Last updated: Monday, May 20, 2013
Tra Catfish Industry Struggles to SurvivePosted: Friday, July 20, 2012
The sharp price reduction, huge losses suffered by farmers, and insufficient capital sources leaving companies unable to operate and leading to dumping and unhealthy competition are among the difficulties that the tra catfish industry is facing. The immediate and necessary solution is to quickly pump in capital to support the price of raw tra catfish. However, a long-term solution is necessary to ensure the sustainability of the industry.
Tra catfish companies are in danger due to shortage of funds
According to a report by the Directorate of Fisheries, for the first six months in 2012, expenses to produce tra fish remained stable compared to that of the same period last year, with the price ranging from VND23,800 to VND24,200 per kg. Meanwhile, selling price continued to decrease from the beginning of this year. Tra fish price ranged from VND23,000-VND23,500 per kg in early May 2012, but the current price is only VND18,000 to VND22,000 per kg. This is most probably the sharpest price reduction in the context of rising production cost, such as an increase of VND500-VND1,000 for a kg feed; a 10-15 per cent increase of veterinary medicine price; increase in raw materials and energy price. The cost of producing 1 kg of finished tra product is VND25,000 per kg. This price results in a loss of VND7,000 per kg. The output for 1 ha of tra pond is 300 to 350 tonnes. Thus, the farmers lose more than VND2 billion per 1 ha of tra fish pond. This is an unprecedented number.
According to experts, this is because production and processing companies could not access loans for raw fish while previous debts have not yet been fully repaid. This difficult situation has led to companies charging different prices in the same market, dumping and unhealthy competition. A fishery company (requesting to remain anonymous) said, “If cost and expenses remain the same, but dumping is utilised to get rid of the products and obtain the necessary funding to continue operation, both companies and farmers may not survive.”
According to Mr Duong Ngoc Minh, Vice President of Vietnam Association of Seafood Exporters and Producers (VASEP), those raising and producing tra fish are encountering many problems, the most important of which is the shortage of funds for companies to continue operation and for farmers to sustain aquaculture farming. Due to the huge investment of VND6-8 billion per ha, farmers need to borrow capital from banks. Companies do not engage in any transactions, even when price of raw fish decreases below the production cost, because of the tightened monetary policies employed by banks. In addition, companies continue to absorb many types of expenses and the increased cost of raw materials.
At the moment, the Mekong River Delta has about 136 companies involved in exporting tra fish, of which 64 are producers and 72 are wholesale companies. There has already been healthy competition among the companies. At the recent Preliminary Conference for production, consumption of tra fish for the first 6 months and agendas for the last 6 months of 2012 in Dong Thap Province, representatives of fisheries companies lamented that most of them had difficulty acquiring capital and were affected by the financial crisis. Since the banks tightened the borrowing standard, businesses do not have enough funding.
Directorate of Fisheries forecast that for the last six months of 2012, the tra fish industry will face difficulties due to lack of funding to purchase and process raw fish raised on an area of 4,300 ha. This raises the risk of a surplus of raw fish for the last six months. Besides, the lacking of fund to reinvest in raising fish may lead to a shortage of raw fish for production during the first quarter of 2013.
Helping businesses access capital funding
Industry experts suggest that in order to save those raising and producing tra fish, banks need to restructure the funding model for companies, pump in capital so that companies can buy fish and help famers have the necessary money to reinvest. On the same note, Ms Truong Thi Le Khanh, Director of Vinh Hoan Fishery Limited Liability Company based in Dong Thap Province, said that pumping in capital is crucial at this time. This needs to be done quickly and in time to resolve issues that the tra fish industry is facing, provide companies with enough funding to continue operation and boost confidence of companies and farmers. This will help advance the development of the whole industry.
Mr Cao Duc Phat, Minister of Agriculture and Rural Development said, “We have to focus on resolving the issues of decreasing tra fish price, decreasing exporting price and losses for both companies and farmers. In order to do that, we have to increase demand by helping companies access the required funding to buy raw fishes to export or producing and stockpiling. This has to be done together with restructuring and extending debt and the borrowing period.”
The urgent circumstance necessitates the quick capital injection to restore the tra fish price level. However, the long-term solution requires the restructuring of the raising, producing and exporting tra fish industry, formulation of the exporting price floor, raising area planning to produce an exact forecast of the market supply and demand, etc. Moreover, in order to save the tra fish industry, the surplus of tra fish, the decrease in price and the quality problems also need to be resolved. This is the time for the producing business community to gather and rebuild the producing industry as well as price and quality floor. At the same time, the reorganization of raising and producing tra fish is necessary to provide a more positive image for the tra fish industry.
The Finance Ministry is proposing a VND9,000 billion rescue package through the Bank for Investment and Development of Vietnam to save companies and farmers. The rescue package will help supply companies with enough funds to purchase raw materials, in the process help increase the price of tra fish and enable farmers to reinvest.