Grain and Flour Market in Vietnam

Milling sector in Vietnam focuses on rice that has the highest production rate. However; changing consumption habits with the economic development in the recent years have important role on the development of wheat milling sector. At the beginning of 1990s; flour was being imported for country’s flour and bakery products industry. But then flour import started to give its place to wheat import with the increase of capacity and investments related with wheat mills.

As one of the world’s fastest-growing economies, Vietnam achieves growth with 7-8 rate each year and develops with the help of economic growth in terms of market potential for many sectors. Although there is not enough land for agriculture, the yield of the existing lands provides an important competitive advantage for the country especially in rice production. In the country’s export list, rice is one of the 4 important products and the country is among the largest 5 rice exporter in the world with the rice amount it exports.

Besides rice, wheat is another product that has gain importance recently. In Vietnam where wheat production does not exist, averagely 2 million tons of wheat is consumed every year. Despite that this consumption amount is very low compared to region countries; it will continue to increase in the next years. In Vietnam that imports its entire wheat need as there is not production, wheat milling sector has made progress in the last 10 years. In the country where flour import had priority at the beginning of 1990s, wheat import came to the forefront with the development in milling sector.

ECONOMY IN VIETNAM
As one of the countries with the highest growth rate in the world, Vietnam made important progress in economy and integration to the international system especially after war. With the economic change policy accepted at the 6th congress of the Communist Party in 1986, ıt was decided to support private sector and policies were developed in this direction.

In Vietnam economy, the share of industry in real gross domestic product was 41,1 in 2010. In Vietnam where industry is the largest sector; petroleum, mining, construction and textile are the most important industry sectors. The share of agriculture in gross domestic product was 20,6 in the same period.

Agricultural products such as coffee, rice and pepper are among the most important export goods. Although the share of agriculture sector in gross domestic product is low, 54 of total labor force works in agriculture, forestry and fishery sector. Vietnam has the characteristics of an agricultural society in terms of labor force.

Vietnam’s participation to ASEAN (Association of Southeast Asian Nations) Free Trade Agreement in 2001 and becoming a WTO (World Trade Organization) member in 2007 caused important changes in country’s economic and commercial regime. WTO membership caused liberalization of Vietnam’s foreign trade system and facilitated the entrance possibilities to foreign markets.

In Vietnam, government has an important role on economy via state-owned enterprises with 37 share in gross domestic product. Government continues to own majority shares in important and precise sectors like energy, telecommunications, aviation and banking. Vietnam’s most important problem is to create jobs for 1,5 million persons that participate to the labor force every year.

After the global finance crisis, Vietnam economy became one of the countries with the highest growth rate in its region by growing 6,8 in 2010. Despite that a decrease was experienced in 2009 compared to the growth with 6,18 rate in 2008, government’s estimation for 2009 exceeded the target of 5 .

Economic growth in the recent years is around 7-8 . This rate is 14-15 in industrial production.

AGRICULTURAL SECTOR IN VIETNAM
Vietnam faces with important deficiencies in terms of agricultural products and resources due to its nearly 88 million-population and the ratio of cultivable land per capita that is below the average of Asian countries. Despite the limited possibilities in agriculture sector, the country has become an important producer and exporter in some agricultural products by using the existing agricultural land and agricultural resources effectively. Thus agricultural sector has very important place in country’s export although it constituted only 21 of gross domestic product between 2003 and 2009. Vietnam continues to apply import substitution policies in some agricultural products.

Although Vietnam has too little cultivable land (0,08 hectare/person), these lands are very fertile. With this fertile land, Vietnam is the country that produces and exports the largest amount of rice in the world. Besides this; coffee, rubber, cotton, tea, pepper, soybean, sugarcane, peanuts, bananas are other significant agricultural products that Vietnam produces. As it has a long coastline, coastal fishery is much developed in the country.

Grain production estimation of the country in 2009 was around 43,3 million tons and the production increased 24,4 thousand tons compared to previous year. Rice production in 2009 was realized as 38,9 million tons and increased 165,700 thousand compared to previous year. Corn production in 2009 was realized as 4,4 million tons and the production decreased 165,700 thousand compared to previous year. Tea production in 2009 was realized as 798.800 tons, rubber production as 723.700 tons, pepper production as 105.600 tons. Compared to previous year, there was 7 increase in tea production, 9,7 in rubber production, 7,2 in pepper production.

Beside the increase in the production amounts of these products, there are other increases in cultivation fields. In 2009; tea cultivation land was 128.100 Ha, coffee cultivation land was 537,000 Ha, rubber cultivation land was 674.200 Ha, pepper cultivation land was 50.500 Ha and there were increases in the cultivation lands compared to previous year (2008) with 2.600 Ha in tea, 6.100 Ha in coffee, 42,800 Ha in rubber and 600 Ha in pepper respectively.

Livestock sector also continues to develop in Vietnam in the recent years. Farm numbers in the country increased 18,5 in 2009 compared to previous year. According to a study on livestock in 2009; there are 27,7 million pigs, 280,02 million barnyard fowls, 2,9 million buffalos and 6,1 million cattle in the country.

GRAIN PRODUCTION AND CONSUMPTION
As we mentioned above; although Vietnam does not have enough land for agricultural production, it is one of the 5 largest rice producers in the world due to the fertile land. According to data of U.S. Department of Agriculture’s Foreign Agricultural Service (USDA); country realizes 20 million tons rice production every year. When the last 10-year data of USDA is examined; the rice production that was 18 million tons in 2003 increased consistently for the next years and reached 20,4 million tons in 2011. Estimated to be realized as around 20,2 million tons in 2012, production is foreseen to be realized as 21,1 million tons in 2013.

Vietnam uses 50 of its rice production for domestic consumption. According to USDA data; Vietnam’s rice consumption that was 9,4 million tons in 2003 reached 10,4 million tons in 2011. Estimated to be realized as 10,6 million tons in 2012, consumption is foreseen to be realized as 10,7 million tons in 2013.

Estimations of International Grain Council (IGC) on rice production in Vietnam is a little higher than USDA’s estimations. According to data of IGC; country’s rice production that was 26,9 million tons in 2011/12 season will be realized as 27,2 million tons in 2012/13 season. IGC’s projection about 2013/14 season rice production is 27,6 million tons.

Food and Agriculture Organization of the United Nations’ (FAO) data is seen as higher than both USDA and IGC’s data. According to data of FAO; realizing around 26 million tons rice production in 2003, Vietnam increased this production amount to 33,9 million tons. Estimating that rice production of the country on paddy rice basis in 2012 as 43,6 million tons, FAO foresees 43,5 million-ton production for 2013 season.

If we use the average of these 3 institutions that provides data and projections about the agricultural production of the countries for 20122/12 season data, we can consider that Vietnam rice production is around 26 million tons. This production amount is in parallel with IGC data. Wheat is not produced in Vietnam but its consumption has increased lately. According to USDA data; wheat consumption of the country has reached to 2 million tons levels in the recent years. According to this data; Vietnam ‘s wheat consumption that was 950 thousand tons in 2003 reached 2,2 million tons in 2011. USDA foresees that wheat consumption will be realized at the same levels in 2013. Corn production in Vietnam is around 4 million tons. According to USDA data; Vietnam corn production that was 4,1 million tons decreased to 3,8 million tons between 2006 and 2007 but reached 4,3 million tons in 2011 by increasing in the next years. Estimating that the country realized 4,6 million tons in 2012, USDA foresees 4,8 million-ton production in 2013.

According to USDA data; the country uses the entire corn production for domestic consumption. Announced as 4,6 million tons in 2011, corn consumption was realized as 4,9 million tons in 2012. 2013 corn consumption projection is 5,3 million tons. FAO and USDA data are almost parallel to each other on Vietnam’s corn production. According to FAO data; country’s corn production that was 4,6 million tons in 2010 was realized as 4,8 million tons in 2011/12 season. FAO’s projection for 2013 corn production is 5,1 million tons.

GRAIN MILLING AND PROCESSING INDUSTRY
Milling sector in Vietnam focuses on rice that has the highest production rate. However; changing consumption habits with the economic development in the recent years have important role on the development of wheat milling sector. At the beginning of 1990s; flour was being imported for country’s flour and bakery products industry. But then flour import started to give its place to wheat import with the increase of capacity and investments related with wheat mills.

It is estimated that there are over 30 flour mills in the country and 14-15 of these mills have 60-70 of the domestic market and their existing processing capacity is around 1,8 million tons.

Vietnam’s flour consumption is seen as very little compared to other countries in the region. However; the rapid growth of the economy and the increase in personal income, existence of consumption culture for bread and similar bakery products although there is not wheat production in the country point out that wheat demand will increase in time. For that reason; the country is considered as an important market for both wheat and milling technologies in the next period. Vietnam’s 2008 wheat and wheat flour import total was 293 million dollars. Vietnam’s current tariff is 5 for wheat and 10 5 for wheat flour.

FOREIGN TRADE IN VIETNAM
Vietnam, was in struggle to open outside Asia and find new export markets following the regional crisis in 1997-1998 and was significantly successful. Foreign trade sector in the country has a large volume. Both export and import has a great increase trend in general excluding crisis periods.

It is estimated that export that was nearly 40 billion dollars in 2006 reached 107 billion dollars in 2012 and the import exceeded 216 billion dollars by increasing by more than two times. It was estimated that foreign trade in total that was 193 billion dollars in 2011 exceeded 216 billion dollars in 2012. Foreign trade in the country is in favor of import in general but foreign trade deficit between 2006 and 2012 was 8 billion dollars averagely.

Compared to the country’s economic scale, Vietnam has a considerable level of export and its export products spread a wide range from industrial products to agricultural ones. Petroleum oils are at the top of country’s export. Besides petroleum oils; shoes, rice, coffee, fish products and other furnishings are major products to be exported.

When the country’s export is examined on product basis; it is seen that a great part of the exported products are traditionalized and there are not serious fluctuations in terms of product type. Vietnam exports to around 160 countries. Five most important countries in country’s export list are United States, Japan, China, Germany, and Australia. Turkey is among the top 30 countries in Vietnam’s export.

Vietnam’s import has been in a serious increase trend in the recent years and it increased more than two times in the last five years. Petroleum oils (excluding crude oils) ranks first among the imported products. Other major products in import are iron and steel products, telephone equipment, and automotive and auto spare parts. Just like in export; country’s imported products show a consistent structure in terms of variety. Major countries in Vietnam’s import are China, Singapore, Taiwan, Japan, Republic of Korea and Thailand. Import from these countries constitutes approximately 70 of total import. Turkey is among the top 40 countries in Vietnam’s import.
GRAIN’S PLACE IN FOREIGN TRADE
Rice is a very important product for Vietnam as rice is among top 4 products in the list of the products the country export. As one the five largest rice exporters with its export amount, Vietnam realizes approximately 9-10 million tons rice every year according to USDA data. However there important fluctuations in rice export between the years. According to USDA data; Vietnam’s rice export that was 10,1 million tons in 2003 decreased to 7 million tons level in the next 2 years and remained under 10 million tons all the time except 2007-2010. In 2011, country’s rice export decreased to 6,9 million tons and it is estimated that it was realized as around 7 million tons in 2012. The projection for 2013 is 8 million tons.

FAO’s data on Vietnam’s rice export between 2003 and 2011 are lower than USDA’s (except 2011). According to FAO data; country’s rice export that was 5,9 million tons in 2009 reached to 6,8 million tons in 2010 and 7,1 million tons in 2011.

Especially on the rice export data of USDA, FAO and IGC for 2011, there are not many differences. Declaring 2011/12 season rice export amount as 7,7 million tons, IGC estimates 7,4 million-ton export for 2012/13 season and 7,6 million-ton export for 2013/14 season. The most important agricultural product that Vietnam is imported is wheat. As there is not wheat production in the country, entire wheat need is imported from abroad. When the data of FAO and USDA on wheat imports of the country, it is seen that their data are almost the same. According to USDA data; country’s wheat import has reached 2 million tons levels in the recent years.

According to these data; Vietnam’s wheat import reached 2,6 million tons in 2011.Estimating that Vietnam wheat import was realized as 1,8 million tons in 2012, USDA foresees that wheat import will be realized as 2,1 million tons in 2013. According to FAO data; the country also imports wheat flour between 30 and 50 thousand tons every year.

Export and import of other grain products in the country is at much more limited levels.