered at VND15,000/kg, prompting farmers to invest in raising fish. However, feed prices upping by 30 to 50 percent have augmented production costs and the dollar devaluation has aggravated the situation, particularly on the export scenario.

 

Nhiep said that except big processors like Nam Viet (An Giang) and Hung Vuong (Tien Giang), which have high processing capacity and huge cold storage, other processors need to scale down production and reduce volumes in order to reduce losses. Vinh Hoang Company, for example, can only make 100 tonnes a day, while its capacity is 250 tonnes. The lower processing output has forced material prices down, said Nhiep.

 

Credit lending has added more woes to farmers as financial crunch due to high feed prices have forced them to cut production or leave them out of business.

 

Raw material price dropped to VND13,000/kg on March 15, below the production cost. It is estimated that in the past month, fish farmers have lost over VND200 billion.

 

As a result, farmers are selling their products below production cost. Ba H., a farmer in Chau Phu district in An Giang province, said that he sold 400 tonnes of fish and incurred the loss of VND200 million.

 

Despite low prices of raw materials, seafood processors are not elated said Nguyen Van Hai, Director of Cuu Long Company. Foreign partners, upon hearing about the material price decreases are asking for a "renegotiation" of the contracts, despite being agreed from its "old, high prices."

 

Nhiep said Dong Thap is foreseeing serious shortage of fish material at the end of the second quarter or early third quarter, as the low material prices have made a lot of farmers give up tra farming.