Highlights

Total rice production for MY 2015/2016 down about a million tons, due mainly to the impact of drought weather caused by El Nino, which lowered mainly the Spring crop production in the Mekong River Delta. The MY 2015/2016 rice export is revised down to 5.7 million tons.

Regarding the corn crop, the local corn production areas faced greater difficulties in MY 2015/2016 due to adverse weather and competitive price corn from giant corn growers like India, Argentina, and Brazil. Imports of corn into Vietnam are up sharply from 4.9 million tons in the MY 2014/2015 to 7.9 million tons in the MY 2015/2016 due to attractive corn prices.

In relation to wheat import, feed wheat imported in MY 2015/2016 increased sharply due to its price competitiveness compared to imported corn prices. However, the latter is not the primary reason for feed wheat import into Vietnam, which also depends a lot on the price difference of feed wheat and corn.

SITUATION AND OUTLOOK

Total rice production for MY 2015/2016 is down about a million tons, due mainly to the impact of drought weather conditions caused by El Nino, which lowered the spring crop production in the Mekong River Delta. However, the planting expansion of the late autumn crop in the Delta, and in other areas has superseded the loss of harvested area. Currently, the annual flooding in the Mekong River Delta is diminished due to dams constructed up-stream. As a result, the late autumn crop can be expanded in previously flooded areas. However, the soil condition in the delta is becoming poorer as less fertile sediment is brought from up-stream via seasonal flooding.

Post revised down the forecast for MY 2016/2017 rice production. However, this is slightly higher than MY 2015/2016 rice production since the end of El Nino in May 2016. It is still lower than Post's April estimate mainly due to expected bad weather pattern (La Nina) towards the end of calendar year 2016.

Regarding the corn crop, the local production areas faced greater difficulties in MY 2015/2016 due to adverse weather conditions and competitive corn prices from large corn producing countries like India, Argentina, and Brazil. The corn import volume increase sharply to satisfy local needs and also meet the needs driven primarily by the cross border trade.

Vietnam does not produce wheat. The country has to import wheat annually for both milling and feeding purposes. Unlike milling wheat that has maintained an almost stable import volume, feed wheat imported in MY 2015/2016 increased sharply, due to its price competitiveness when compared to imported corn prices. However, price competitiveness is not the primary reason for this trend of increasing feed wheat import into Vietnam. There is another aspect to the issue - increasing wheat imports depend a lot on the price difference of feed wheat and corn.

WHEAT

Vietnam's Production, Supply and Demand for Wheat

Wheat new

Market Begin Year

Vietnam

2014/2015

2015/2016

2016/2017

Jul 2014

Jul 2015

Jul 2016

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

368

368

288

310

563

517

Production

0

0

0

0

0

0

MY Imports

2296

2317

3000

2932

2700

2700

TY Imports

2296

2317

3000

2932

2700

2700

TY Imp. from U.S.

317

358

0

271

0

400

Total Supply

2664

2685

3288

3242

3263

3217

MY Exports

226

225

250

250

250

250

TY Exports

226

225

250

250

250

250

Feed and Residual

600

600

900

900

900

900

FSI Consumption

1550

1550

1575

1575

1600

1600

Total Consumption

2150

2150

2475

2475

2500

2500

Ending Stocks

288

310

563

517

513

467

Total Distribution

2664

2685

3288

3242

3263

3217

PRODUCTION

Vietnam does not produce wheat.

CONSUMPTION

The Marketing year (MY) 2015/2016 wheat total consumption is estimated at 2.475 million tons, about 325,000 tons increase compared to MY 2014/2015 due mainly to the increase use of feed wheat in the market. The latter is due to the competitive prices of feed wheat over corn for use in animal feed and aqua feed.

The MY 2016/2017 wheat consumption is also forecast to slightly increase due to greater demand for both feed wheat and milling wheat. The increase in feed wheat consumption is following the growth of the feed industry - specifically the aquaculture feed industry.

TRADE / COMPETITION

Import

Post estimates Vietnam's wheat imports volume in the MY 2015/2016 at 2.93 million tons, an increase of about 600,000 tons compared to MY 2014/2015 imported volume, due mainly to the increase in the use of feed wheat. Forecast for MY 2016/2017 import volume remained at 2.7 million tons, unchanged compared to USDA's official number.

Australian milling wheat is expected to continue its dominance in the wheat import market in Vietnam. However, its market share is declining from 70-80 percent down to about 43 percent of Vietnam's total wheat imported volume in MY 2015/2016. In volume, Australian wheat was down from 1.3 million tons in MY 2014/2015 to 1.26 million tons in MY 2015/2016.

Exports of U.S. wheat in MY 2015/2016 are down to 270,000 tons from 350,000 tons in MY 2014/2015, due to strong price competition from Canada. The forecast import volume for U.S. wheat in MY 2016/2017 is 400,000 tons.

Feed wheat can be an alternative feed source mainly in place of corn. Imports of feed wheat depend greatly on its price competitiveness with corn prices. Feed wheat imported in MY 2015/2016 increased sharply due to its price competitiveness. The main sources for feed wheat are Brazil, Canada and Black Sea. In MY 2015/2016, imports of feed wheat into Vietnam are estimated at about 600,000 tons, which is almost all the wheat import volume increase.

Export

Vietnam exports wheat flour to neighboring countries in South East Asia. Wheat flour produced in Vietnam is mainly for export and it is a competitive price product with low quality and mainly supplied as an ingredient for the aquaculture industry. Small quantities are used in the instant noodle industry. Vietnam is the largest wheat flour exporter to Thailand. Also, Vietnam exports wheat flour to other countries like Indonesia, Malaysia, and the Philippines for use in the feed industry. Additionally, Vietnamese flour exports to Singapore, Hong Kong and Taiwan are for the food processing industry and for re-selling to other countries. Vietnam exports of wheat flour in MY 2015/2016 and MY 2016/2017 are estimated at about 250,000 tons of wheat equivalent.

CORN

STATISTICAL TABLES

Vietnam's Production, Supply and Demand for Corn

Vietnam

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

1179

1179

1300

1100

1300

1200

Beginning Stocks

724

724

1005

1061

1885

1562

Production

5281

5281

5980

4950

6250

5520

MY Imports

4900

4956

7300

7951

6000

6000

TY Imports

6700

6700

6900

7200

6000

6000

TY Imp. from U.S.

6

6

0

0

0

0

Total Supply

10905

10961

14285

13962

14135

13082

MY Exports

500

500

500

500

500

500

TY Exports

500

500

500

500

500

500

Feed and Residual

8100

8100

10500

10500

11000

10500

FSI Consumption

1300

1300

1400

1400

1500

1500

Total

9400

9400

11900

11900

12500

12000

Ending Stocks

1005

1061

1885

1562

1135

582

Total Distribution

10905

10961

14285

13962

14135

13082

PRODUCTION

The revised estimate of CY 2016 harvested area is 1.1 million hectares due to unfavorable weather conditions in corn planted areas (the central highland), and unfavorable international corn prices. The CY 2016 Vietnam corn production is revised down to 4.95 million tons, down about a million tons compared to Post's last estimate. The CY 2017 corn harvested area is forecasted about 1.2 million hectares. The average corn yield is expected to be slightly higher in CY 2016, at 4.6 tons per hectare, due to the introduction of GM corn varieties in Vietnam. The overall increase of corn production is mainly due to higher average corn yields. As average corn yields increase to certain levels, farmers can be convinced that achieving profit margin is possible by planting corn.

Meanwhile, with small and scattered scale corn cultivation, Vietnam's locally grown corn faces strong competition from imported corn of many origins, such as Brazil, Argentina, India, and including the U.S.

IMPORT / EXPORT

Imports of corn into Vietnam are up sharply from 4.9 million tons in the MY 2014/2015 to 7.9 million tons in the MY 2015/2016 due to its attractive prices.

Imported corn is mainly used in the animal feed industry. Imported volume depends largely on the livestock and aquaculture industries. Corn (including local production and imported corn), imported feed wheat, rice/rice bran (local production), cassava (local production) are energy sources for feed production and can alternatively replace each other based on the market price and availability.

The total increase of imported corn and imported feed wheat is about 3.6 million tons in MY 2015/2016 compared to MY 2014/2015. Consequently, the surplus of energy source supply in MY 2015/2016 is about 2 million tons.

In terms of demand, compared to MY 2014/2015, the increase of energy use for feed in MY 2015/2016 is expected around 500,000 tons, satisfying the expected 3 percent increase of the industry 2016.

After balancing the supply and demand, the outstanding increase of the volume is 1.5 million tons. This over-supply volume is believed to be absorbed by the border trade (China, Cambodia, and the Philippines). In MY 2014/2015, corn imported volume was 4.9 million tons, in which, about 2 million tons was expected as border trade (about 40 percent of the total import volume). The total border trade volume for MY 2015/2016, therefore, is about 3.5 million tons (accounting for 44 percent of the total import volume). However, since there is no official number available for border trade to specific countries, Post adds the over-supply number into feed and residual category.

The Vietnam MY 2016/2017 corn import forecast remains at 6.0 million tons. The year-over–year decline in imports is attributed to tight exportable supplies in Brazil in MY2016/2017, and expected decline in border trade. Feed wheat from Argentina and Brazil (in late MY 2015/2016) and East EU countries (in the early MY 2016/2017) will continue to be an important energy source in the Vietnam feed market. According to traders and Vietnamese importers, feed wheat is still preferred if its price is equal or below the level of $10 premium to corn price.

RICE

STATISTICAL TABLES

Vietnam's Production, Supply and Demand for Rice

Rice, Milled

2014/2015

2015/2016

2016\2017

Market Begin Year

Jan 2015

Jan 2016

Jan 2017

Vietnam

USDA Official

New Post

USDA Official

New Post

USDA Official

New Post

Area Harvested

7823

7823

7654

7674

7750

7690

Beginning Stocks

1299

1299

1259

850

959

1108

Milled Production

28166

28166

27500

27458

28500

27791

Rough Production

45066

45066

44000

43933

45600

44466

Milling Rate (.9999)

6250

6250

6250

6250

6250

6250

MY Imports

400

400

400

400

400

400

TY Imports

400

400

400

400

400

400

TY Imp. from U.S.

0

0

0

0

0

0

Total Supply

29865

29865

29159

28708

29859

29299

MY Exports

6606

6615

6400

5700

6800

6500

TY Exports

6606

6615

6400

5700

6800

6500

Consumption and Residual

22000

22100

21800

21900

21900

22000

Ending Stocks

1259

850

959

1108

1159

799

Total Distribution

29865

29565

29159

28708

29859

29299

Estimate for MY 2015/2016 (began January 2016)

Post revises total rice production for MY 2015/2016 down about a million tons, from 44.94 million tons to 43.93 million tons of paddy rice, due mainly to the impact of drought weather conditions caused by El Nino, which lowered the spring crop production in the Mekong River Delta.

Spring Crop

Post revises the area for the spring crop down about 16,000 hectares less than the old estimate due to less harvest areas in the southern upland area (about 8,000 hectares) and the northern provinces (about 8,000 hectares). However, according to the Vietnam Ministry of Agriculture and Rural Development, lowering crop yield has contributed significantly to a decrease in the spring crop production (from 6.7 tons per hectare to 6.4 tons per hectare). The total production for the spring crop is down 1 million tons of paddy.

Autumn Crop

The estimate for the harvested area is slightly up, about 10,000 hectares, compared to the old estimate, due mainly to shrinking harvested area of the early autumn crop in the MRD - as a result of late rains. However, the expansion of planting of the late autumn crop in the Delta, and in other areas has superseded the loss of harvested area. The overall yield however, is slightly down for the autumn early crop and main crop, due to unfavorable weather conditions. The total production for the MY 2015/2016 autumn crop is expected to be around 100,000 tons more than Post's last estimate.

Winter Crop

Post estimate for the winter crop harvested area remains 1.70 million hectares, in MY 2015/2016 due to favorable weather conditions for the crop during the planting period.

Forecast for MY 2016/2017 (began January 2017)

Post also revised the forecast for MY 2016/2017 rice production from 45.77 million tons down to 44.47 million tons of paddy. This is slightly higher than the MY 2015/2016 rice production at the end of El Nino conditions in May 2016. However, it is still lower than the Post April estimate due to expected bad weather pattern (La Nina) by end of calendar year 2016.

Mekong River Delta (MRD) Rice Production in the MY 2015/2016

Spring Crop

As stated, the loss area in the MRD is about 50,000 hectares compared to MY 2014/2015. The crop yield declined from expected 7.10 tons per hectare to 6.69 tons per hectare. As of August 2016, the loss of MRD production for the spring crop is about 620,000 tons of paddy.

Autumn Crop and Winter Crop

Water shortage and salinization are threatening the upcoming autumn crop in the MRD. Under this condition, the late planting of the autumn crop was impacted due to El Nino conditions in the MRD. The second impact relates to the lowering yield of the autumn main crop from expected 5.84 tons per hectare to 5.80 tons per hectare. Additionally, the harvested area was slightly down about 10,000 hectares

The late autumn crop area is still expanding due to the high selling price advantage of the crop during harvest. Additionally, the autumn crop is off-season with competing countries' harvests. Post revises the harvested area for late autumn crop from 850,000 hectares to 860,000 hectares

In total, Post estimates the autumn crop harvested area for the MY 2015/2016 at 2.52 million hectares (including main and late autumn crops), compared to 2.49 million hectares in MY 2014/2015.

Winter Crop

MY 2015/16 Post estimate for the winter crop harvested area in the MRD remains the same at 200,000 hectares, about the same with other normal marketing year.

CONSUMPTION

Rice is the main staple food in Vietnam. Vietnam's declining per-capita rice consumption is consistent with other countries in Asia. As the economy develops, consumers have greater purchasing power and more access to other foods. Additionally, with growing income per-capita consumption of rice is declining.

The most recent per capita rice consumption is about 136 kilogram. MARD uses the average per capita rice consumption to forecast rice supply and demand. The amount of rice used for average per capita consumption has decreased because of the availability of other food sources. The average per capita rice consumption per month in urban areas is lower than that in the rural areas. Rice consumption also registered a faster decline in urban areas. However, based on the current per capita rice number, the yearly population growth of about one million people is the main driver for the increase in total consumption – thus, total consumption continues to grow. Post estimates that the country needs each year an additional 150,000 tons to meet total rice consumption.

Part of Post's per capita consumption is the unrecorded volume of border trade, which is referred to as the residual (about 2 million tons of milled rice in MY 2014/2015). However, for MY 2015/2016, the border trade is expected to decrease about 1.5 million tons and about the same for MY 2016/2017, due to tightened controls at the border. As a result, rice will be shipped mostly through official channels.

STOCK

There is no official number of Vietnam rice stocks. Rice stocks are calculated from the total of rice production, carry over stock and import after deducting export and consumption and residual. Rice stocks in MY 2014/2015 went down to 850,000 tons, due to the increase of rice consumption and residual. A part of residual is the unrecorded volume of border trade. This contributed to higher paddy price increases in the early part of calendar year 2016. Rice stocks in MY 2015/2016 are revised up to about 1.1 million tons due to expected lower export volume. Rice stocks in the MY 2016/2017 are estimated to decrease to 799,000 tons, due to remaining strong rice consumption and higher residual and expected export volumes.

TRADE / COMPETITION

Exports

The Vietnam Food Association (VFA) maintains rice export registration requirements and the Minimum Export Price (MEP), which is based on government regulations – especially Ordinance 109/2010/ND-CP that regulates the flow and prices of rice exports.

The Vietnam MY 2015/2016 rice exports are estimated at a revised 5.7 million tons, compared to 6.6 million tons in the MY 2014/2015. Exports have been lower in recent months due to competitive exports from other Asian rice production countries.

Exports in MY 2016/17 are revised lower to 6.5 million tons, on account of the downward revision in exportable supplies. However, this still represents a year-on-year increase, given a relatively larger forecast crop.

Imports

In Vietnam, imported paddy is used for local consumption after processing. Most of the rice grown in the Mekong River Delta is purely for export. As a result, Vietnamese farmers also have paddy rice investments in Cambodia for additional rice production, which is used mostly for local consumption in Vietnam. In the absence of official data, Post estimates that MY 2015/2016 and MY 2016/2017 rice imports are maintained at 400,000 tons.