Twelve in the afternoon. The sun is high and the stifling heat floods the rice fields around Hanoi. Mr Nguyen Van Thu, 42 year-old, is back home : a single room of twenty square meter, with two beds, one for the three kids and one for the parents. In the court yard, some skinny chickens wander around while a dog barks at strangers. Nguyen Van Thu and his family are rice growers but as it appears, rice has not turned into gold for them, despite the rice fever around the world.
Agricultural markets are overheated these days and the shadow of hunger / starvation has reappeared. Even before the crisis, around one billion people were already starving on the planet and it is going worse. Hunger riots spark in Africa and in Latin America while speculators are making all-time high profits; United Nations specialists fear food war and refugees in the long run.
But for Mr Thu in Hanoi, nothing has changed. He does cash in any profit from the skyrocketing rice's prices in international markets. Due to the 16% inflation rate during the first quarter in Vietnam, the situation has even got worse for him and his family. These days, Mr Thu is selling his harvest. "We will sell it cheaper than the October harvest. It is usually like this. In May, more rice is available while in October, harvest are 50% less due to the rain and we have to keep more rice for us until May harvest". Even though the selling price will be higher than May last year, profits and actual purchasing power will be lower. "Prices of fertilizer and insecticides have nearly doubled. So have gasoline, oil and sugar!", he explains. The revenue will amount to usd 900 for the two harvests. "The situation is hard. Especially for the children, Mr Thu continues after a pause. Our elder daughter is already helping us in the fields but I think next year she will have to stop school… it is too expensive".
Little does Mr Thu knows that on international markets, people are battling hard for his rice. "It is impossible to find Vietnamese rice on the markets today", Jean Pierre Brun, a French trader says. Since Vietnam suspended its exportations, and this country is second largest exporter, the market is now upside down", he adds. These measures were also taken in India and Thailand in order to tackle a potential rice shortage in the domestic market. The Vietnamese government took this measure in order to guarantee domestic food security and try to preserve rice from general inflation; it is also trying to avoid riots like those in Thailand, where the army has been deployed in order to protect warehouses.
The general inflation can explain partly the increase in rice price. But the reasons why price increased in Vietnam are threefold:
- Psychological: the decision from the Vietnamese government to drop its exports this year by 1 million tons – form 4 Mt to 3Mt- paradoxically sparked the idea within the population that there was a rice shortage in the country. May harvests were good in the South but were quite weak in the north and center Vietnam due to climatic conditions and typhoons. The floods and heavy rains destroyed a large part of the harvest.
- Ignorance: people see the worldwide rice shortage on TV and newspapers, thus comforting them in their feeling of rice shortage. They then rush to buy as much rice as they can in markets and supermarkets. Coopmart in Cong Quynh street, district 1 in HCMC, was literally sacked. There was no more rice to sell in the afternoon but customers kept pouring looking for rice to buy. A wholesaler explains: "in the morning the price was 10 000 vnd / kilo, but in the evening it reached 18 000 dongs, almost doubled !". Lately, Coopmart announced that they had put in place a 24h supply chain, enabling them to have rice stocks always available in their stores for their customers.
- Speculation: there always has been speculation on rice. Speculators would buy rice in May and sell it in October when price have increased. Because of the rush on rice nowadays, prices have increased, encouraging even more speculators to buy and make more profit. The Vietnamese Prime Minister reaffirmed that there was no shortage in the country and that the government will crack down on speculators; most of them are individuals having nothing to do with the rice business but they are normal people willing to make quick profits.
Profits! In Geneva, Trading Houses like the American Cargill or the French Louis Dreyfus are taking advantage of the situation, making huge ones. Geneva has become the world capital for the commodities – raw material - market, due to its central position between Asia and Africa, a major importer. So for operators on these markets, the rice shortage is a huge opportunity. For Cargill for example, profits have increased by 80% vs 9 months ago, reaching usd2.9 billion. A Cargill trader simply explains: "our job is to buy and sell, so when selling prices reach the roof, we obviously make more money". Some traders are even reluctant to deliver rice in Africa, in Sierra Leone or Ivory Coast for example, fearing a potential wrath of the population. "It's crazy. We do not know how more prices will increase. It is already usd45 for a 50 kgs bag, it represents a month salary for a civil servant there. By the time a boat from Asia reaches Africa, prices have increased by 20% or even 30%. In some cases, the trader based in Geneva prefers to wait and wait again… even when the boat has already reached its harbour of destination in Africa. In Senegal for instance, a trader argued that the importer papers were not complete, while in fact, he was waiting for the price to rise again.
The situation is indeed critical on Africa where speculation is rampant. Riots are occuring in Senegal, even though President Wade fixed a ceiling price, promising wholesalers to subsidise price: wholesalers will still perceive the difference if the price is over this ceiling price. But because these wholesalers doubt that the government will keep its promise, they still keep the rice on hold in the warehouse and wait for price to increase. Rice is now dominant in African food, replacing wheat, used more and more for bio-fuel, and manioc. The Agricultural and Food Organisation calls for emergency help from all developed countries to avoid a major disaster in poor countries.
