Pork trading floor to boost price transparency in Vietnam market

A pork trading floor will boost price transparency and help remove undue influence of traders in the market, Nguyen Ngoc Quynh, deputy general director of the Mercantile Exchange of Vietnam, tells The Investor.

A pork trading floor is being established in Ho Chi Minh City. How will it run?

The Mercantile Exchange of Vietnam (MXV), the municipal departments of Industry and Trade and Agriculture and Rural Development signed a cooperation agreement recently to build the pork trading floor. It has not been put into operation formally. The project is still in the establishment stage and clearance has been sought from the HCMC People's Committee.

Transactions on the floor will go through three phases. In phase 1, buyers and sellers will reach an agreement on the price. Phase 2 will involve spot trading and Phase 3 will involve futures trading.

What current problems would such a floor solve in the pork industry?

The most important issue that will be solved is food hygiene and safety. Pork products that are consumed in the city will have to be approved by the exchange, which will have an independent unit that is responsible for traceability, quality control, quantity and preservation systems.

Secondly, the floor will help the market be transparent about prices and no longer under the control of traders (traders currently account for 80% of trading volume in the market). When buying and selling activities are transparent on the exchange, the prices will go up and down according to the actual supply and demand. Whether the price is low or high, it will be transparent.

Wholesale markets in HCMC have acted as traditional trading floors. How will the new one be different?

Electronic transactions will apply the latest technologies, which is the first difference. In addition, the floor will have a greater variety of participants (those who find it difficult to participate in wholesale markets). The project is still under construction, so there will be more specific updates later.

What are the meat standards that the floor will set?

Pork traded will have to fully meet standards set by the exchange, including quality testing by an independent unit.

Can large businesses like BAF and Hoang Anh Gia Lai join the floor?

Big pork companies can join the floor, of course. But it will also be open to small businesses, livestock households and small traders.

What are the steps to be taken towards formally establishing the pork trading floor?

It will have to be rolled out in phases so that the market gets used to this new form of trading. The first stages will require synchronous coordination between many related departments and sectors to ensure smooth operation of the system.

Are there other countries that have applied this model that we can learn from?

Major pork markets in the world including the U.S. have applied this trading floor model since 1966. Their trading volume is very large at thousands of tons per day.

Nguyen Nguyen Phuong, deputy director of HCMC Department of Industry and Trade, said the pork trading floor will help overcome the overdependence on traders and solve the problem of price manipulation. Farmers will have the right to decide their selling prices. HCMC consumes 10,000 pigs per day, enough to meet the floor’s trading scale.