High interest rates force fish prices down

images (7) The “tra fish price fever” in the Mekong Delta has subsided. In early April, the tra fish price was at sky high levels of 28,500 dong per kilo, while it has dropped to 26,500 dong per kilo. Experts believe that the overly high bank loan interest rate is one of the reasons that have forced the fish price down.

The fish export prices to the EU market have been hovering around 3.4-3.6 dollars per kilo. Meanwhile, the export prices to the US market prove to be more attractive. Some exporters can sell fish to the market at 4.4 dollars per kilo. The prices are clearly very good for Vietnamese exporters, if noting that in 2010, the average export price was just 2.14 dollars per kilo, and in the first quarter of 2011, the price was 2.54 dollars per kilo; according to the Vietnam Association of Seafood Exporters and Producers VASEP.

It was the high export prices and the material shortage which created the fish price fever in the first months of 2011.

Exporters cry on overly high material prices

The high export prices did not make seafood exporters happy. The problem was that the high export prices could not cover the domestic material price increases.

In April 2011, for example, the fish prices increased sharply by two folds in comparison with that in mid 2010, thus bringing the fat profit of 4000-6000 dong per kilo. However, this did not bring fat profits to seafood exporters. Navico, for example, reported the modest post-tax profit of 378.9 million dong in the first quarter of 2011, much lower than the 20 billion dong profit gained in the first quarter of 2010.

The company’s profit decreased in the first three months of the year, because the turnover in the quarter was 255.13 billion dong only, a sharp fall of 30.4 percent over the same period of the last year. The key problem was that the input costs were too high with the high fish material prices. As a result, the total profit of the company in the first quarter of 2011 only reached 16.5 billion dong, down by 61.58 percent than that in 2010’s first quarter.

Exporters admitted that the fish material shortage in recent months led to fact that seafood processing factories scrambled for materials, thus pushing the prices up. Enterprises, in many cases, had to accept very low profits and purchase fish at high prices in order to fulfill orders and get enough jobs for workers.

However, it was the last straw that the bank loan interest rate jumped to 24 percent per annum. “The overly high fish prices and interest rates have made us unbearable,” director of a fish processing factory in the Mekong Delta said.

According to the director, 60 percent of the working capital of seafood companies comes from bank loans. As the interest rates have soared, the input costs have increased dramatically.

Ngoprexco got only a modest turnover of 37.5 billion dong in the first quarter of 2011, while it had to pay 1.5 billion dong for the loan interests. Due to the sharp increases of many other kinds of expenses, the quarterly post tax profit of the company was just 550 million dong.

High interest rates forcing prices down

As everything got unbearable for enterprises, they have been trying to force the fish material prices down.

An agreement was reached among seafood processing factories, under which factories reduced the prices and reduced the volumes of fish they purchased in order to cause a “virtual material oversupply”. Farmers got shocked when they saw the prices going down and they rushed to sell out fish. As a result, the market prices have been going down.

A director of a seafood company said, that only when the material fish price goes down to 26,000 dong per kilo, can seafood processors make profits. Meanwhile, the 26,000 dong per kilo price is still high enough to bring profits to farmers.

According to VASEP, Vietnamese seafood exporters are trying to negotiate with importers to raise the average export price by 0.2 dollars per kilo.

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