FARMER’S BEHAVIOUR IN BUYING PESTICIDE IN MEKONG RIVER DELTA.

ABSTRACT In this research project, an effort has been made to build up the draft picture of Vietnam’s pesticide market and to study the farmer ‘s behaviour in buying pesticides in Mekong

ĐẠI HỌC MỞ TP HỒ CHÍ MINH UNIVERSITÉ LIBRE DE BRUXELLES UNIVERSITE OUVERTE DE HCMV ECOLLE DE COMMERCE SOLVAY

MMVCFB PROGRAMME DE MAITRIES EN MANAGEMENT - BELGIQUE

PHAM BAO KHANH

FARMER’S BEHAVIOUR

IN BUYING PESTICIDE IN MEKONG RIVER DELTA

MASTER OF MANAGEMENT THESIS

Supervisor : Doctor Nguyen Van Ngai

Ho Chi Minh City, Vietnam

2006

This is my original work Any data, result or quote in the project

is clearly indentified Pham Bao Khanh

ACKNOWLEDGMENT

Completing this research project is never the work of a single person, and when attempting

to acknowledge the contributions of others, one always runs the risk of omitting some important contributions Nonetheless, the attempt must be made, because this project has been helped immensely by the many helpful comments I have received along the way from

my advisor, farmers and interested colleagues

I would like first to express my deepest thanks to Dr Nguyen Van Ngai for his invaluable advice and contributions in the completion of this research project

I am grateful to a number of people for their assistance in this project especiallly the technical and marketing staffs in Mekong River Delta Many thanks are given to the Directors of Tan Thanh Company Ltd., An Nong Company Ltd., Nong Phat Company Ltd whose helped me substantially by sharing their busy time from marketing ‘s activies to collect the data, doing the survey and arrange the group discussions for the project

Pham Bao Khanh

HoChiMinh city, Vietnam

December 2006

SUPPERVISOR’S COMMENTS

Understanding the market and consumer’s behaviors of a particular product is really necessary for companies to do business and develop the market in general, the topic that the author chose for his study is suitable for the program that the author is studying and for works that he is doing

The thesis includes five chapters that is appropriate for a Master Thesis The methodology

of the study is acceptable to meet the objectives of the study Based on a clear analytical framework with primary data surveyed by the author with a proper sample size and secondary information, the thesis provides a comprehensive analysis of the market for pesticides including demand and supply sides, discusses the behaviors of farmers in buying pesticides for their farming and then recommends solutions for companies doing business in pesticides to improve their business and improve farmers’ farming The suggested solutions are accepted Thus, the thesis has great contributions to parties in pesticide markets such as farmers and companies, and also to social planners and related studies

I strongly support the author to present the thesis to an academic board for evaluation of the study and complete the Master Degree

Ho Chi Minh City, 9 Feb 2007

Supervisor

Dr Nguyen Van Ngai

THE FIRST discussion

THE SECOND discussion

ABSTRACT

In this research project, an effort has been made to build up the draft picture of Vietnam’s pesticide market and to study the farmer ‘s behaviour in buying pesticides in Mekong River Delta, the main agrochemical market in Vietnam The three focus group’s discussions and

317 farmer’s surveys were used to collect all information for these purposes At the same time, depth discussion with the marketers from four local companies was also conducted to understand the current marketing practice

The total value of end-user markets increased to around US$400 million (year 2006, our estimation), a increase 60% on 2000 Agrochemical sales increase heavily in all around country, due to pests conditions and planting area increase The increase of the agrochemical market in Vietnam has also resulted in a number of local companies opened dealing in pesticides make the market become more competion as well as to explore the use

of pesticide in current planting practice

The buying behaviour of farmer is complex due to many influences were made through many marketing activities conducted by almost hundred of pesticide / trading companies in Vietnam and other environmemtal factors Farmers think efficacy is the most important factor for any pesticide and they think it’s very much related to price According to our reasearch, the most effective channels that can influence to farmer’s buying behaviour mainly farmer meeting, retailer’s effect

TABLE OF CONTENTS

CHAPTER 1 - INTRODUCTION 1

CHAPTER 2 : LITERATURE REVIEW & ANALYTICAL FRAMEWORK 5

2.1 C ONSUMING THEORY 5

2.1.1 Consuming Products 5

2.1.2 Factors influence to consuming 6

2.2 T HE C ONCEPT OF C ONSUMER / P URCHASING BEHAVIOR 6

2.3 C ONSUMER DECISION MAKING PROCESS 9

2.4 T HE QUALITATIVE - QUANTITATIVE DICHOTOMY 11

2.5 T HE STUDY APPROACH 12

2.5.1 Conduction of focus groups 12

2.5.2 Sampling Plans 13

2.5.3 Characteristics of the sample and how well it works 14

CHAPTER 3 – MARKET FOR PESTICIDES IN VIETNAM 16

3.1 D EMAND 16

3.1.1 Rice production 16

3.1.2 Pesticide use on rice 19

3.1.3 Demand of pesticide 21

3.1.4 Mekong River Delta – the most important area 21

3.2 S UPPLY 23

3.2.1 Import evolution 23

3.2.2 Market share 23

CHAPTER 4 : FARMER’S BEHAVIOUR IN BUYING PESTICIDE 28

4.1 B RAND RECOGNITION 28

4.1.1 Unaided awareness 28

4.1.2 Aided awareness 29

4.2 P RODUCT FEATURES & B UYING CRITERIA 30

4.2.1 Unaided awareness 30

4.2.2 Aided awareness 31

4.3 P RODUCT FEATURES & B UYING CRITERIA DISCUSSION 32

4.3.1 Cost / sprayed area 32

4.3.2 Duration of control 32

4.3.3 Farmer fellow recommendation 33

4.3.4 Retailers recommendation 34

4.3.5 Government officer recommendation 34

4.3.6 Easy to use & Spectrum of control 35

4.3.7 Advertising 35

4.4 S OURCE OF INFORMATION 36

4.4.1 Source of information for new pesticide 36

4.4.2 All sources of information 38

4.5 B RAND SWITCHING & LOYALTY 38

CHAPTER 5 - CONCLUSIONS & RECOMMENDATIONS 41

5.1 M AIN FINDINGS ON FARMERS BUYING PROCESS 41

5.2 K EY INFLUENCES MODEL 44

5.3 R ECOMMENDATIONS 44

5.4 L IMITATION AND DIRECTION FOR FURTHER 45

REFERENCE 47

APPENDIX 48

TABULATION OF SURVEY 52

SURVEY QUESTIONARE 67

LIST OF TABLE

Table 3-1 Paddy rice production & export 18

Table 3-2 Rice planted area, Output and Yield per hectare by area 18

Table 3-3 Rice planted area in Mekong Delta by province - 2005 21

Table 3-4 Rice pattern schema in Mekong Delta 22

Table 4-1 First priority of buying criteria analysis 33

Table 4-2 Summary of source of information 38

Table 6-1.Frequencies statistic of planting area (Question 1a) 48

Table 6-2 Frequencies statistic of yield/hectare (Question 2b) 48

Table 6-3Frequencies statistic of percentage income from rice paddy field (Question 2) 49 Table 6-4 Frequencies statistic of brand known (Question 3a) 49

Table 6-5 Frequencies statistic of brand known at first ranking (Question 3a) 51

Table 6-6 Summary of brand recognization (Question 3b) 51

Table 6-7 Summary of important factors (Question 4) 52

Table 6-8 Criteria ranking summary (Question 5) 53

Table 6-9 Ranking brand from criteria (Question 6) 53

Table 6-10 Three main sources of information for new pesticide (question 7) 54

Table 6-11 Information sources (Question 8) 56

Table 6-12 Three main criteras to switch to other pesticide (Question 9) 58

Table 6-13 Three main critera for new new pesticide (Question 10) 59

Table 6-14 Cost imporant evaluation for pesticide (Question 11) 60

Table 6-15 Age frquencies (question 12) 60

Table 6-16 Education status (Question 13) 61

Table 6-17 Sex (Question 14) 61

LIST OF FIGURES

Figure 3-1Vietnam Planting area by crop 16

Figure 3-2 Paddy rice production cost 19

Figure 3-3 Vietnam Pesticide Market Evolution by Import value 23

Figure 3-4 Vietnam market share by import value (%) – Year 2000 25

Figure 3-5 Vietnam market share by import value (%) 25

Figure 3-6 Import by origin (%) – Vietnam pesticides market – Year 2005 27

Figure 4-1 Top of mind brand responded - Unaided awareness 28

Figure 4-2 Brand recognization – aided awareness (% of responded) 29

Figure 4-3 Important reasons to choose one pesticide 31

Figure 4-4 Main criteria to buy pesticide by ranking (% responded) 32

Figure 4-5 Evaluate some pesticide’s brand basing efficacy performing criteria 36

Figure 4-6 Main sources of information for new pesticide 37

Figure 4-7 Main variables to switch brand 39

Figure 4-8 Main features ‘ expecting for new pesticide 40

Figure 5-1 Key influences model 44

1 CHAPTER 1 - INTRODUCTION

1.1 Problem statement

After the war, the Vietnamese government moved towards instituting reforms to help its ailing economy In a series of reform measures in 1981, Vietnam turned away from the collective farming system to a group-oriented system In 1986, the production system was altered again, but this time the change was towards individual contracts For the average small farmer, the reforms resulted in a 40 per cent increase in individual income from harvested crops For the first time, small farmers in Vietnam had a vested interest to increase crop production not only for consumption, but for export as well

As Vietnam increases its participation in the global market, growing urban centers have spurred a labor migration into non-agricultural sectors As the labor market shifts into the cities and industrial fields, the once cheap cost of hiring a agricultural worker inevitably rises In order to minimize costs associated with production while producing surplus amounts of rice for export, farmers indiscriminately turn to pesticides

Vietnam market proportion of pesticide is about 0.5% of the international market and the last two years has seen a great increase in the Vietnam agrochemical market from 116MUSD in 2003 to 244MUSD in 2005 due to pests conditions and planting area increase

The increase of the agrochemical market in Vietnam has also resulted in a number

of local companies opened dealing in pesticides make the market become more competition as well as to explore the use of pesticide in current planting practice There are more than 531 active ingredient & mixtures of pesticide already

registered in Vietnam with about 3,000 trade names from around 120 companies now approaching mainly to rice planting ‘s farmers

To be successful in this high competition market, one trade name should be satisfied the end user - farmer and make them chosen among various items with same application usage Due to the limit finance and non-professional working, local companies seems puzzled to allocate the resource in marketing as well as less opportunity to win the game in comparision with multi-national companies whose having large budget and experiences

This market research in Mekong River Delta is carried out by the co-operation of four local pesticide companies including authour ‘s company to study farmer ‘s behaviour in buying pesticide to help us to decide the good marketing policies and undertand factors that influence buying ‘s decision of our customer

1.2 Research objectives

The objectives of this market study are being stated below :

* To analyse the demand and supply of the existing pesticide market

* To study farmer’s behaviour in buying pesticide in Mekong River Delta within purchasing decision making process

* Within on these findings, the recommendations for local pesticide suppliers especially our co-ordinating reasearch’s companies are given to adjust the marketing policy in the best way to influence to the farmer’s buying process effectively

1.3 Methodology and data sources

1.3.1 Methodology

This study is going to simplify previous works by using marketing mix

variables that influence the customer ‘s buying decision making process and studying further in term of a survey Using descriptive statistics with SPSS software statistic tool to understand the important of each criteria that influences to that process

Ü Data and information from books and journals, newspaper Articles related to the research were collected in Vietnamese national library and internet

Ü Data and information were also obtained from annual report from sponsor local companies, from in-depth interviews conducted with sponsor companies’ director and representative staffs in provinces

Ü In addition, data has to be collected from focus group discussion and through the survey ‘s records

1.4 Struture of the dissertation

This dissertation is organized in five chapters, as follows:

- Chapter 1 includes problem statement, research objectives, methodology and structure of dissertation

- Chapter 2 presents the literature review relates to the fundamental ideas on consumer buying behaviour and analytical frame work

- Chapter 3 analyzes and assesses the existing pesticide market through demand and supply by collecting the statistic data, various sources of information as well as own analysis

- Chapter 4 discuss the farmer ‘s behaviour in buying pesticides

- Chapter 5 presents conclusion for the reaserch and recommendations

16 CHAPTER 2 : LITERATURE REVIEW & ANALYTICAL

Consumer products were classified on the basis of consumer purchasing habit as:

• Convenience goods Goods that the customer usually purchase frequently,

immediately, and with the minimum of effort in comparison and purchasing

• Shopping good Goods that the customer, in the process of selection and

purchase, characteristically compares on such bases as suitability, quality, price, and style

• Specialty goods Goods with unique characteristics and /or brand identification

for which a significant group of buyers are habitually willing to make a special purchasing effort

• Unsought goods Goods that the consumer does not know or knows about but

does not normally think of buying New products, such as smoke detectors and

food processors, are unsought goods until the consumer is made aware of them through advertising

Pesticide products is classified as a specialty goods because of its unique characteristic and strong brand identification

16.1.2 Factors influence to consuming

Most of textbooks about principle of marketing or consumer behavior, authors try

to define factors influencing a purchase, purchasing process, and outcomes or post purchase behavior

Kotler (1991) separated a model of purchasing behavior into two parts The first one is about factors influencing purchasing behavior which are:

• Outside stimuli : Marketing Mix, and Environment

• Buyer characteristics : Cultural, Social, Personal, and Psychological

In the current pesticide market practice, the rural culture is one of the key element that effect to consuming process

16.2 The Concept of Consumer / Purchasing behavior

Consumer behavior encompasses all the “acts of individuals that involve

Social Personal Psychological

Problem recognition Information search Evaluation Decision Postpurchase

b h i

Buyer’s purchase decisions Product choice Brand choice Dealer choice Purchase timing Purchase amount

buying and using products, including the decision processes that precede and determine these acts” (Engel and Blackwell 1988) Although the factors that precede and determine consumer behavior are a combination of external and internal influences which interact constantly, it is helpful to analyze them as a separate elements

Any study of consumer behavior would be incomplete if it treated only one consumer role However, emphasizing on one role, while still devoting adequate treatment to the others, may be seen during the research study When the only one role is considered then the individual who makes the purchase This approach is useful because even when told what to purchase, then the buyer often make decisions regarding purchase timing, store choices, package sizes, and other factors Therefore, focusing on the buyer, while allowing for the influences of the others on the purchase decision, still gives considerable flexibility while concentrating on one consumer role

Purchasing behavior is the decision processes and acts of people involved

in buying and using products (Engel and Blackwell, 1986) Consumer purchasing behavior refers to the purchasing behavior of ultimate consumers: those persons

who purchase products for personal or household use, not for business purposes (Pride and Ferrell 1987)

Marketers have classified types of purchasing behavior by using different criteria According to Schiffman and Kanuk (1991), consumers make two types of

purchases: trial purchases and repeat purchases Trial purchases are the

exploratory phase of purchasing behavior in which consumers attempt to evaluate a product through direct use But repeat purchases are closely related to the concept

of brand loyalty which most firms try to encourage because it ensure them of

stability in the marketplace

Classified by intentions of purchase (Engel and Blackwell 1993), purchasing

behaviors fall into three categories:

• Fully planned purchase: both product and brand are chosen before the store

visit

• Partially planned purchase: there is an intention to buy the product only but

brand choice is deferred until shopping

• Unplanned purchase: both the items and brand are chosen in the store This is often referred to as the impulse purchase

Another approach categorized by buyer involvement and degree of brand differences (Assael 1987) Assael distinguished four types of purchasing behavior:

• Complex buying behavior: highly involved in a purchase and aware of

significant differences among brands, purchasing behavior is expensive, bought infrequently, risky, and highly self-expressive such as purchasing of a personal computer

• Dissonance-reducing buying behavior: highly involved in a purchase but see

little difference in the brands The purchase is expensive, infrequent, and risky such as carpet buying

• Habitual buying behavior: low consumer involvement and the absence of

significant brand differences Consider the purchase of salt

• Variety-seeking buying behavior: low consumer involvement but significant

brand differences Here consumers are often observed to do a lot of brand switching An example occurs in purchasing cookies

The concepts of purchasing behaviors discussed above are general guidelines for a pesticide to conduct further study which related to the pesticide’s business In practical way a pesticide brand usually work out a consumer research to find out

farmer’s purchasing behavior which correspond with the pesticide’s market segment

16.3 Consumer decision making process

According to Kotler (1991), the buying decision process consists of five stages: problem recognition, information search, evaluation of alternatives, purchase decision, and post purchase behavior

Five-stage Model of the Buying Process

(Source: Kotler, 1991) Need recognition: The buying process starts when the buyer recognizes a problem

or need The buyer senses a difference between his or her actual state and a desired state The need can be triggered by internal or external stimuli

Information search: An aroused consumer will be inclined to search for more

information Consumer information sources fall into four groups:

• Personal sources: Family, friends, neighbors, acquaintances

• Commercial sources: Advertising, salespersons, dealers, packaging, displays

• Public sources: Mass media, consumer-rating organizations

• Experiential sources: Handling, examining, using the product

The consumer receives the most information exposure about a product from commercial sources, that is marketer-dominated sources However, the most effective exposures come from personal sources Commercial information normally

Post purchase behavior

Purchase decision

Evaluation of alternatives

Information search Need

recognition

performs an informing function, and personal sources perform a legitimizing and/or evaluation function Through gathering information, the consumer learns about competitive brands and their features

Evaluation of alternatives: How does the consumer process the information and

brand choices to make the final choice? There are several evaluation processes Most current models of the consumer evaluation process are cognitively oriented that is they see the consumer as forming product judgments largely on a conscious and rational basis

Purchase decision: In the evaluation stage, the consumer forms preferences among

the brands in the choice set The consumer may also form a purchase intention to buy the most preferred brand However, two factors can intervene between the purchase intention and the purchase decision The first factor is the attitude of others A buyer's preference for a film brand will increase if someone he or she likes the color tone of the same brand The influence of others becomes complex when several people close to the buyer hold contradictory opinions and the buyer would like to please them all Purchase intention is also influenced by unanticipated situation factors The consumer might lose his or her job, some other purchase might become more urgent, a friend might report disappointment in that kind of purchase, or a store salesperson may affect his or her negatively

Postpurchase behavior After purchasing the product, the consumer will experience

some level of satisfaction or dissatisfaction If a film buyer is satisfied, then he or she will exhibit a higher probability of purchasing the brand again and tend to say good things about the brand to others: they are loyal to their brand A dissatisfied film buyer may take public action or private action If the former, public actions include complaining to the brand, going to a lawyer, or complaining to other groups that might help the buyer get satisfaction, such as business, private, or government agencies Or the buyer might simply stop buying the brand, utilizing the exit option

Alternatively, the buyer may choose to use the voice option

In our reaserch, we will focus on this model to build up the questionaire and to find out elements that influence to this buying process

16.4 The qualitative - quantitative dichotomy

Once the research issues are settled, the researcher must move on to figuring out how to get the information This research design, the “how to get” part of the project, can be broadly divided into qualitative and quantitative methods of getting data and information

Qualitative and quantitative research are mutually exclusive and complementary at the same time They are mutually exclusive because they cannot be done at the same time, and they are not interchangeable But they are also complementary in that they are for accomplishing different kinds of tasks In many research projects, they have an order qualitative comes first and then quantitative Quantitative research is made substantially easier and more rational by having previously done the qualitative part

Qualitative research involves discussing topics, about which we may not yet know very much, in great detail with a few people (representative respondents from our target population) We cannot even call these topics “questions” yet, but later we can, if we wish, turn these discussions into questions to ask people Such research includes defining what we do understand well, and groping toward understanding what we do not yet understand but need to know Then we must organize this information and lack of information into some clearer insight into the topic

Quantitative research cannot proceed before we have this understanding The term

“quantitative” itself suggests that we already understand the concepts, now we just need to put numbers to them Quantitative research, then, involves numbers, formulas, computers, print-outs, and number-based decisions This means structured

ways of asking questions so that the answers can be coded easily into numbers It means more respondents The important decisions left before proceeding with this research are mainly “how many and who”, i.e., sample size, target population, and sampling methodology

16.5 The study approach

We planned to employ a phase approach to manage this study project The first phase enabled us to obtain certain qualitative findings about the market through moderating a couple of focus groups In the second phase, we obtained quantitative findings through carrying out surveys in 6 provinces inside the farmer meetings with the co-operation of 3 local pesticides companies ‘ staffs Sample elements were chosen by a systematic approach for farmers in Kien Giang, Can Tho, Dong Thap,

An Giang, Tien Giang, Ben Tre Besides, all relevant secondary information have continuously been gathered from more than 10 years working in relevant part to build up background understanding of the pesticides market, especially in the first phase of the project, and to frame the whole picture of the market

16.5.1 Conduction of focus groups

Even the quantitive findings have enough samples, we decide to carry out the qualitative measurement in this pesticide market study to compensate for limitations

on quantitative side, especially in deriving out key attributes for the farmer behaviors

We moderated three focus groups whose attendants were carefully selected among the current users of the product field Attendant choice criteria for the three groups were defined as follows:

Group 1 Current key users (6 persons)

• Key farmers from introduction from Sub-department of Plant Protection

of An Giang province

• Age range: 18 to 50

• Large rice field area

• Often used of pesticides

Group 2 Current key users (6 persons)

• Key farmers from introduction from local pesticides company

• Large rice field area

• Often used of pesticides

Group 3 Current normal users (6 persons)

• Farmers pick up randomly in Tien Giang province

• Age range: 18 to 50

• Average rice field area

Due to the special characteristics of farmer reactions, the group discussions were conducted in a free and open atmosphere which enabled high level of information gotten in group analysis At the end of the process, the qualitative report was recorded and being the foundation for implementing the questionaire for quantative phase

16.5.2 Sampling Plans

For the farmer survey: As to the nature of the research problems, we need to get a

sample that obtains highest representative for the population in the market With the support from 3 local pesticides companies, we therefore employed a stratified sampling procedure Total sample size was divided into 6 provinces and totally 317

survey reports were recorded, in the different typical districts, in consistent with the district’s rice area density The sampling procedure must have to ensure the probability in selecting respondents to represent the users of pesticides

In the same time, it is very essential to filter from the survey to get the accurate data, we have asked interviewers to select farmers that have minimum planted rice area is at least 2,000m2 and the respondent must be the key decision maker in buying pesticides to use in his / her farm Then, a respondent didn’t attend any market survey at least 3 months ago to avoid any influences from the past survey Besides that, respondent ‘s family is not involved any marketing, advertising activities or any career that influence to the survey

16.5.3 Characteristics of the sample and how well it works

Since the project ‘s target seem only focus to the farmers in Mekong Rive Delta whose lifestyle are sticking with rice paddy field for years, the target population of the consumer survey is all adults in who aged from 18 to 60 years old but mainly over 30 years old Age category was therefore used as an important stratum of the stratified sampling procedure applied in the survey as the key farmers with experiences (should be more than 30 years old) seem to be the one can effect the neighborhood about the pesticide use behavior With the support of 3 local companies, the total sample size was relatively enough for achieving the objectives and the stratum of sample was divided by disproportionate method

The second important feature of the sample was that it should ensure to get information from current key farmers of the rice paddy field For this purpose, the sample elements were actually selected among the farmers who are the buyers of pesticide or the key decision makers In our survey, some survey were carried out in farmers meting who had been chosen as key buyers of some pesticides companies This way of selecting respondents could enable us get full information of key

farmers into the sample However, we had no choice to ignore samples in remote area that pesticides market share is not important

The third important feature of the sample was in the concentration of large planting area farmers since they should consider carefully when buying pesticides than others one This requirement was met by choosing 3/6 provinces that have biggest paddy planting area in Mekong River Delta Sub-zones in each province were also selected in the same manner

Last but not least, it is necessary to encourage farmers during the survey to supply more information that recorded to our team to build out the picture of pest

17 CHAPTER 3 – MARKET FOR PESTICIDES IN

VIETNAM 17.1 Demand

In general, market proportion of pesticide in Vietnam is about 0.5% of the international market, total sales volume is increased by about 50,000 tons every year On the pesticide production field, Vietnam will increase and use and prevent and cure effectually, the alternative will be strong, produce and use the simple and convenient, apt resolving, products with low toxicity Meanwhile, Vietnam will also adjust the products organization gradually, will reduce the insecticide proportion, increase weed killer products , the products of and the family expenses and health quarantine

17.1.1 Rice production

Source : Statistic department - 2005

Figure 17-1Vietnam Planting area by crop

The role of agriculture, forestry and fishery was estimated by about one fourth of the national economy of Viet Nam, of which agriculture contributed nearly 80%, the rest from forestry and fishery Structure of gross output from agriculture was of around 80%, 16,6-16,9% or 2,7-2,9% from cultivation, animal husbandry or services, respectively The value of rice production contributed the largest part of cultivation

As an integral part of life in Vietnam, rice is the staple food as well as an economic activity The "average Vietnamese eats three quarters of a pound of rice a day [and] rice covers 75 percent of the country's cultivated land" (www.destinationvietnam.com) Rice is the main crop for many Vietnamese and the Vietnamese Ministry of Agriculture (MAFI)is planning a multi-million dollar farm diversification program designed to protect the country from possible domestic food shortages Encouraging farmers to be less reliant on rice, crops such as fruit trees and coffee are being encouraged But the task is a difficult one considering that to many Vietnamese, Vietnam is described as "two rice baskets on a carrying pole"(Ibid) With rice playing such a central role in Vietnam, it is no wonder that rice area is the main market of pesticide use in Vietnam

After the war, the Vietnamese government moved towards instituting reforms to help its ailing economy In a series of reform measures in 1981, Vietnam turned away from the collective farming system to a group-oriented system In 1986, the production system was altered again, but this time the change was towards individual contracts For the average small farmer, the reforms resulted in a 40 per cent increase in individual income from harvested crops For the first time, small farmers in Vietnam had a vested interest to increase crop production not only for consumption, but for export as well

Total paddy production 32.5 32.1 34.4 34.6 36.1 35.8

Source : Statistic department - 2005

Table 17-1 Paddy rice production & export

If in the year 1990, Vietnam only exported 1,48 million tons, 9 years later the

export volume was recorded at 4,6 million tons and Mekong Delta is occupied

mostly the export volume Now Vietnam becomes the second country (after

Thailand) in rice exportation in the world

Source : Statistic department - 2005

Table 17-2 Rice planted area, Output and Yield per hectare by area

17.1.2 Pesticide use on rice

Pesticide 14%

Fertilizer 29%

Labour 52%

Seed 5%

Total production cost : 6.2 million VND/hectare

Source : Farmer practice & our analysis– Mekong Delta 2006

Figure 17-2 Paddy rice production cost

Even the production cost and profit of paddy rice varying from different area in Mekong Delta, but according to our calculation, the profit return over the cost is about 20-30% The family labor occupies mostly the cost and then fertilizer and pesticide Pest infestation is one of the greatest challenges to rice production and can affect crop output, if left unmonitored, pests can eliminate close to 90 per cent

of the yield The solution for many farmers, unfortunately, were increased use of agrochemicals

A study of pesticide use in Vietnam showed that a significant amount of pesticides applied on rice fields are unnecessary Vietnam's researchers at the International Rice Research Institute (IRRI) in conjunction with Vietnam's Ministry of Agriculture monitored insecticide use patterns of 950 farmers Their findings

indicate that 42 percent of pesticides used was focused on leaf but spraying patterns did not correlate with current pest situations (PANUPS, 1995)

Over 95 per cent of the farmers interviewed applied at least one type of pesticide during the growing season and the mean number of sprays in Vietnam is seven (PANUPS, 1995) Recent studies have shown unsafe storage, handling, application and disposal of pesticides increases the risk of incidental exposure and contamination of water canals and ducts The side effects of pesticides on humans are also linked to bronchial asthma, eye irritation, and pulmonary disorders (Naylor, 1994) Furthermore, toxic chemicals used in rice paddies are often not confined to them During heavy rains, rice fields often overflow paddy boundaries contaminating surrounding soil and water In pesticide-free rice fields, certain types

of fish and shrimp can usually be farmed with rice However, because of the high level of toxicity of the pesticides, farmers are limited solely to rice and lose the capability to produce additional food for consumption or sale Prolonged misuse of pesticides, herbicides and fertilizers over the years has affected the development of inland fisheries including pond culture, "cage and pen rearing and brackish water culture" (www.servenet/agriculture/fish/forestry) With a growing population, Vietnam's ability to feed its people along with production for export is a growing concern for the future sustainability of the country The pressures to explore alternate methods of pest control while continuing to increase crop yield will come

to the forefront of agricultural discourse as the axis of population and food output intersect at maximum levels

In fact, in current practice, as Vietnam increases its participation in the global market, growing urban centers have spurred a labor migration into non-agricultural sectors As the labor market shifts into the cities and industrial fields, the once cheap cost of hiring a agricultural worker inevitably rises In order to minimize costs associated with production while producing surplus amounts of rice for

export, farmers indiscriminately turn to agrochemicals That’s why the amount of pesticides used and the market have been increased for years

17.1.4 Mekong River Delta – the most important area

Source : Statistic department & our estimation

Table 17-3 Rice planted area in Mekong Delta by province - 2005

The total planting area for paddy rice is approx 7.5 million hectares in the year

2004 in which the Mekong Delta occupied about 51% The average yield there is around 4.6 tons per hectare and also occupied 52% rice production output There are two main crop season including Summer-Autumn and Winter-Spring and the yield per hectare will be high for Winter-Spring season after flooding season

3 crops / year Summer-Autumn Autumn-Winter Others

Source : our analysis

Table 17-4 Rice pattern schema in Mekong Delta

Although all volume of rice exported has been from their production, especially in this case of rice farmers in the Mekong River Delta who have contributed around 90% of total volume of exported rice, however, small producers or rice farmers have to face many difficulties in their life as well as production

Due to the important of Mekong Delta to contribute the country rice production as well as interesting market for pesticides (occupied about 70% pesticide use), we had arranged the survey in 6 provinces in Mekong River Delta area including Kien Giang, Can Tho, Dong Thap, An Giang, Tien Giang

Source : Statistic department - 2005

Figure 17-3 Vietnam Pesticide Market Evolution by Import value

The last two years has seen a great increase in the Vietnam agrochemical market The total value of import increases to US$250 million (year 2006, our estimation), a increase 70% on 2000 Agrochemical sales increase heavily in all around country, due to pests conditions and planting area increase

The increase of the agrochemical market in Vietnam has also resulted in a number

of local companies opened dealing in pesticides make the market become more completion as well as to explore the use of pesticide in current planting practice

17.2.2 Market share

Central to the pesticide distribution system of Viet Nam is the complex web of relationships among its key participants, namely suppliers, traders, wholesalers, and

retailers The overall purpose of these channels is to distribute the pesticides to farmers The main problems of the relationship between these key participants are taking many intermediate channel for pesticides from production to end-users Hence, the end-users market is nearly double the import value of pesticides when almost pesticide ‘s companies in Vietnam mainly do repacking into small packages and formulating some simple pesticides formulation

Due to the limit times of storage, the supplier should balance the import and sales and try to sell out all pesticides of the previous season

There are more than 531 active ingredient & mixtures of pesticide already registered in Vietnam with about five times of trade name from around 120 companies One popular active ingredient normally has at least 15 trade names in the market including one key register from multi-national company and the rest for generic owned by local companies That’s why there was a big change in market share of Vietnamese pesticide market from the year 2000 and 2006 when the local companies occupied only 29% in 2000 and around 50% in 2006

The evolution was due to the high margin of dealing in pesticide from the national companies in the past year lead the big wholesalers (that distributed for multi-national companies) entering to the market by register good selling pesticides according to their experience

Aventis 8.0%

Norvatis 16.0%

Zeneca 11.0%

Takeda

7.0%

Kumiai 5%

Dupont

3.0%

Dow 3.0%

Other 4%

Source : Our analysis

Figure 17-4 Vietnam market share by import value (%) – Year 2000

Aventis 10.6%

VFC (Kumiai )

5.2%

Others (76 trading companies) 20.3%

Syngenta 15.0%

Map Pacific 3.3%

Arysta 3.1% Vipesco3.0%

Source : our analysis updated on Oct 2006

Figure 17-5 Vietnam market share by import value (%)

Probably there are more than 3,000 kinds of crop insect pests , hundreds of kinds of weeds in Vietnam, especially insect pests such as the fly , mosquito ,etc wreak havoc Country these traditional agriculture country, pesticide industrial development lag behind, depend on import mainly, the market potential is relatively great

There are two main groups of supplying companies dealing with pesticides in Vietnam The first one is multi-national companies like Syngenta, Bayer, BASF… with experiences and strong finance The second group is local companies with generic items and mixtures Ofcourse, there is also a middle group of companies that is distributing products from multi-national companies and also creating own trade names In this research, we are focusing on the top part of the second group of local companies (around 100 companies with about 50% market share vs the first group of multi-national companies occupied about 40% market share)

All in all, Vietnamese pesticide market has three characteristics: First, the import for the product is great; Second, the demand increases fast, the market potential is great; Third, middle-and-low grade to take product to be popular while being agricultural Because the foundation of Vietnam is relatively bad, the economic situation lags behind relatively, welcome practicability a strong one middle-and-low grade to take product while being agricultural even more According to the estimation by Vietnamese agriculture and rural development department, Vietnamese pesticide import volume is about 250 million dollars per year and the share on the Vietnamese pesticide market of pesticide products from China accounts for 32%

Others 59%

China 32%

India 9%

Figure 17-6 Import by origin (%) – Vietnam pesticides market – Year 2005