Vietnamese businesses still achieve positive results in exporting agricultural products, despite rising raw material prices and logistics costs.

2024 is forecast to be a booming year for Vietnamese agricultural exports. Businesses in this industry have achieved positive results despite major challenges from rising raw material prices and logistics costs.

Agricultural products grew impressively

According to data from the General Department of Customs, in the first half of 2024, Vietnam's agricultural exports recorded positive results with a total agricultural export turnover reaching 29.2 billion USD; up 19% over the same period in 2023, main agricultural product group 15.76 billion USD, up 24.4%. Notably, most sector groups showed positive growth.

Currently, the United States, China and Japan continue to be the three largest export markets for agricultural, forestry and fishery products of Vietnam. Export value to these three markets is also increasing.

In the first half of July 2024 alone (from July 1 to July 15), Vietnam earned 898 million USD from export activities of agricultural products, an increase of 21% over the same period last year.

Fruit and vegetable products have the largest turnover with 238 million USD. Cashew nuts brought in the second largest turnover with 196 million USD, up 39% over the same year last year. Rice also recorded positive growth with export volume reaching 290,035 tons and turnover reaching 177 million USD, up 15% and 30% respectively over the same period last year. The average rice export price increased by 12%, reaching 612.3 USD/ton. Rice also recorded positive growth with export volume reaching 290,035 tons and turnover reaching 177 million USD, up 15% and 30% respectively over the same period last year. The average rice export price increased by 12%, reaching 612.3 USD/ton.

Along with the increase in volume (except coffee), the average export price of agricultural products also increased, contributing to higher turnover compared to the same period last year.

Exports of Vietnam's strong agricultural products such as cashew nuts, pepper, coffee, durian, vegetables and fruits... all grew impressively. Farmers growing the above agricultural products are excited, because they expect to earn good profits in the next harvest. However, businesses processing and exporting agricultural and food products face many difficulties due to record increases in raw material prices. In addition, rising logistics costs also create an additional burden for businesses in this field.

There are still many challenges

One of the biggest obstacles that agricultural export businesses are facing is rising transportation costs. The cost of shipping international goods has doubled compared to the previous year, due to a rise in fuel prices and a global shortage of containers.

Currently, ocean freight rates have increased by an average of 30% in recent weeks, eroding the profits of many export businesses.

Mr. Tran Van Linh, Chairman of the Board of Directors of Thuan Phuoc Seafood and Trading Joint Stock Company, said that the EU market accounts for about 25% of the export market share of Vietnamese enterprises and this is also the area with the highest increase in shipping rates. Accordingly, shipping rates from Vietnam to the EU are currently around 4,000 - 5,000 USD/container, an increase of 2 - 3 times compared to the end of last year. On average, a container exported to the US costs about 6,000 - 7,000 USD, double compared to before. Freight rates to areas such as China, Japan, Korea and Southeast Asia also increased, ranging from 1,000 - 2,000 USD/container. Rising shipping costs make businesses' profits almost non-existent, or even incur losses.

"Businesses are almost no longer profitable when shipping rates increase," General Director of Vina T&T Group Import-Export Company Nguyen Dinh Tung shared. Increased shipping freight also caused the cost of fruit and vegetables to increase, within 2 months it increased by over 100%, greatly affecting signed contracts.

Mr. Tran Huy Vu - Director of Green Eco Company specializing in exporting agricultural products to Japanese, Korean and Chinese markets said: "Exports are increasing but the purchasing power of the world market is decreasing; A large number of Vietnamese enterprises have no orders and low profits due to rising production costs and increased raw materials, especially the increasing costs of gasoline, electricity, and logistics. Although there are financial support policies from the state and banking institutions; But businesses are still difficult to access due to previous outstanding debts, difficulty structuring assets and cash flow to be able to use new loan packages."

The price of input materials for agricultural production has also increased significantly. Prices of fertilizers, pesticides and other raw materials have increased due to global market fluctuations and extreme weather factors.

"Increased transportation costs have directly affected product prices, reducing our competitiveness in the international market. Rising input raw material prices have put great pressure on production costs, causing for businesses to face more difficulties in maintaining profits," shared Mr. Tran Van Hung, Director of Hung Phat Import-Export Company.

Solutions to overcome difficulties for businesses

Faced with difficulties in raw material prices and increased production and transportation costs, many businesses have had to change their business strategies and look for new solutions. Ms. Nguyen Thi Lan, Director of Lan Huong Agricultural Products Co., Ltd. said that her company has switched to using different transportation methods to reduce costs, while promoting the application of technology in production to increase productivity and reduce costs. "We have invested in automation technology and digital solutions to improve production efficiency and reduce waste," Ms. Lan shared.

“We have to expand the market to find more customers; Select export orders more effectively. Asset structure and cash flow to access low-interest loan packages. Optimize production and administration costs to reduce business costs. In addition, the company also plans to develop other businesses related to the current core business, such as deep processing of agricultural products. At the same time, strengthen cooperation with international partners to ensure stable supply and minimize price risks," added Mr. Tran Huy Vu - Director of Green Eco Company.

Chairman of the Vietnam Logistics Service Business Association (VLA) Le Duy Hiep said that it is time to tighten the management of fees and surcharges for foreign shipping lines. Currently, foreign shipping lines only need to notify price changes 15 days in advance without checking or explaining the fee components. This leads to increased surcharges, causing frustration for businesses but has not been completely resolved. It is necessary to research the legal aspects as well as international practices, it may be required that if they want to increase fees, they must get approval from the management agency and from the association, and then it will be issued.

In the context of rising transport costs, Deputy Minister of Industry and Trade Nguyen Sinh Nhat Tan signed document No. 5178/BCT-XNK sent to import and export industry associations; logistics industry associations; Vietnam Shippers Association; Vietnam Association of Agents, Brokers and Maritime Services on recommending 6 solutions to promote import and export as shipping costs continue to escalate.

The Ministry of Industry and Trade stated that in recent times, increases in shipping rates, local congestion at some Asian ports, and lack of empty containers have had an impact on import and export activities. Therefore, the Ministry of Industry and Trade notes that associations and businesses must coordinate between import-export businesses and logistics service businesses; freight routing and alternative routes; enhance the use of incentives from FTAs; Resolve backlogged import and export goods; Support training and improve capacity to negotiate sales contracts and insurance contracts for small and medium-sized enterprises; Develop a prevention and rapid response plan.

Experts predict that the situation will remain challenging in the second half of 2024. The government needs to have policies to support businesses, including tax reduction; Support loans and promote agricultural extension programs to help businesses reduce cost burdens.

Although Vietnam's agricultural exports in the first 6 months of 2024 have achieved positive results, the challenges of transportation costs and rising raw material prices have posed many difficulties for businesses. To continue to maintain growth momentum, businesses need to be flexible, creative and find effective solutions. At the same time, support from the Government and related organizations is also an important factor to help businesses overcome this difficult period.

According to: Yen Thu - Cong Thuong Newspaper