FEED Business Worldwide - December, 2011
Can Vietnamese agribusiness challenge Thailand's ASEAN dominance?
by F.E. OLIMPO
Dramatic developments in Vietnam's agribusiness sector are slowly eroding Thailand's dominance of Southeast Asia's feed, livestock and aquaculture industries, most particularly the latter. Vietnam's seafood exports (mostly accounted for by shrimp), leaped 26.7% during the first nine months of this year, hitting US$4.4 billion. Indeed, despite many challenges, including disease outbreaks and high input costs, Vietnam is set to achieve its seafood export target of US$5.5 billion this year.
Moreover, shrimp sales, where Thailand still dominates â€“at least for nowâ€“ are contributing much to this growth. From January to August, Vietnam's shrimp exports jumped 22.7% over the same period last year. Except for Japan, where it had a slight 5% decline, its expansions in other key markets were double-digit â€“ 17% in the US, 40% in the EU, 88.9% in China and Hong Kong, 44.6% in Korea, and 29.7% in Canada.
Rapid growth, recovery challenges flood damaged Thailand
According to Globefish, a publication of the Food and Agriculture (FAO), in several countries in Europe, particularly Germany and Italy, Vietnam doubled its shipments this year to become their largest supplier, overtaking Thailand. And while Thailand has almost stopped looking for other markets, Vietnam has been spreading its wings aggressively. In Russia, a rapidly expanding market that Thailand has yet to tap, Vietnam shrimp exports rose 63% during the first eight months of the year compared to the same period last year.
The two neighbours share similar exports, such as rice, garments and textile, footwear, seafood, to name a few, and that makes them the tightest economic rivals among ASEAN countries. Vietnam and Thailand are also the world's top two rice exporters, with Thailand currently in the number one position, albeit precariously. That distinction is likely to be gone next year when Thailand's rice exports are seen to take a nosedive due to floods damaging much of the crop. To make matters worse, in October, Thailand's government launched a rice-subsidy program that raised paddy prices by 30-40%, making Thai rice exports more expensive and therefore less competitive - to Vietnam's delight, of course.
By comparison, while Vietnam's livestock and aquaculture sectors are enjoying a banner year, Thailand is being challenged by something beyond its control: The current flooding in central Thailand has been actually a Southeast Asian phenomenon but out of all ASEAN countries, Vietnam was the least affected.
In terms of damage to rice farmlands, FAO estimates show that 1.6 million hectares, or 12.5% of Thailand's total, have been damaged. In Cambodia, 12% of paddy fields have been destroyed, with another 7.5% in Laos and 6% in the Philippines. Vietnam's damage, on the other hand, was less than half a percent. In other words, while floods create great short-term damage to Thailand's meat production and exports, Vietnam's meat industry and seafood exports surge ahead.
As a result of the flooding's devastation, Thailand may have to import at least 160,000 tonnes of corn this year to partly replace what it lost to the floods, which has submerged 26 provinces including some parts of the capital Bangkok. Industry estimates show that Thailand's corn production this year could plummet by as much as one million tonnes. It also expects shrimp and poultry production to fall by as much as 30% due to widespread farm damage.
Yet, out of protein lines, Thailand's shrimp export is particularly vulnerable to Vietnam's challenge. For now, Vietnam is not an exporter of pork or poultry but it is already an exporter of note with regards to seafood. Vietnam's shrimp shipments last year were worth US$2 billion, about US$600 million shy of Thailand's. While that gap may appear enormous, one has to remember that Thailand's farmed-shrimp industry is a more than decade ahead of Vietnam's. Worse for Thailand is Vietnamese aquaculture's far more rapid growth and the fast progress it has made in such a short time.
Less than four years years ago â€“and just a few years after it started, Vietnam's shrimp industry was in a shambles. Disease outbreaks, weather changes, bio-safety issues, trade barriers and the global recession had caused production in the Mekong Delta, which contributes 80% of Vietnam's annual shrimp output, to plunge by 30% to 40%. Farms were closing down due to losses. Due to the resulting lack of domestic supplies, Vietnam's shrimp processing plants were running at just 30% of their capacity.
Since then, its quick recovery and the size of its year-on-year growth has been nothing less than remarkable â€“ hence a cause for worry for Thailand. Indeed Thailand should be worried. While the kingdom has been busy keeping its shrimp ponds safe from its worst flooding in over six decades, Vietnam continues to aggressively pursue its goal of giving Thailand a run for its shrimp-exporting money. Very recently, it introduced what it calls a shrimp-rice rotation culture involving 1,600 hectares of rice lands in Tien Giang province. Under this concept, farmers will grow rice and shrimp alternately, so as to increase Vietnam's shrimp production.
The program has an additional benefit: Instead of polluting rivers, otherwise toxic shrimp waste will fertilise the soil for the rice crop that follows, thereby making it a model of sustainable recycling. If this pilot project proves successful, the plan is to implement shrimp-rice cultivation nationwide.
Joint ventures with other nations to jump over trade barriers
As if this wasn't enough, Vietnam has even taken steps to grow shrimp overseas, which it could export to the US. A Vietnamese delegation recently visited Bangladesh to explore the potential of an aquaculture joint-venture aquaculture between the two countries. And this is a smart move: Unlike Vietnamese seafood, Bangladeshi shrimp isn't subject to US antidumping tariffs. So if Vietnam can grow shrimp in Bangladeshi ponds, it could export to the US freely. This also has the effect of forcing Thailand to match intensified market competition from the combined efforts of two lower wage countries instead of just Vietnam alone.
And it doesn't stop there. A member of the Vietnamese delegation that visited Bangladesh was quoted in the media saying: "Many less developed countries are exporting fish and fish products to the US market without any obstacles. Vietnam wants to take advantage of this benefit." It's a hint it plans to duplicate the same revolutionary idea in other countries.
The delegation member wasn't coy about Vietnam's real motives. America's antidumping stance against Vietnamese seafood is hampering its exports, he said. Therefore, "Vietnam wants to expand its seafood exports to the US by developing aquaculture production bases in other countries."
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