Vietnam offers tremendous market potential for U.S. farm exports
By Jennifer M. Latzke
While China and India get most of the press for expanding middle class demand for American agricultural exports, Vietnam has the potential to rank right up there with them, according to a panel of experts during the 2012 Commodity Classic.
The panel included: Thomas Dorr, president and CEO, U.S. Grains Council; Mark Jagels, vice chairman of U.S. Meat Export Federation; and Roy Bardole, U.S. Soybean Export Council chairman.
In Vietnam U.S. farmers and ranchers face dual export opportunities from the increasing demand for protein. "The rapidly growing middle class is driving the food demand," Dorr said.
On the crop side, more coarse grains and oilseeds will be needed for livestock feed and consumers. On the livestock side, there's an opportunity to export more beef, pork and lamb to a country that can't raise enough domestically to fill demand.
Dorr said that USGC expects by 2020, 600 million households will join the global middle class. And those markets will exceed the U.S., European and Japanese markets in demand within the next decade. "By 2020, Vietnam could account for 350 million new households in the middle class--that's about 925 million people," Dorr said. Many Asian countries, where the biggest population booms will be, are the least able to increase food production from their own natural resources.
Jagels explained that Vietnam's 90 million population continues to grow by about 1 million every year, and as of today 54 percent of that population is under 25 years of age. Those young Vietnamese, combined with new tastes in cuisine and an increasing GDP (up by 5.89 percent in 2011), mean the appetite for meat in Vietnam is growing.
There's also a strong demand for meat among the growing Viet Kieu population--the more than 3 million Vietnamese who fled the country at the end of the U.S.-Vietnam war and who currently live outside of the country. These Vietnamese refugees regularly return to their homeland to visit family.
Another segment of the population that is growing in buying power are cash-rich farmers who have received large payments for their land from the ever-expanding cities, Jagels said. With shrinking farmland, he added that it's doubtful domestic production of coarse grains will be able to fully meet food and feed demand, and that's where USGC and USB come into play to promote U.S. grains.
In Vietnam, Dorr explained, USGC has been working since relations were normalized to develop credibility and access to the government. It's a situation that those in the room who served in the Vietnam Conflict may never have foreseen, Dorr said.
"I strongly suspect you never thought you'd go back there to develop markets, but you left an incredible legacy," Dorr said to the 15 to 20 self-identified veterans in the room. Total agricultural exports to Vietnam in 2006 were $215 million. In 2010, they were $1.3 billion, Dorr said. Working with the Food and Ag Export Alliance, he said, USGC has been able to develop international relations there and assemble the technical experts to help write animal and plant health and safety laws and food systems in a WTO-compliant manner.
"It's 20 years behind China on the development curve, but they are learning from that example," he said, adding that there are gigantic new growth opportunities for U.S. producers and agribusiness.
Domestic production of coarse grains continues to fall short of the feed and food demand, Dorr said. "Imports of U.S. corn in 2011 were down 1.7 mmt just because of the cost and were replaced with feed wheat from Argentina." From 2009 to 2010, Vietnam imported nearly 4 mmt of corn. He said while their demand for feed corn is growing at a 30 percent rate, their production can't match it because of a smaller base.
"Vietnam is the No. 1 market for U.S. dried distillers grains in Southeast Asia and is only behind China, Mexico and Canada," Dorr said.
USMEF, Jagels said, is working to educate buyers, chefs, and food service professionals not only about U.S. beef, pork and lamb, but also about storage, making the most of new cuts available, processing and food safety for these growing Vietnamese consumers--filling that increasing demand for higher quality proteins on Vietnamese menus.
"They rely a lot on wet markets and street vendors, and the food safety education we offer has been helpful," Jagels said. "We're tailoring our programs to the Vietnamese market. They're still developing their retail sector, so we are placing an emphasis on safety and handling, more so than in other markets."
Bardole spoke about the aquaculture connection to the Vietnam demand for U.S. coarse grains. Vietnam has a strong aquaculture industry, and in the next three years, as China's expanding population will demand nearly all of the world's aquaculture production, Vietnamese fish farms will have a large opportunity.
In 2010, he said, there were more than 4,000 square miles of aquaculture in production in Vietnam, producing about 500,000 tons of fish. And U.S. soybeans could be the key to maximizing Vietnamese fish farm profits.
"Most fish ponds are on the edge of livestock pens," Bardole said. Using a manure base for fish feed is common, but by using a soy-based fish diet, Vietnamese farmers could have better feed conversions and be better able to control diseases.
"The amount of soybeans produced in Vietnam in any year is about 250,000 mt," Bardole said. "There are two counties in Iowa that grow more soybeans." The U.S. has a 75 percent market share in soybean exports to Vietnam, mostly in containers.
But the good news is that the Vietnamese want to take American soybeans and run them through their own crushing facilities in country. This changes our exports from a soy meal to a soybean market, Bardole said.
In the end, the issue is about food security for these developing middle classes, and making sure that U.S. farmers and ranchers have a role to play in that security. From providing technical support, or the raw materials to grow their own livestock sector, American farmers and ranchers are looked to for answers.
"Food security means food self-sufficiency," Dorr said. And that's good for all.
Jennifer M. Latzke can be reached at 620-227-1807, or firstname.lastname@example.org.