2013-02-19 10:42:01 - New Food market report from Business Monitor International: "Vietnam Agribusiness Report Q1 2013"

BMI View: The agriculture industry (including forestry and aquaculture) contributes to more than 20% of Vietnam's GDP and employs almost half its population. It holds strong growth opportunities in terms of production, exports and retail sales, more specifically with regard to the coffee and livestock sectors.

However, some industries face large risks in terms of losing competitive advantage as other Asian countries step up production, particularly of rice and coffee. We believe Vietnam will have to significantly ramp up investment in crop productivity in order to not be left behind, and if it wants to be able to produce more value-added crops and maintain its status as an export spearhead.


Full Report Details at
- www.fastmr.com/prod/536603_vietnam_agribusiness_report_q1_2013.a ..


Key Forecasts

* Rice consumption growth

to 2017: 7.7% to 21.3mn tonnes. Rice remains the major food staple in Vietnam, and we do not see this changing over our forecast period. However, rising interest in other foods such as wheat-based goods - supported by growing affluence - will restrict demand for rice, and over the forecast period we expect production growth to significantly outpace that of consumption.
* Coffee production growth to 2016/17: 28.0% to 29.1mn bags. Strong growth in domestic coffee production will be driven by increasing investment, leading to tree replacement programmes and expansion of area cultivated. Consumption growth and export prospects will also favour output.
* Poultry production growth to 2016/17: 27.2% to 954,000 tonnes. Dramatic increases in herd numbers and increased public and private sector investment - part of the effort to reduce the country's growing import dependency - will be the main boost to growth. Rising consumption, driven by income growth, will also play a key role.
* BMI universe agribusiness market value: US$22.9bn in 2013 (down from US$23.1bn in 2012); growth expected to average 2.9% annually between 2012 and 2017.
* 2013 real GDP growth: 7.0% (down from 5.3% in 2012; predicted to average 6.9% over 2012-2017).
* 2013 consumer price index: 6.4% year-on-year (y-o-y) (lower than 9.2% in 2012; predicted to average 6.2% over 2012-2017).
* 2013 central bank policy rate: 9.00% (lower than 10.00% in 2012; predicted to average 7.8% over 2012-2017)

Key Developments

Thailand's strong push to form a rice cartel along with five other Association of Southeast Asian Nations countries - including Vietnam - in order to control and boost international rice prices is unlikely to materialise, in our view. Although the project can count on a strong support from Thailand and Cambodia, Vietnam, which would be one of the two pillars of the project given the volume of its exports, has shown a clear scepticism towards such a plan in past years. Moreover, Vietnam has been making inroads into some markets traditionally dominated by Thailand, as Viet rice is now enjoying a US$100/tonne discount over Thai rice. Participating in the rice cartel would lead to a compression of the price differentiation and could hamper Vietnamese exports.

The animal feed industry has been receiving significant - mainly foreign - investment in recent years, given the attractive prospects of the livestock and aquaculture industries of the country. Foreign-invested feed companies continue to meet most of the domestic demand, such as Thailand's Charoen Pokphand Group and U.S.-based Cargill, according to the Ministry of Industry and Trade. Vietnam currently has 59 foreign-invested firms and joint ventures that hold 70% of the domestic animal (compound) feed market share; 180 local firms retain the remaining 30%, according to the Vietnam Animal Feed Association. We believe the ongoing consolidation of the sector is likely to continue, with foreign livestock and feed companies buying local assets and increasing their exposure to the sector.

Coffee has proven to be one of main agricultural export engines of the Vietnamese economy, and the bulk of Vietnam's coffee production is for export. Only about 6% of total production is for domestic consumption. In 2012/13, exports are expected to be strong on the back of strong production and ending stocks in 2011/12. Exports are projected to reach 20.5mn bags, up 5.7% y-o-y, in 2012/13. Vietnam now accounts for 17.7% of the world's total exports and exports to more than 80 countries, with Germany, the US, Italy and Spain as its biggest clients. Vietnam overtook Colombia as the second largest exporter of coffee in 2000, and its impact on international markets has been steadily growing ever since.

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