Falling euro hurts Vietnamese tra fish

The euro's falling value has made EU buyers pay EUR 2.20 (US$2.73) for one kilogramme of Vietnam's tra fish, US$0.41 more as compared from the start of this year.

Earlier this year, EU buyers needed EUR 1.87 (US$2.32) to buy one kilogramme of tra (pangasius). What's emerging is a classic margin squeeze, with buyers asking producers to drop prices and threatening not to order unless there are cuts. The ongoing economic turbulence in Europe is setting up problems for Vietnamese seafood exporters.

Not only has the EU currency fallen by more than 15% against the US dollar over the last five months which makes Vietnamese exports more expensive, but rising unemployment in some Eurozone countries and the risk of a sovereign debt default is adding to exporters' woes.

At stake is a market which was worth more than EUR 1.3 billion (US$1.61 billion) in the first five months of 2010, according to Vietnam's Ministry of Agriculture and Rural Development. The weakened euro has badly affected seafood exports to the EU markets, said Truong Dinh Hoe, general secretary of the Vietnam Association of Seafood Exporters and Producers (VASEP).

Cao Thi Kim Lan, director of the Binh Dinh Fisheries Company, was quoted by Tuoi Tre newspaper as saying that with 60% of total export revenues coming from the EU, the depreciation of the currency had badly affected her company's earnings.

European importers don't want to sign contracts with large volumes or long delivery times because they're afraid the euro could fall further, another seafood company executive said.

The outlook though is not without hope. Pham Quang Dieu, director of Agricultural Market Forecast and Analysis Joint Stock Company (Agromonitor), recommends local seafood companies strengthen exports to non-traditional and emerging markets, such as the Middle East and China.

Russia and the US are also markets with high potential, said Duong Ngoc Minh, general director of the Hung Vuong Seafood Company.