Sharp declines in prices cause deep concern among farmers and ministries. The harsh reality of “good harvest, but lost profit” will come back to haunt farmers as long as there is no revolution in production and agricultural development strategy.

There was a time when many lorries carrying out water melons had to wait desperatedly in a long line at the Lang Son border gate and were forced to sell the fruit at VND1,000 per kilogram. With rice, coffee and salt faring no better farmers are sinking into despair.

Several weeks ago, the prices of rice dropped so steeply that the Government decided to buy for reserves to reduce losses for farmers. Salt and coffee share the same story, so the Ministry of Industry and Trade proposed the Government buy for reserves and the Coffee Association asked the Government to purchase 200,000 tonnes.

The problem is that farmers can produce a huge volume of products but are unable to control prices. Vietnam now ranks first or second worldwide in terms of rice and coffee exports, but finds it difficult to manage exports of farm produce.

It is something of paradox that Vietnam pours much investment into producing more products but lacks export markets. Preventive measures should have been put in place before production got underway.

It is easy to see that the weakness of Vietnamese businesses is lack of capital and storehouses, enabling foreign importers to drive down buying prices. Rice is a typical example. Taking advantage of declining rice prices, importers seek to pay at an unreasonably low level.

The agricultural sector drew special attention from the Government, especially when it strictly implemented a programme to link regions and four entities: the State, farmers, scientists and businesses. However, it did not produce as efficiency as expected, and several problems arose. Farmers are still worried, even if they have a bumper crop. Over the past years, the prices of farm produce have not remained stable and the story “good harvest but lost profit” is heard again and again.

Vietnam has not yet devised a mechanism to keep the prices of rice, coffee and other farm produce stable to ensure the farmers’ rights. A proposal to form a mechanism to intervene in a timely fashion when the prices of farm produce drop sharply or to establish a fund to stabilize market prices has not become a reality.

It is clear that finding output markets for agricultural products needs a strategic orientation. Band-aid solutions, such as buying for temporary reserves are insufficient. In addition to a fund, specific strategies need to be employed to get farmers focused on the dynamics of supply and demand and more store houses need to be built.

Thailand has a good experience that Vietnam can learn from. In addition to setting up a modern storehouse system which can store 10 million tonnes of rice, in 2000 Thailand invested nearly US$2 billion in implementing a mechanism to keep rice prices stable. According to the mechanism, farmers can sell their rice to the Government’s agencies at the ceiling prices and can re-buy all their rice within 90 days at an interest rate of 3 percent. As the ceiling price is always higher than the market price, the Government becomes a direct purchaser from farmers and is also in charge of exporting rice through its contracts, bidding or selling on the farm produce exchange.