Commodity trading through the Department: The solution to the problem of 'good harvest, low price' of Vietnamese agricultural products - Lang Son Newspaper and Radio and Television Station

The development of commodity trading through the Department is helping Vietnam's agricultural sector gradually escape the vicious cycle of "good harvest, low price". Thanks to the connection with international exchanges and the application of futures contracts, farmers and businesses have more tools to prevent risks, stabilize output and improve competitiveness in the global market.

Solution to the problem of good harvest but low price

Recently, the price of durian in many localities has suddenly plummeted, causing difficulties for durian growers. While the price of Ri6 durian reached 170,000 VND/kg two years ago, the price of durian is now only 35,000-40,000 VND/kg. At this price, people are suffering heavy losses.

According to traders, the main reason for this situation is dependence on the Chinese market, or more directly on Chinese traders. This country is currently tightening trade, making it difficult to export durian. In addition, in the past few years, durian prices have increased sharply, so people have also increased their planting areas, leading to a situation of good harvests and low prices.

Obviously, over-reliance on the free market and lack of tools to hedge price risks make farmers and businesses vulnerable to being passive when supply exceeds demand or when exports encounter problems.

The situation of good harvest and low price of durian seems to have been a vicious cycle for Vietnam’s agricultural production industry for many years. From coffee, watermelon, longan, lychee… all fall into this cycle.

Up to now, the agricultural product that is considered to have temporarily escaped this vicious cycle is coffee.

Since the severe crisis period of 2008-2016, when many gardeners destroyed coffee trees to convert to other crops, the coffee growing area is now being maintained, coffee output is growing steadily, and transaction prices are at a high level.

The latest report from the US Department of Agriculture (USDA) shows that in the 2023-2024 crop year, Vietnam's coffee output will reach 27.5 million bags (equivalent to about 1.65 million tons), in the 2024-2025 crop year it is expected to reach 29 million bags (equivalent to about 1.74 million tons) and in the upcoming 2025-2026 crop year it is expected to reach 31 million bags (equivalent to about 1.86 million tons). Meanwhile, coffee prices have increased rapidly from the range of 50,000-60,000 VND/kg in early 2023 to the range of 130,000 VND/kg in 2025 and are expected to remain at this level in 2026.

According to Do Xuan Hien, Chief of Office of the Vietnam Coffee Association, the results achieved are largely thanks to the trading of goods through the Exchange. When the Exchange is directly connected with international exchanges such as ICE and CME, Vietnamese businesses can access global standard coffee prices in real time, improving transparency and pricing capabilities in business.

Typically, in mid-February 2025, when world coffee prices peaked (Arabica was over 9,000 USD/ton, Robusta was also approaching 6,000 USD/ton), domestic coffee prices were also at their highest level ever at 133,000 VND/kg.

More importantly, participating in futures trading helps businesses proactively hedge price risks, stabilize revenue and profits by "locking in" selling prices in advance, instead of depending on market fluctuations. This is also a strategic step to help improve financial management capacity and gradually integrate deeper into the global value chain.

According to economist Dr. Nguyen Minh Phong, the advantage of trading goods through the Exchange is not only reflected in products such as coffee, but also in contributing to diversifying and expanding effective consumption channels. This form also helps to make information transparent, supports the balance of market supply and demand, and at the same time creates a fair competitive environment according to market principles, in line with the spirit of Resolution 68 recently issued by the Politburo . Moreover, because prices are publicly determined based on supply and demand and use market tools such as forward contracts, futures contracts or international standard clearing mechanisms to regulate the economy, the economy is not subject to administrative intervention, helping businesses - especially the private sector - proactively hedge risks and optimize production and business efficiency.

Market creation role

Dr. Nguyen Minh Phong also said that the development of commodity trading through the Exchange also contributes to the formation of a modern financial investment channel thanks to the synchronous development of various types of markets and the completion of healthy and transparent competitive institutions between market participants; reducing dependence on intermediaries and price manipulation; contributing to concretizing and realizing the Party's major orientations on private economic development: Taking the private economy as the most important driving force in economic growth, innovation, enhancing competitiveness and job creation, ensuring social security in the socialist-oriented market economy in our country in the coming time.

Performing this role, the Vietnam Commodity Exchange (MXV), a unit in Vietnam licensed to trade commodities, has built a solid market foundation by organizing the trading of 46 commodities and connecting with 10 major commodity exchanges in the world such as CME, ICE, SGX...

According to MXV data, there are currently 30 member companies and brokers, with an average transaction value of 5,000-7,000 billion VND/day, even reaching 11,000 billion VND in some sessions, achieving a growth rate of 10% in the period 2023-2024.

MXV Deputy General Director Nguyen Ngoc Quynh said that, aiming towards a modern, international commodity trading market, over the years, MXV has made efforts to build an effective management and trading system and received high appreciation from foreign partners.

“A typical example is the M-System trading technology system developed by MXV itself, which is capable of processing large transaction volumes, safely, quickly, and effectively serving thousands of investors every day,” said MXV Deputy General Director.

Notably, the development of commodity trading activities via MXV has always received close attention, direction and management from the Government and management agencies.

The Ministry of Industry and Trade - as the governing body - has demonstrated a strategic vision in creating a legal corridor for the Vietnamese commodity trading market, by proactively building a new policy system, aiming to be compatible with international standards, creating a solid foundation for sustainable development of commodity trading activities.

Typically, in the direction of developing the Draft Decree replacing Decree No. 158/2006/ND-CP and Decree No. 51/2018/ND-CP, the Ministry of Industry and Trade has demonstrated a breakthrough mindset with three important reform pillars: (i) Optimizing conditions and procedures for market entry, ensuring that only organizations with sufficient capacity and reputation are allowed to participate in operations; (ii) comprehensively perfecting the legal framework regulating the activities of entities - from enterprises to individuals - to improve the quality and efficiency of transactions; (iii) building a modern state management mechanism with the ability to closely monitor, strictly enforce the law and promptly handle violations, creating a transparent and fair business environment.

On the part of the Ministry of Finance, this agency has created a favorable environment for the development of the commodity trading market through tax management policies, including VAT policies in accordance with international practices and Vietnamese reality, helping to reduce transaction costs and increase market competitiveness.

Furthermore, to ensure transparency in financial reporting and risk management for financial products, the Ministry of Finance has also planned to closely coordinate with the Ministry of Industry and Trade to develop a system of regulations on specialized accounting regimes for commodity trading activities to complete the legal framework for commodity derivatives trading - an important tool to help businesses hedge against price risks. Developing separate accounting standards for commodity derivatives products not only enhances professionalism but also creates trust for international investors.

The State Bank of Vietnam has also issued regulations on payment and money transfer specifically for commodity transactions in Circular 20/2022/TT-NHNN on guiding one-way money transfer activities from Vietnam to foreign countries and payment and money transfer for other current transactions, significantly improving the efficiency of commodity transactions and demonstrating initiative and foresight in building a modern payment infrastructure, creating a solid foundation for commodity transactions.

Notably, the State Bank has also established a strict monitoring mechanism for payments and money transfers of the Commodity Exchange. This strict control mechanism not only enhances the safety and protection of the commodity trading market, but also contributes to ensuring the security of the financial payment system.

Source: https://baolangson.vn/giao-dich-hang-hoa-qua-so-loi-giai-cho-bai-toan-duoc-mua-mat-gia-cua-nong-san-viet-5048462.html