Focus on Vietnam

by Chris Lyddon
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Vietnam is traditionally a big rice producer and consumer, but the diet of Vietnamese people has changed in recent years to include more wheat-based products, all based on imported grain.

Vietnam is one of the world’s most important rice producers. The International Grains Council (IGC) has projected its production for 2014-15 at 28 million tonnes, up from its forecast of 27.8 million for 2013-14.

It’s also a major exporter, with a forecast 6.7 million tonnes set to leave the country in 2015, up from 6.4 million the year before.

China is a major customer for Vietnam’s rice exports, but there have been problems. “On Aug. 11, 2014 authorities banned cross-border rice imports from Vietnam, in an attempt to curb the evasion of customs tax payments,” the IGC reported.

Vietnam does not produce wheat, but its maize crop is forecast at 4.9 million tonnes in 2014-15, compared with 5.2 million the year before.

The IGC put its total grains imports at 5.4 million tonnes in 2014-15, down from 5.7 million in the previous year. The figure includes imports of 1.9 million tonnes of wheat, up from 1.6 million in 2013-14.

Rice, maize dominate

The USDA attaché’s annual report on the grains sector notes the dominance of wheat and maize (corn). “While rice is used mostly for food and export, corn mainly satisfies the local feed industry,” it said. “Corn is also imported to fulfill the gap between local supply and demand.”

“More than 10 years ago, Vietnam was a seasonal corn exporter and importer,” the report said. “This has been halted recently due to local high demand from the feed industry.

“Feed wheat’s share of total feed consumption was historically 15% to 20%, mainly used for aquaculture feed, both as an ingredient and a binding. Feed wheat, however, has recently been an alternative source for other animal feeds as well – in lieu of corn, cassava, and broken rice – based on its price competitiveness.”

The attaché explained that Australian wheat has duty-free access to Vietnam under the Australia–Vietnam Free Trade Agreement.

“Australian milling wheat is expected to continue dominating the wheat import market in Vietnam,” the report said. It accounted for over 70% to 80% of Vietnam’s total wheat import volume in 2012-13.

The Australian Export Grains Innovation Centre explained in a report on Vietnam earlier this year that the country has for some years been the second largest market for Australian wheat.

“In fact, exports to that market have increased dramatically from 380,000 tonnes in 2007 up to a high of 2.4 million tonnes during 2011,” it said. “The consumption of wheat-based foods in Vietnam has been historically low. However, Vietnamese people are beginning to replace traditional rice-based diets with wheat products, particularly in the larger cities of Hanoi and Ho Chi Minh. This growth is predicted to be 3% to 8% per year and is largely due to changing lifestyles as consumers become more familiar with convenience and fast foods and as rural-based populations move toward the cities for work opportunities.”

Instant and Chinese noodles are the main wheat flour-based products consumed in Vietnam, representing between 40% and 50% of total wheat use, the AEGIC report said.

“Vietnam ranks fourth in the world amongst instant noodle consumers with more than 50 instant noodle factories producing more than 5 million packets each year with an annual growth rate of 8%. The dried noodle segment uses a medium protein flour that is largely produced from APW grade wheat from Australia,” it said. “This may be blended with wheat from other grades to develop a range of products with different quality attributes.”

The bakery sector represents between 35% and 40% of total flour use in Vietnam and is trending toward more western-style sandwich type breads and baguettes, it said.

“Australian grades APH, AH and APW are utilized, along with higher protein wheats from North America. Wheat imports for feed purposes, commonly used for the aquaculture industry, have grown dramatically due to price competitiveness against corn and rice,” it said. “While the aquafeed industry seeks cheap grain it also needs wheat with a high gluten content to help hold the feed pellets together when placed in water.”

Fewer bigger mills

As the wheat flour milling sector has developed, the overall number of plants has fallen from over 30 five years ago. “We’re operating around 20 mills,” Mike Spier, U.S. Wheat Associates Vice-President in Singapore, told World Grain. “The larger flour mills are expanding their capacity. They are more efficient than the smaller mills.”

He put the amount of wheat going into flour milling at 1.3 to 1.4 million tonnes. “It’s pretty much dominated by Australia,” he said. “From the United States, it’s probably 150,000 tonnes. That’s in the last five years. If you look at the five years prior to that it was maybe 30,000 tonnes. We’re less than 10% of the market.”

The reason for the limited U.S. share is partly logistics.

“Since a lot of the flour millers in Vietnam are small, they don’t have the capability to import large vessel sizes,” he said. “They like to buy by containers and Australia’s got a really good set up for that.”

The noodle market has a preference for Australian wheat. “We are seeing a growth in U.S. wheat in the premium quality flours,” he said. “You have more of the fast food franchises that need hamburger buns, pizza doughs, and so we are seeing an increase in demand for U.S. wheat to meet those requirements from more the industrial size bakeries, for hard red spring wheat and soft white wheat.

Rice consumption falling

Rice is the main staple food in Vietnam, but consumption is falling. The attaché quoted the Ministry of Agriculture and Rural Development (MARD) as putting per-capita rice consumption at about 136.8 kilograms a year.

“Vietnam’s decline in per-capita rice consumption is consistent with other countries in Asia,” it said. “As the economy develops, consumers have greater purchasing power and more access to other foods, with per-capita consumption of rice tending to decline as income increases.”

However, the rise in population means that total rice consumption continues to grow. The attaché estimated that Vietnam would need an extra 150,000 tonnes of rice a year.

“Other factors in Vietnam’s increased rice consumption include higher use of rice in homemade animal and aquaculture feeds, and growth in industrial scale food processing, especially in the beer and rice wine (a local alcoholic drink) industries,” the report said.

The attaché has also reported on moves by MARD to encourage farmers “to implement a large-scale farm model, where farmers gather their individual small farms to create larger farms, and thereby decrease production costs, such as land preparation, irrigation, planting, and harvesting costs, which it is argued, better protects the environment and creates stronger competitiveness.”

Soybean imports

Vietnam is expected, according to the IGC, to import 1.6 million tonnes of soybeans in 2014-15, up from 1.4 million the year before. It is also forecast to import 3.1 million tonnes of soybean meal, up from 3 million the year before.

“Vietnam’s oilseed production continues to fall well below demand from the food industry and the livestock and aquaculture feed sectors due to low yield and strong competition from other field crops, namely corn,” the attaché reported.

“Although Vietnam started domestically producing SBM on an industrial scale in 2011, Vietnam continues to import the majority of the SBM consumed to offset the protein shortage in the country and meet the growing demand of the animal and aquaculture feed industries.”

Key Facts

Capital: Hanoi (Ha Noi)

Population: 93,421,835 (July 2014 est.)

Religions: Buddhist 9.3%, Catholic 6.7%, Hoa Hao 1.5%, Cao Dai 1.1%, Protestant 0.5%, Muslim 0.1%, none 80.8% (1999 census).

Location: Southeastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South China Sea, as well as China, Laos, and Cambodia.

Government: Communist state. Chief of state: President Truong Tan Sang (since July 25, 2011); head of government: Prime Minister Nguyen Tan Dung (since June 27, 2006).

Economy: Vietnam is a densely-populated developing country that has been transitioning from the rigidities of a centrally-planned economy since 1986. Vietnamese authorities have reaffirmed their commitment to economic modernization in recent years. Vietnam joined the World Trade Organization in January 2007, which has promoted more competitive, export-driven industries. Vietnam became an official negotiating partner in the Trans-Pacific Partnership trade agreement in 2010. Agriculture’s share of economic output has continued to shrink from about 25% in 2000 to less than 20% in 2013, while industry’s share increased from 36% to more than 42% in the same period. State-owned enterprises account for about 40% of GDP. Poverty has declined significantly, and Vietnam is working to create jobs to meet the challenge of a labor force that is growing by more than 1 million people every year. The global recession hurt Vietnam’s export-oriented economy, with GDP in 2013 growing at 5%, the slowest rate of growth since 1999. In 2013, however, exports increased by more than 12%, year-on-year; several administrative actions brought the trade deficit back into balance. Between 2008 and 2011, Vietnam’s managed currency, the dong, was devalued in excess of 20%, but its value remained relatively stable in 2013. Hanoi has oscillated between promoting growth and emphasizing macroeconomic stability in recent years. In February 2011, the government shifted from policies aimed at achieving a high rate of economic growth, which had stoked inflation, to those aimed at stabilizing the economy, through tighter monetary and fiscal control. Although Vietnam unveiled a broad, “three pillar” economic reform program in early 2012, proposing the restructuring of public investment, state-owned enterprises, and the banking sector, little perceptible progress has been made. Vietnam’s economy continues to face challenges from an undercapitalized banking sector. Non-performing loans weigh heavily on banks and businesses.

GDP per capita: $4,000 (2013 est.); inflation: 6.8% (2013 est.); unemployment: 1.3% (2013 est.).

Currency: Dong (VND): 21,204 dong equals 1 U.S. dollar (Sept. 23, 2014).

Exports: $128.9 billion (2013 est.): clothes, shoes, electronics, seafood, crude oil, rice, coffee, wooden products, machinery.

Imports: $121.4 billion (2013 est.): machinery and equipment, petroleum products, steel products, raw materials for the clothing and shoe industries, electronics, plastics, automobiles.

Major crops/agricultural products: Rice, coffee, rubber, tea, pepper, soybeans, cashews, sugar cane, peanuts, bananas; poultry; fish, seafood.

Agriculture: 19.3% of GDP and 48% of the labor force.

Internet: Code: .vn; 189,553 (2012) hosts and 23.382 million (2009) users.

Source: CIA World Factbook

Source: U.S. Department of Agriculture

Chris Lyddon is World Grain’s European editor. He may be contacted at: