The sudden surge in durian prices: More harm than good.

Việt Nam•04/08/2023

08:29, 04/08/2023

Durian in Dak Lak has just begun its harvest season, but early-season prices have already skyrocketed, doubling compared to last year. This is both good news and a cause for concern for the durian industry.

Price manipulation due to... middlemen

In 2023, Dak Lak province had 22,500 hectares of durian orchards, with a production of over 200,000 tons. Experts assess that this year's durian crop in Dak Lak will benefit from favorable prices (up 15-20%) and a thriving market. Some orchards have already begun harvesting, with relatively high selling prices, which is good news for durian farmers. However, the price manipulation by some middlemen and buyers has created risks for both businesses and farmers.

According to observations in some durian-growing areas of Dak Lak, many traders, including Chinese nationals and durian brokers, are currently inflating prices to 75,000-90,000 VND/kg for bulk purchases at the orchards, double the price at this time last year. One durian broker stated that their job is to find beautiful durian orchards, take photos and videos, and send them to Chinese buyers. The buyers then set a price, and if the orchard owner agrees, a deposit is made. If the deposit is successfully secured, the broker receives a commission of approximately 1,000 VND/kg.

Mr. Nguyen Dinh Ke's durian orchard (Doan Ket ward, Buon Ho town) is still about a month away from harvest.

While many businesses have stated they will not import goods at the current high purchase prices, many others have started to finalize contracts with farmers (30% of the orchard value), but the contracts are not very binding, do not specify a harvesting date, only state when the fruit falls, and do not specify a date for returning the orchard…

Ms. Bui Thu Phuong, Director of Tan Khang Sustainable Agricultural, Commercial and Service Cooperative (Cu M'gar district), said that due to the inflated purchase prices by traders, up to 80% of members are not selling their products to the cooperative but are selling them elsewhere. This is because compared to the cooperative's price of 75,000 VND/kg for good quality fruit, the price outside the cooperative has reached 95,000 VND/kg. The significant price difference is causing member farmers to compare and carefully consider their options.

Given this situation, the cooperative has warned the farmers, but they are only interested in immediate profits and are accepting the agreed-upon prices. The cooperative is very worried about the farmers' situation. Firstly, they risk having their orchards held up (leaving the fruit to rot, then forcing down the price); secondly, if the farmers break their contracts, the buyers might hire thugs to protect them, preventing the orchard owners from harvesting and selling to others.

“The high prices will lead to bidding wars and a breakdown in public order and security, which requires the intervention of local authorities to ensure that the 2023 durian harvest takes place safely and smoothly,” said Mr. Vu Duc Con , Deputy Director of the Department of Agriculture and Rural Development and Chairman of the Dak Lak Durian Association.

In Buon Ho town, the practice of middlemen entering orchards to negotiate prices is also common in durian-growing areas. Mr. Bui Thanh Huynh, Director of Buon Ho Agricultural Cooperative, said that this year's durian harvest for its members is bountiful, with yields increasing by about 20% compared to last year. Although there is still more than a month until the durian harvest season, some durian middlemen from other areas are already coming to demand high prices (around 100,000 VND/kg), causing market disruption and making many farmers hesitant to sign sales contracts with the cooperative.

According to Mr. Nguyen Dinh Ke (Doan Ket Ward, Buon Ho Town), his family has been forced to lock their orchard gates for several days to avoid being disturbed. On average, Mr. Ke receives dozens of "brokers" each day who come to inquire about buying durian and negotiate the final price. He says he has never seen such a situation with brokers inflating prices and causing price chaos as this year.

Mr. Ke said that this year his family's durian yield is estimated at 15 tons, but it will take about 40 more days for the durian to reach the desired quality for harvest. Although brokers offered him over 100,000 VND/kg, Mr. Ke refused, deciding to wait until harvest time to sell at market price. Based on his experience from previous durian seasons, he believes that brokers offering higher prices than dealers and purchasing units isn't necessarily a good thing and carries many risks. Especially the situation where brokers leave the orchards without a return date, leading to neglected trees, increased susceptibility to pests and diseases, or trees becoming exhausted from carrying fruit for too long, affecting their development and yield in the following season.

Many risks

Explaining the reasons behind the surge in durian prices, economic experts suggest that the signing of the Protocol on Official Durian Export between Vietnam and China has triggered a frenzy of competition to purchase durian orchards. In reality, Vietnam's durian production isn't excessive, but there are many buyers involved in purchasing partnerships. Buyers are seeking out new suppliers like Vietnam. The price above 100,000 VND/kg is unrealistic; it reflects competitive pricing. Therefore, consumers need to be cautious about the current price fluctuations.

Farmers in Cu M'gar district are harvesting durian at the beginning of the season.

According to durian farming cooperatives, when farmers have good techniques, the production cost is below 20,000 VND/kg; if not done well, it is around 20,000 – 25,000 VND/kg. Therefore, a stable selling price of 50,000 – 60,000 VND/kg allows farmers to confidently produce and develop sustainably.

However, the current difficulty is that intense buying pressure drives prices up, and farmers don't know the real price versus the inflated price. Furthermore, farmers lack the experience and techniques to assess the percentage of ripe fruit ready for harvesting, as well as the harvesting techniques in the orchard, making them vulnerable to price manipulation and forced harvesting by traders. If farmers mastered the techniques and knew when to sell at the right price, they would be more proactive and advantageous, instead of blindly following market prices without distinguishing between real and inflated ones, which would lead to many risks.

Mr. Vu Duc Con, Deputy Director of the Department of Agriculture and Rural Development and Chairman of the Dak Lak Durian Association, assessed that the 2023 durian crop had many advantages, firstly because it was sold at high prices and had a more stable market due to the official export of durian to the Chinese market. In addition, farmers invested more in and cared for their orchards better, resulting in relatively high yields; production reached approximately 200,000 tons, an increase of 20,000 tons compared to the 2022 crop.

However, the biggest disadvantage of this year's durian harvest is the extremely "heated" purchasing situation. Therefore, closing prices early could have negative consequences and drawbacks, as many contracts may be difficult to fulfill as signed (when prices fluctuate during the harvest season).

On the other hand, if farmers only chase after prices, sustainable development and long-term linkages will be neglected, affecting the quality of products sold in this season, as well as the sustainable development of the durian industry. The association only advises farmers to remain calm and not rush to finalize prices early, as this could be detrimental to themselves and buyers. Besides price, adequate attention should be paid to sustainable cooperation and linkages with businesses and buyers that invest in each season or in the long term.

Minh Thuan - Tuyet Mai

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