Agricultural exports benefit when USD price increases

In the recent period, the exchange rate between the US dollar and Vietnam dong (VND) has been on the increasing trend. According to the State Bank of Vietnam (SBV), the ceiling rate that banks applied on July 27th was 23.328 VND/USD. On the same day, the buying – selling of USD at SBV Operation Center were at 22.700 – 23.284 VND/USD. At State commercial banks continue to note the increasing price compared to the previous 2 days, the price of USD buying – selling is still high. Specifically, USD prices Vietcombank listed the USD price at 23.175 VND – 23.255 VND; BIDV listed at 23.160 – 23.240 VND… Similarly, USD prices remain high at private commercial banks.

 

Cocoa processing is for the purpose of chocolate production and then chocolate exportation at Cocoa Trong Duc Limited Company. Through evaluation, high USD price will put enterprises that import raw materials for production in a difficult place. The reason is that the high price of materials forces enterprises to increase the selling price of products, weakening competitiveness.

 

However, to exporters of agricultural products, increasing USD prices brings positive signal to the business. The reason is that VND price decreasing means agricultural products from Vietnam will be cheaper from other countries, Vietnamese enterprises will have a more advantageous competitiveness.

 

Mr Dang Tuong Khanh, Director of Cocoa Trong Duc Co., Ltd (Cocoa Trong Duc Company, Dinh Quan district) said that cocoa products of the company are currently being export to Japan and Korea. However, the selling price is still higher than that of products from other countries, making the number of exported products still humble. That’s why the current increasing price of USD to VND is the opportunity for enterprises to increase export output. “The decreasing price of VND to USD will create us opportunities to reduce export price without the need to losing profits. From there, the products of the enterprises will have a more competitive product price compared to that of other countries exporting into these markets”, Mr. Khanh said.

 

Also according to Mr. Khanh, the enterprise has signed export contracts with partners from the beginning of the year, the duration of the contract continues till October of this year. That’s why as of now, the enterprise cannot adjust the price. However, if in the future new contract term, the USD price remains high similarly to current price, the enterprise will take the initiative to decrease the price for partners.

 

With similar judgement, Mr. Nguyen Ngoc Luan, Director of Lam San Agricultural Cooperative, Cam My district, which is directly exporting pepper to Europe, thinks that, the current high exchange rate of USD to VND is a very good opportunity for exporters of agricultural products to initiatively decrease the selling price without losing profit, strengthening the competitiveness of Vietnamese agricultural products when exporting.

 

 

According to exporters of agricultural products, the opportunity for these enterprises to expand market, increase export output when the price of USD increasing to VND comes from the advantages of raw materials.

Unlike other lines of business, exporters of agricultural products almost entirely take initiative in production materials as well as in exportation. This helps them to not only remain unaffected by the fluctuations of exchange rate but also gain great benefits.

 

Mr. Nguyen Ngoc Luan gave an example, having an available source of materials and previously signed contracts, Lam San Agriculture Cooperative will still buy pepper from farmers at the old price. However, when the USD price hasn’t increased, the Cooperative had to sell at 3.600 – 3.700 USD per ton. Currently, when the USD price increases, the Cooperative can reduce tens of USD per ton without affecting profit nor purchasing price from farmers. “With the domestic materials source and the initiative to sign contracts beforehand have helped the Cooperative to lower the selling price for competitiveness without affecting profit”, said Mr. Luan.

 

Favorable changes in markets as well as exchange rate fluctuations have made opportunities for exporting agricultural products open to other enterprises.

 

Recently, Japanese Department of Animal Health has officially licensed 2 additional chicken export processing lines for Kyou & Unitek Co., Ltd (located in Long Binh Tan Industrial Zone, Bien Hoa City). This helps the company to increase the volume of processed chicken exported to Japan from 100 tons to 300 tons per year.

 

Similarly, after the first export orders of Chiquita bananas to Korea market, Quyet Tien Commercial – Service - Agriculture Cooperative, Cam My province has also expanded supply areas. According to Mr. Pham Thanh Dong, Director of Quyet Tien Cooperative, the expansion of supply area is to increase export output. “For the export of agricultural products, taking the initiative for domestic source of materials is an extreme advantage when compared to other line of business”, Mr. Dong said.