Vietnam’s agricultural sector has made enormous progress. The country has achieved explosive growth in agricultural exports. It is the world's third major rice supplier, after India and Thailand. Rice exports are forecast at 7.1 million tonnes in 2020, close to the 2019 level. The recent activation of the free trade agreement with the EU will allow Vietnam to increase its rice exports substantially.

With a population of over 90 million people, Vietnam is the 15th most populated country in the world. It is experiencing rapid demographic and social change. Its population reached 97 million in 2018 up from about 60 million in 1986 and is expected to expand to 120 million by 2050. Unlike many other countries in the region, Vietnam is very much a socialist state, but one that still boasts a market economy. Its development over the past 30 years has been remarkable. Economic and political reforms under Đổi Mới, launched in 1986, have spurred rapid economic growth, transforming what was then one of the world’s poorest nations into a lower-middle-income country. Between 2002 and 2018, GDP per capita increased by 2.7 times, reaching over US$2,700 in 2019.

Vietnam is set to outpace the rest of South East Asia and much of the rest of the world in its rate of economic growth and development over the coming decades.

Agriculture is one of the most important economic sectors in Vietnam. Over the past quarter century, its agricultural sector has made enormous progress. Steady advances in smallholder rice productivity and intensification through the 1990s and beyond have played a central role in Vietnam’s successes in poverty reduction, national food security, and social stability.

Besides production for increasing domestic demand, Vietnam is now a major exporter of agricultural products. The country has achieved explosive growth in agricultural exports and ranks among the top five global exporters in products as diverse as shrimp, coffee, cashews, rice, and pepper.

With its significant contribution to gross domestic product (20%), agriculture will continue to play a considerable role in Vietnam’s transition to a market-based economy. Vietnam’s strength in agriculture output is built upon a large rural base (66% of the population) where farm and agri-business labor accounts for 70% of the workforce. Besides production to satisfy domestic demand, Vietnam is also playing its part on the agricultural import and export markets. Vietnam has significantly increased productivity in rice-growing over the past 15 years, and it has become one of the largest rice exporters in the world.

In more recent years, aquaculture and fruit production have grown substantially and are export-oriented as well. Surging domestic consumption combined with increasing demand for high-value products has also pushed imports of agricultural products into Vietnam. Meat and meat products enjoy the highest growth figures, followed by rubber, animal feed and feed grain, sugar and cotton.

RICE EXPORTS EXPAND DURING PANDEMIC Rice is the staple food in Vietnam, but per capita consumption in the cities is declining as people have more choices. Harvesting of 2020, mostly irrigated, main “winter/spring” paddy crop, accounting for 46 percent of the annual output, concluded in June and the production is officially estimated at 19.9 million tonnes, close to the five‑year average. The area planted is estimated slightly below the previous five‑year average due to dryness and salinity intrusion in parts of the Mekong River Delta (the country’s main rice‑growing region in the south), but overall yield results were positive.

Vietnam is the world's third major rice supplier, after India and Thailand. Rice exports are forecast at 7.1 million tonnes in the 2020 calendar year, close to the 2019 level. Vietnam’s rice exports have expanded during the pandemic to surpass rival Thailand in the price for the first time in three decades. While other agricultural products suffered from a decline in exports due to the impacts of COVID-19, domestic rice export value reached 2.2 billion USD in the first eight months of 2020, up 10.4 percent over the same period in 2019. The Philippines was Vietnam's major buyer until August, acquiring nearly 40% of that volume, while the largest increases in exports were to Senegal, Indonesia and China. According to local exporters, the recent activation of the free trade agreement with the European Union will allow Vietnam to increase rice exports substantially.

DOMESTIC PRICES OF RICE AT HIGH LEVELS Domestic prices of rice have been increasing since the beginning of 2020, sustained by strong demand by importing countries. Between March and April 2020, prices of rice surged by 30 percent due to panic buying by households amid the COVID‑19 pandemic and concerns over the impact of dry weather conditions on the 2020 winter/spring output. In June, prices of rice decreased reflecting the improved supplies from the early summer/autumn harvest and a decline in foreign demand. Overall, prices in June 2020 were 40 percent above their year‑earlier levels.

DECLINING CORN PRODUCTION Corn is one of several locally produced crops supplied to the feed industry. However, local corn production has not grown on par with local demand and has generally been declining steadily since 2015. This is despite the Vietnamese government rolling out incentive policies to encourage farmers to switch from rice to corn since 2016.

Harvesting of the 2020 main maize crop was completed in June and official estimates put this season’s output at a below‑average level of 1.9 million tonnes. The decrease in production mostly reflects a reduction in the area planted as farmers preferred to grow vegetables instead of maize.

In Vietnam, 85 percent of corn is used for feed and industrial production. In the feed industry, corn is a main ingredient in hog, poultry, and livestock feeds. Also, corn is an alternative to feed wheat if its supply is short or its price becomes uncompetitive. Feed wheat is currently less competitive than corn, encouraging feed millers to move away from it for price reasons.

ASF OUTBREAKS SEVERELY AFFECTED PIG INDUSTRY The country, which is the fifth-largest producer and consumer of pork meat in the world, has been severely affected by several outbreaks of African Swine Fever (ASF) in 2019 and early 2020. According to the latest available official estimates, as of mid‑March 2020, at least 6 million pigs, accounting for more than 20 percent of the national herd, have died or have been culled due to ASF. Animal losses have caused a substantial reduction of farmers’ income, raising concerns over the livelihoods and the food security situation of about 2.5 million pig farming households.

Grain import requirements, mostly corn and wheat, in the 2020/21 marketing year (July/June) are forecast at a near‑record level of 15.5 million tonnes, 10 percent above the five‑year average. Import requirements of corn are forecast close to last year’s record level of 11.5 million tonnes, supported by the growing demand by the feed industry that accelerated from 2012. While the local rice bran and broken rice supply is abundant as Vietnam’s rice production remains stable, corn production has seen a slight downtrend and cassava feedstock has faced competition from the increasing demand for exports, local industrial production, and the biofuel industry. Vietnam has been importing corn primarily from South America, with limited quantities from the United States and Eastern Europe.

AN IMPORTER OF MILLING WHEAT Wheat is an important staple food in Vietnam, being consumed mainly as bread, noodles and sweet biscuits. Wheat consumption per capita as food in Vietnam has increased from 5kg in 1990 to over 16kg in 2018 and will continue to grow to about 23kg by 2030. The total demand for wheat for food is projected to grow to 2.8mmt by 2030. Consumption of wheat as food for people has increased steadily, while consumption within the animal feed industry has jumped from nearly zero up to 3mmt in the space of 10 years.

Vietnam does not produce wheat. Import requirements of wheat are forecast at 3.6 million tonnes, 10 percent below the five‑year average, reflecting a decrease in the demand for feed use. Australia has been a traditional exporter of milling wheat that has accounted for approximately 38-40 percent of the market share. However, imports of Australian wheat into Vietnam have been decreasing since MY17/18, due to unfavorable weather conditions that lowered production and pushed up prices. Declining imports from Australia have been offset by other importing markets. Russian wheat imports increased significantly in MY17/18 but fell by 43 percent in MY18/19 due to tightened phytosanitary inspections by the Vietnamese government. Demand for feed wheat is similarly likely to continue to grow as aquaculture and animal industries continue to grow. However, demand for feed wheat is more variable as it depends on the relative prices of alternative local and imported competing feed sources, such as corn and cassava. There is nevertheless an underlying demand for wheat in aquafeeds given wheat’s functional role in stabilizing feed pellets and its ease of use in industrialized feed processing.

Vietnam already has free trade agreements with major wheat suppliers, such as Australia and Russia. Import volumes of wheat may be further boosted by Vietnam's efforts to expand its exports of flour products to neighboring markets—as well as the positive growth prospects for animal husbandry and aquaculture.

WHEAT MILLING INDUSTRY IN VIETNAM Vietnam’s wheat milling capacity is about 3.5mmt annually. This is more than twice the current demand for wheat for food; indeed, more than the demand estimated above using 3 percent growth to 2030. Four mills dominate wheat milling in Vietnam: Vimaflour, Mekong, Interflour and Bing Dong. These mills account for about 50 percent of market share. This large milling capacity suggests the industry is anticipating strong future growth in the consumption of wheat for food, but may also point to expectations of growth in flour exports and the increased use of milled wheat for aquafeeds.

Flour exports have increased by more than 20-fold since 2001, with Vietnam being the largest exporter in South East Asia. Flour is mainly exported regionally with the main destinations being Thailand and the Philippines. ASEAN is the major market for Vietnam’s wheat flour products, as Vietnam enjoys tariff-free Access. Vietnam’s exports of wheat flour declined in MY18/19 on reduced wheat imports and competition from other countries. USDA estimates that MY19/20 exports will continue their downtrend for the same reasons.

SOURCES: The Food and Agriculture Organization of the UN The United States Department of Agriculture The Australian Export Grains Innovation Centre