During the first ten days of the program, however, paddy prices were kept from falling, and even inched up slightly at some point. The program to purchase rice for temporary storage conducted by the Vietnam Food Association (VFA) began on March 15 and will wrap up at the end of this month.

Pham Van Bay, vice chairman of VFA, said the number of rice export contracts signed in March has risen significantly against the preceding two months.

China has high demand for Vietnamese rice this year, said Bay to the seminar named "Solutions for development of rice production and consumption in the Mekong Delta" held in Dong Thap last Friday.

In the year to date, over 600,000 tons of the 5% broken rice has been exported to China through official quotas, versus 200,000-250,000 tons last year. Chinese traders have also bought some 400,000 tons of the 15-25% broken rice via border trade.

However, there is a paradox that while rice export contracts are on the rise, commercial rice prices in the local market is now dropping sharply.

In particular, the fresh paddy IR 50404 is now sold at VND4,000-4,200 per kilo in Dong Thap and Long An, while the dried type is priced at VND5,000-5,150 a kilo, dipping VND200-400 against a week ago.

Prices of the fresh IR 50404 even plunge to VND3,800-4,000 per kilo in Long An, lower than the levels before the rice storage program was launched.

In explanation for such a strong price drop, both intermediary traders and trading firms said it is because the warehouses of storage enterprises have been full, thus enterprises restrict buying. Meanwhile, as rice supply is surging, prices keep declining.

However, a source told the Daily that domestic rice prices drop sharply because export enterprises are pushing down prices to make up for the higher shipping charges.

To facilitate the rice storage program, central bank governor Nguyen Van Binh has requested several banks to give out loans with preferential interest rates to the program participants.

The initial target of the program is to prevent local paddy prices from falling to below VND5,000 per kilo as for the dried type, and guarantee a 30% profit margin for farmers. However, given the current paddy price plunge, a question arises if it is because the rice storage program has failed.

Speaking at the rice seminar last Friday, Professor Vo Tong Xuan said: “Farmers are often forced to sell their produce at low prices, and they can rely on the Government's bailout, but the Government assigns VFA to take charge of making decisions. The past experience shows that the paddy prices decided by VFA only protect the interests of the association while farmers' interests are neglected."

Source: The Saigon Times Daily