[Vnbiz] EIU Vietnam Agriculture Production and Demand

[Craig Stevenson]

Vietnam agriculture: Production and demand
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 September 4th 2006

   FROM THE ECONOMIST INTELLIGENCE UNIT

Cropping intensity and yields have increased

Although Vietnam is still a predominantly an agricultural society,
cultivated land is scarce, at just 0.12 ha per head, one of the lowest rates
in the world. Only about 20% of the land is arable, and another 6% is
devoted to permanent crops. Some of the remaining land may have potential,
but most of it has been degraded by soil erosion, usually because of
deforestation or, in the deltas, by saline or acid-sulphate conditions.
About 70,000 ha per year of cultivated land is lost to soil exhaustion and
urban encroachment. Against this background, it is surprising that the area
of land sown to crops (including tree crops) continues to increase, reaching
13.2m ha in 2004, up from around 10m ha in the early 1990s. Of the total
cultivated area, around 60% is devoted to rice and a further 25% is sown to
other annual crops, with the remainder being given over to perennial crops.
About 20% of the increase in land area has been used to grow perennial
industrial crops, such as rubber, cashew nuts, tea and coffee, and 30% comes
from additional paddy land that has become available as a result of
investment in irrigation.

Rice yields remain high

Rice yields have more than doubled since the disastrous year of 1978, when
they averaged 1.79 tonnes/ha. In 2005 the yield of paddy rice stood at
4.9 tonnes/ha,
up slightly from the yield recorded in 2004. The use of (mainly imported)
chemical fertiliser per cropped ha has risen, such that fertiliser
applications are now at a higher rate than in Indonesia but still well below
that in China. The rise in yields has allowed Vietnam to maintain its
position as one of the world's top three rice exporters for almost a decade,
and was one of the most immediate pay-offs from the thorough reform of the
rural economy undertaken in 1989.

The area under coffee cultivation begins to fall

The area planted to coffee rose rapidly from 101,000 ha in 1993 to 565,000
ha in 2000, before declining to 503,200 ha in 2004. Coffee output followed
the same trajectory, rising from 136,000 tonnes in 1993 to 841,000 tonnes by
2001 before slipping back to an average of around 780,000 tonnes a year in
2002-04. Most of this coffee, which is almost all of the lower-priced
robusta variety, is exported. In 1997 Vietnam overtook Indonesia to become
the largest coffee exporter in Asia; in 2000 it became the second-largest
exporter (by volume) in the world, after Brazil. Coffee exports reached
974,800 tonnes in 2004, up from an average of around 785,000 tonnes a year
in 2000-03, but dropped to 885,000 tonnes in 2005 partly in response to the
government's effort to reduce output in order to bolster prices. Vietnamese
firms have increasingly moved into downstream processing, making substantial
investments in roasting and in the production of instant coffee.

Output of industrial crops rises rapidly

The output of most industrial crops was stagnant until about 1994, when
output of sugarcane (which recorded 16% annual growth in 1994-99) and
soybeans increased strongly. Cotton output rose sharply in 1998, but the
growth momentum has not been maintained. Output of the minor crops—jute and
rush—has been largely stagnant. The area planted to perennial industrial
crops expanded rapidly during the 1980s, with coffee clearly the best
performer.

Tea. Vietnam produced 488,000 tonnes of fresh tea in 2004, up from 315,000
tonnes in 2000. Tea exports rose sharply in 2004 to 99,400 tonnes, up from
only 55,700 tonnes in 2000.

Rubber. Rubber cultivation has benefited both from an expansion in the
cultivated area, from 180,000 ha in 1985 to 450,000 ha by 2004, and from the
replanting of land with new high-yielding varieties, often with assistance
from Malaysia and Taiwan. Yields have now risen remarkably, from
0.27tonnes/ha in 1985 to
0.89 tonnes/ha in 2004, and the quality of rubber produced has improved.
Rubber output reached 400,100 tonnes in 2004, more than four times the level
recorded in the early 1990s. Officially recorded exports rose to 513,300
tonnes in 2004, rising from an annual average of 367,000 tonnes in 2000-03.
However, substantial (although unknown) quantities were also smuggled into
China, in order to evade import duties there.

Sugarcane. Although processing capacity has trebled to 70,000 tonnes of cane
per day since 1994, the result of a government programme aimed at making
Vietnam self-sufficient in sugar production, the area under cultivation
reached 320,000 ha in 2002, up from 166,000 ha in 1994, but dropped to
287,000 ha in 2004. Sugar output reached a record 16.9m tonnes in 2003
before declining to 14.7m tonnes in 2005, when drought hit parts of the
country.

Demand for meat grows

Rising affluence and population growth of around 1.4% per year has increased
the demand for meat. The number of pigs rose to around 26m in 2004 from
around 16m in the mid-1990s, and the quality of pig meat has improved.
Poultry meat output has also risen rapidly, with the number of poultry birds
reaching around 255m in 2004, compared with around 150m in the mid-1990s.
However, poultry stock fell sharply in 2004 as Vietnam was hit by the
virulent H5N1 strain of avian influenza (bird flu), with more than 46m
birds, around 20% of the poultry stock, being culled in an effort to curb
the spread of the virus.
The Economist Intelligence Unit
Source: Country
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