High-cost pressure, slow consumption, reduced profits and competitiveness in the market are major concerns of Vietnamese agricultural exporting enterprises during the rest of 2022.
Logistics costs increase and profits decrease
Rice export is considered to have many positive signals, but enterprises in this sector are still considering many difficulties in the third quarter of 2022.
The export of Vietnamese rice is suffering from reduced competitiveness in the market. (Photo: Internet)
Currently, the African market has shifted to buying Indian rice due to its good price and much cheaper shipping costs than Vietnam. Production costs along with high freight rates (such as fares to major ports in the EU remain at $9,000 – $10,000 per 20-foot container, while the shortage of empty containers still occurs), causing Vietnamese rice to lose its market competitiveness.
The pressures of logistics cost that will remain high in the coming months also cause Vietnamese rice exporters to fear a sharp decline in profits. The problem that worries enterprises is that the export price of rice will be stable, while production and business costs increase sharply, so it is difficult to get a profit.
Some enterprises specializing in exporting fresh fruits said that the profit of enterprises is greatly affected because many other costs are constantly increasing, freight rates are also increasing as well as storms. With the current excessive cost pressure, the effort of enterprises is very much but the profit is very little, and even suffer losses.
Not only that, to bring fresh fruits for export to difficult markets, it is also not easy for enterprises to avoid the increase in price because the cost is very high, including the cost of packaging, transportation, storage, etc.
Remarkably, wooden furniture export to the US is extremely difficult for the time being. According to the Vietnam Wood and Forest Association, although the Covid-19 pandemic has been controlled, consumers still tighten their spending due to high inflation in many markets. Consumers in the US and the EU are focusing on the need for food and essentials, so many people refuse to buy wood items at this time.
In addition, transport fares along with the purchase price of raw wood are high, causing production costs to increase, making it more difficult for enterprises to produce wooden furniture. “Not only the US, the export of wood and wood products to some other major markets such as the EU, Korea, etc also started to show signs of difficulties due to inflation” – Chairman of the Vietnam Wood and Forest Products Association – Mr. Do Xuan Lap shared.
Export flexibility, market diversification
Pointing out the “bottleneck” in agricultural exports to China, Chairman of Vietnam Vegetable Association – Mr. Nguyen Thanh Binh commented that China continues to pursue the “Zero Covid” strategy, while the northern border provinces are delayed in investing in logistics infrastructure (yards, transshipment points, international standard warehouses, etc), which has caused supply chains to be interrupted, goods being congested at the northern border gates.
The risk of agricultural products and goods congestion at the northern border gates is available. (Photo: Internet)
“This shows that, in the last 6 months of the year, it is very likely that the supply chain breaks again, transport causes export goods to continue to stuck at the entire northern border gates, then thousands of tons of exported agricultural products will have to be “turned back” for domestic consumption” – Mr. Nguyen Thanh Binh expressed his concern.
Regarding this issue, Deputy Director of Management Supervision Department (General Department of Customs) – Mr. Dao Duy Tam recommends that enterprises should focus on improving the quality of agricultural products to meet the standards of importers; diversifying customers and agricultural export markets to avoid dependence on a customer or a traditional market. Along with that, the enterprises also need to complete customs procedures early so that when goods are taken to the border gate, they do not have to wait for export.
According to the Ministry of Industry and Trade, in the last months of the year, the global economy is forecast to continue to face a series of difficulties such as the price of inputs and petrol remaining high causing rising inflation. In addition, the Russian-Ukrainian conflict, China’s policy of “Zero Covid”, and the risk of the Covid-19 pandemic coming back also have a negative impact on the world economy.
It is expected that the economic growth of many countries will decrease and be lower than in 2021. Consumers reduce spending, accordingly, countries will reduce imports of goods. The above issues will directly impact Vietnamese exporters, including agricultural exporting enterprises.
Regarding the solutions for enterprises, Deputy Minister of Industry and Trade – Mr. Do Thang Hai said that to maintain export growth, enterprises must update information from the markets quickly to have flexibility in building and operating production plans.
Currently, Vietnam has expanded trade with most countries and territories in the world. In addition to some main markets such as the US, the EU, Japan, Korea, China, etc, enterprises need to find out how to expand the consumption of goods in other markets.