Ministry looks to address hurdles in agri-exports to Russia, Ukraine

Russia-Ukraine tensions are pushing up prices of input materials for global production, such as wheat and corn. (Photo: nongnghiep.vn)

Diversifying markets will help Vietnam mitigate the potential negative impacts of the conflict between Russia and Ukraine on agri-forestry-fishery trade, according to the Ministry of Agriculture and Rural Development.

This is among measures the ministry has raised to overcome difficulties caused by the political instability, warning on March 9 that the Russia–Ukraine conflict could deliver a major blow to agricultural trade.

The ministry said that the Russia–Ukraine tension together with measures such as cutting off several Russian banks from the leading international payment system SWIFT, freezing assets of big Russian banks, and restrictions on imports and exports would not only affect the Russian economy but also countries that had trade relations with Russia and Ukraine, including Vietnam.

The trade will be affected by Russia being disconnected from the SWIFT payment system, the supply chain disruption in export-import, rising transport cost, and declining demand in related countries.

Deputy Minister of Agriculture and Rural Development Phung Duc Tien said that Vietnam exported about 550 million USD worth of agri-forestry-fishery products to Russia last year. Of the figure, coffee exports raked in 173 million USD and aquatic products 164 million USD.

Furthermore, Vietnam imported input materials for agricultural production from Russia and Ukraine, such as wheat, maise and fertiliser. Last year, the country purchased about 500 million USD of agro-forestry-aquatic products from Russia.

Tien said firms must closely watch the situation to handle inventories or find alternative export markets. Importers should seek suppliers from other countries.

The supply shortage from Russia and Ukraine was pushing up prices of input materials for global production, such as wheat and corn, which had increased by about 10-20 percent, affecting husbandry and cropping industries, he said.

Tien said the ministry would closely join hands with trade associations and the State Bank of Vietnam to support payments for businesses whose products have already been sent to Russia, but payment was affected by stagnant financial transactions.

The ministry will also work with importers to seek measures to stabilise prices of input materials for domestic agricultural production and bolster investment attraction.

Diversifying markets would be an important solution, he stressed.

Higher prices of corn in the global market coupled with delays in signing new contracts and uncertainties about the worldwide corn shipping might cause Vietnam’s corn import in the first half of this year to fall to the lowest level in the past five years, equivalent to a decrease of nearly 28 percent compared to 2021, according to market analysis for the commodity sectors AgroMonitor.

The company forecast that corn import would be only 2 million tonnes in the first quarter of this year, 20 percent lower than the same period last year.

Russia and Ukraine held a market share of nearly 20 percent of the global corn market, of which a majority came from Ukraine with an annual volume of 30 million tonnes. Ukraine ranked fourth in the world, after the US, Argentina, and Brazil.

The tension between the two countries would significantly impact the world corn market, strongly affecting the corn market and prices of animal feed in Vietnam.

In the first two months of the year, the corn price surged by 8-9 percent compared to the average level of 2021, creating tremendous pressure on both animal feed businesses and breeders.

The average corn price in 2021 was nearly 45 percent higher than that of 2016-2020, at about 2,000 VND per kilogram.

Vietnam imported around 10-12 million tonnes of corn from the world market each year, but the amount imported from Russia and Ukraine was not significant, only accounting for around 3 percent in 2016-21.

The country has reduced the import tax on Russian corn to zero since October 5, 2016, making the country much more competitive than the US and South America.

However, Vietnamese enterprises were not interested in importing Russia's and Ukraine’s corn due to corn quality weed problems.

Still, a few Vietnamese enterprises had signed contracts to purchase two ships of Ukrainian corn before Russia attacked Ukraine to deal with a scarcity of South American corn. However, the Russia-Ukraine conflict may cause difficulties for the ships to leave port in March./.