Many companies missed the opportunity to purchase cheap materials and equipment because of capital shortage, the Ministry of Industry and Trade said at a 2010 six-month review meeting.
Plentiful contracts, insufficient capital
For agricultural products, except for rice and sliced cassava, other farming commodities have good prospects for export in 2010. Unfavourable weather causes an unsuccessful crop in 2010. Tran Duc Tung, Head of Administrative Office of the Vietnam Pepper Association, said: The global crop output declined 20-25 % this year and Vietnam's production also similarly slumped 20 %. The cashew nut output is also forecast to contract 20-30 % in 2010.
Falling outputs send up prices of agricultural products this year. An official from the Vietnam Cashew Association said the price of cashew nuts might climb 14 % in the last six months this year. Currently, many exporters have signed contracts with very good prices.
However, due to the capital shortage, both exporters and farmers are unable to maintain stocks of their products and wait for higher prices.
Mr Pham Van Cong, Vice Chairman of the Vietnam Cashew Association, said: Local producers are running out of materials but don’t have enough money to stock more cashew nuts due to unbearable interest rates. To date, cashew companies have purchased only 300,000 tonnes from the local source and imported 100,000 tonnes from foreign suppliers. At present, cashew nut firms need VND1,100 billion to buy out 50,000 tonnes from local sources and VND5,700 billion to import 350,000 tonnes to meet production demand in the last six months of the year.
The raw cashew nut is now traded at US$1,100 per tonne. Local producers have using up their materials in stock. The current production capacity of facilities in Vietnam reaches 650,000 tonnes per year.
Without money, coffee firms were able to fulfil 7-8 % of the annual plan of stocking 200,000 tonnes this year. As a result, local coffee companies are suffering additional pressures from foreign partners.
Controlling stocks
As up to 95 % of business capital at domestic enterprises comes from bank loans, they must sell their commodities even in unexpected time to have money for operation and cannot wait until the prices get higher. Meanwhile, foreign-led joint ventures have enough capital to wait for low prices to buy in and high prices to sell out.
Wood processing companies are now lack of capital for importing materials for their peak production in the last six months of the year while local sources run out.
Mr Tung said Vietnam has so far exported 72,000 tonnes of pepper, accounting for nearly 80 % of the output. Hence, pepper companies need to weigh on proper selling time to attain highest prices. Indeed, the stockpile in the country is running out and prices are continuously going up, from VND40,000 per kilo to nearly VND70,000 in a short time to date. This year, the Ministry of Industry and Trade expects to see 145,000 tonnes to be exported.
The prices of agricultural products do not rise every year; therefore, local companies need to take this opportunity to increase incomes. According to an official from a coffee company, they should not wait until the prices fall to expected rates to buy in but proactively follow stockpiling plans. They need to quit their habit of buying and selling to attain a higher rate of returns.
Apart from capital shortage, local exporters need to have further policy support to access capital, renovate technology and expand markets.
In the first six months of the year, the country earned US$32.47 billion, up 17 % from the same period of 2009. (VNE)
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