Input producer price increase,producert meet difficulty

Input producer price index in April 2021 increased by 0.37% over the previous month and increased by 4.47% over the same period last year, of which input producer price used for agricultural, forestry and fishery production increased by 0.89% and by 7.82%; for industrial production rose by 0.32% and by 4.49%; for construction grew by 0.18% and by 2.06%. Generally, in the first 4 months of this year, input producer price used for production increased by 4.64% over the same period last year, of which input producer price used for agriculture, forestry and fishery production rose 6.77%; for industrial production increased by 4.95%; for construction went up by 1.95%.

Of which, it is worth noting that the price of raw materials for animal feed and the price of iron and steel products have increased, causing farmers and related businesses to face many challenges.

Prices of raw materials for animal and poultry feed

The price of raw materials for animal feed has shown signs of going up starting from mid-2020 and the closer to the end of the year, the stronger the price increased. Up to now, the prices of many grains such as corn and soybeans have not shown any signs of going down, as demonstrated in the past month, prices have continued to increase. Animal feed businesses are considered the first to be affected when most are in a situation of supply shortage, both in production and waiting for raw materials, followed by farmers, who are affected the heaviest burden, especially for small and medium scale farmers. The price of raw materials for animal feed increased due to the decline in the supply of raw materials for animal feed in the world; the high cost of transporting imported raw materials from the lack of ships and containers affected by the Covid-19 epidemic; climate change causes crop failures. Besides, a number of countries diverted investment in agricultural products and China increased the purchase of raw materials for animal feed, causing the price of animal feed to increase in the world[1]. Meanwhile, in Vietnam, raw materials for animal feed are mainly imported (accounting for about 80%-85%), import prices of animal feed in the first 4 months of 2021 increased 6.66% over the same period of 2020 should affect domestic animal feed prices. Specifically, the price of animal feed products for the processing industry in April 2021 increased by 2.48% over the previous month and by 13.49% over the same period in 2020, for the first 4 months of this year increased by 8.79%; the prices of materials for animal feed for agricultural production households increased by 1.26% and by 5.09%, for 4 months grew by 3.6%.

To overcome the current difficulties, businesses need to actively increase their raw material reserves for production, avoiding shortages when prices are high. Combined with stockpiling, businesses and production households need to actively make the most of available raw materials for domestic animal feed to replace imported sources such as dried cashews, cashew bran, cassava residues, rice bran, etc. In addition, management agencies need to study to reduce import tax as well as reduce transportation and warehousing costs to reduce costs, ensure supply and stabilize domestic production.

Prices of iron and steel products

Just like businesses and farmers facing difficulties due to the increase in the price of raw materials for animal feed, contractors, construction industry enterprises, and people who are building houses also face construction material prices skyrocketed, no sign of decreasing.

Producer price index (PPI) for industry products in April 2021 increased by 0.38% compared to the previous month and by 2.41% over the same period last year, in the first 4 months of this year, it increased by 0.8%. In which, PPI of metal products in April 2021 increased by 2.25% compared to the previous month and increased by 11.18% over the same period in 2020; the average of the first 4 months of the year, it increased by 7.7%. In the group of metal products, the PPI of iron and steel products in April 2021 increased by 4.23% compared to the previous month and increased by 27.68% over the same period last year, the average of the first 4 months of 2021, it increased by 23.15%. The reasons for the increase in prices of iron and steel products are as follows:

(1) The price of input materials such as iron ore, scrap, steel billet and transportation costs increased, causing the production price of iron and steel products to increased. As of April 6th, 2021, the price of steel billet was at $633/ton, an increase of $30/ton compared to the beginning of March 2021 and an increase of about $200/ton compared to the same period in 2020, the impact of increasing domestic iron and steel prices, specifically: In the North, iron and steel prices in April 2021 fluctuated from 14.2-15.4 million VND/ton, up 3.3% compared to March 2021, an increase of 29% compared to October 2020 and an increase of 31.8% over the same period last year. In the South, the price of iron and steel in April 2021 fluctuated from 15.5-16.4 million VND/ton, up 4.9% compared to March 2021, up 24.6% compared to October 2020 and increased 24.9% over the same period last year.

(2) The global supply of iron and steel fell due to China’s implementation of an output control policy in the Tangshan area combined with environmental pollution control in iron ore producing cities. Besides, China’s scrap import policy affects the global scrap market in 2021 after China controlled the Covid-19 epidemic and implemented economic stimulus measures such as infrastructure investment, it started the implementation of the 5-year socio-economic development plan (2021-2025), as a result, China’s demand for iron and steel imports increased and impacts on global iron and steel prices. In Europe and the US, the shortage of iron and steel supply due to the impact of the Covid-19 epidemic and the long delivery time of input materials for production are the main reasons for the sharp increase in iron and steel prices.

(3) In Vietnam, the Covid-19 epidemic was well controlled, production recovered, and construction activities prospered. Production and business units have increased the import of input materials for the production of iron and steel products, construction works have been urgently deployed and at the same time, increased the purchase of iron and steel products to prevent rising prices from affecting construction costs… These factors have caused the domestic iron and steel prices to increase sharply. Along with that, the demand for iron and steel in the market at the end of 2020 and early 2021 will increase due to the promotion of disbursement of public investment in infrastructure construction.

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