Enterprises producing agricultural materials worry about huge stocks

​The high price of agricultural production materials is not only a worry of farmers, enterprises producing agricultural materials are also falling into difficulties. Enterprises that have not yet recovered production after the Covid-19 epidemic have been affected by inflation in the world, causing production costs to increase, products made are in stocks because the consumption market is difficult.

Products of Long Thanh Supper PP Factory are in stock due to difficulties in output..

Enterprises make efforts to find solutions to save production costs to control the price of agricultural materials; promote sales to bring products to production areas with many programs to accompany and share difficulties with farmers in the current period.

Difficulties in the consumption market

 Immediately after the Covid-19 epidemic, the prices of agricultural materials, especially the prices of fertilizers and pesticides, continuously increased and this price fever has continued until now. Recently, in the production season, a number of fertilizers have gradually cooled down, especially Urea fertilizer, which is used a lot in production, has decreased in price but the fertilizer consumption market is still quite quiet.

According to enterprises producing agricultural materials, when the fertilizer price was "fever", businesses could still sell goods to agents, but now the prices of many types of fertilizers and drugs reduce, but distribution agents do not dare to import. This is also the reason why many businesses do not actively produce stockpiles as before, they only produce when they firmly hold the orders in hand. This is also the reason why some businesses fall into moderate production situation because they have no orders while in the past they often received orders before the whole quarter.

According to a representative of Super PP Long Thanh Factory (Go Dau Industrial Park, Long Thanh District), continuously in 2021 and 2022, imported raw materials increased "shockingly", causing the price of fertilizer sold to the market to increase after. The capacity of the factory is designed to be 200,000 tons/year, but from 2021 up to now, the enterprise has operated at less than 50% of its capacity. The company's customers include manufacturing plants and agents to distribute fertilizers to the market. Since the beginning of the year, the stocks of enterprises has increased rapidly because both manufacturers and distribution agents have reduced consumption demand.

​Not only domestic enterprises but also foreign-invested corporations also face these difficulties. Mr. Shiya Matsumura, General Director of DAITO Organic Joint Stock Company, Tam Phuoc Ward, Bien Hoa City, worries that in the first 6 months of 2022, the production output of enterprises decreased by 65% compared to the same period last year. This is a very difficult year for the fertilizer industry because all production costs, especially the price of imported raw materials have increased. Meanwhile, output shrank a lot due to the sharp drop in prices of many agricultural products, farmers were not interested, even left their orchards without investment.

Citing market difficulties, Mr. Theerapong Ritmak, General Director of SITTO Vietnam Co., Ltd in Bien Hoa 2 Industrial Park (Bien Hoa City) added that the export of fertilizers also dropped sharply compared to every year. In the domestic market, from June to now, the fertilizer output sold to agents has decreased by about 20% compared to the previous months. The debt collection has also been prolonged, previously, the agency's debt was only about 1 month, now it lasts for several months. Many businesses are facing a difficult problem of capital.

Reduce intermediaries in material trading

With the difficult problem of both domestic consumption and export markets, both of which fell sharply, while input costs increased, enterprises sought all solutions to reduce input costs and limit product price increases; more investment in distribution and sales in the direction of bringing products to farmers to reduce the cost of intermediaries. Even some large foreign-invested corporations that mainly make exports have also changed their plans to develop the local market, such as directly supplying goods through level 1 and 2 distribution systems, rather than distributing them. through intermediaries as before. They are interested in building a team of market staff to come to the garden to advise farmers, closely to better understand the needs of farmers.

Mr. Shiya Matsumura shared, with this situation, enterprises have strict policies to cut production costs, including solutions to increase labor efficiency. Enterprises also have a policy of marketing products to smaller distribution agents so that farmers can buy products at the closest price.

From a production perspective, businesses are looking for solutions to increase the use of local raw materials to reduce product costs.

As a subsidiary of a multinational corporation, SITTO Vietnam Co., Ltd. is more proactive in stockpiling production materials. However, businesses still implement many solutions to save production costs synchronously, such as: increasing labor efficiency; investing in digital technology in management activities helps to reduce time and increase work efficiency. With the product line of organic fertilizers and biological drugs, enterprises are interested in sourcing domestic materials to replace some high-priced imported materials.

According to a number of corporations and enterprises specializing in the export of agricultural products and materials, from the beginning of the year until now, the export of agricultural materials, especially fertilizers and pesticides, has decreased sharply compared to the same period last year. In which, the current transportation cost is very high, so the company's products lose their competitive advantage in the market.