Vietnam agribusiness report q2 2013

Q2 2013 www.businessmonitor.com VIETNAM AGRIBUSINESS REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1759-1740 Published by:Business Monitor International Vietnam Agribusiness Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 2013 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2013 Business Monitor International All rights reserved All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained Vietnam Agribusiness Report Q2 2013 CONTENTS BMI Industry View SWOT 10 Agribusiness 10 Business Environment 12 Industry Forecast 13 Dairy Outlook 13 Table: VIETNAM Milk Production & Consumption 14 Table: VIETNAM Butter Production & Consumption 14 Table: VIETNAM Cheese Production & Consumption 14 Table: VIETNAM Milk Production & Consumption 20 Table: VIETNAM Cheese Production & Consumption 20 Table: VIETNAM Butter Production & Consumption 20 Livestock Outlook 22 Table: Poultry Production, Consumption 24 Table: Pork Production, Consumption 24 Table: VIETNAM Beef & Veal Production, Consumption 24 Table: Beef And Veal Production And Consumption 29 Table: Pork Production And Consumption 29 Table: Poultry Production And Consumption 30 Coffee Outlook 31 Table: Coffee Production And Consumption 33 Table: Coffee Production And Consumption 38 Rice Outlook 40 Table: Rice Production, Consumption And Trade 42 Table: Rice Production, Consumption And Trade 47 Grains Outlook 49 Table: Corn Production And Consumption 50 Table: Corn Production And Consumption 52 Commodities Price Analysis 53 Monthly Grains Update 53 Table: Select Agricultural Commodities - Performance & BMI Forecasts 60 Monthly Softs Update 61 Table: Select Agricultural Commodities - Performance & BMI Forecasts 71 Table: BMI Commodity Strategy 72 Upstream Analysis 73 Asia GM Outlook 73 Table: Philippines Corn Estimates 77 Table: Select Countries - GM Crops 78 Asia Fertiliser Outlook 78 Asia Machinery Outlook 84 © Business Monitor International Page Vietnam Agribusiness Report Q2 2013 Downstream Analysis 91 Food 91 Table: Food Consumption Indicators - Historical Data & Forecasts 94 Table: Canned Food Value/Volume Sales - Historical Data & Forecasts 95 Table: Confectionery Value/Volume Sales - Historical Data & Forecasts 96 Drink 97 Table: Alcoholic Drinks Value/Volume Sales - Historical Data & Forecasts, 2010-2017 99 Table: Hot Drinks Volume Sales - Historical Data & Forecasts, 2010-2017 101 Table: Soft Drinks Value/Volume Sales - Historical Data & Forecasts, 2010-2017 103 Table: Carbonates Volume Sales, Production & Trade - Historical Data & Forecasts, 2010-2017 103 Mass Grocery Retail 104 Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2010-2017 106 Table: Grocery Retail Sales By Format (%) 107 Table: Trade Indicators - Historical Data & Forecasts, 2010-2017 109 Competitive Landscape 110 Table: Vietnam - Major Agribusiness Companies (US$mn) 110 Demographic Forecast 111 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 112 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 113 Table: Vietnam's Key Population Ratios, 1990-2020 114 Table: Vietnam's Rural And Urban Population, 1990-2020 114 Methodology 115 © Business Monitor International Page Vietnam Agribusiness Report Q2 2013 BMI Industry View BMI View: The agriculture industry (including forestry and aquaculture) contributes to more than 20% of Vietnam's GDP and employs almost half its population It holds strong growth opportunities in terms of production, exports and retail sales, more specifically with regard to the coffee and livestock sectors However, some industries face large risks in terms of losing competitive advantage as other Asian countries step up production, particularly of rice and coffee We believe Vietnam will have to significantly ramp up investment in crop productivity to avoid being left behind, and if it wants to be able to produce more valueadded crops and maintain its status as an export spearhead Rice King Commodity Vietnam - BMI Agribusiness Market Value By Commodity (% of total) Note: The BMI Market Value is an addition of all domestically produced commodities' value (calculated by multiplying the production with the international benchmark prices, converted in US$/tonne); e/f = BMI estimate/ forecast Source: BMI Key Forecasts ■ Rice consumption growth to 2017: 7.7% to 21.3mn tonnes Rice remains the major food staple in Vietnam, and we not see this changing over our forecast period However, rising interest in other foods such as wheat-based goods - supported by growing affluence - will restrict demand for rice, and over the forecast period we expect production growth to significantly outpace that of consumption © Business Monitor International Page Vietnam Agribusiness Report Q2 2013 ■ Corn production growth to 2016/17: 43.4% to 7.1mn tonnes Although acreage is likely to remain stagnant or diminish; current yield immaturity means significant gains are still available via this avenue, especially as robust local corn prices provide incentives to farmers Domestic consumption will be another important driver ■ Milk production growth to 2016/17: 25.7% to 416,000 tonnes Dramatic increases in cattle numbers and increased public and private sector investment - part of the effort to reduce the country's growing import dependency - will be the main boost to growth Commercialisation will also play a key role as larger, more efficient farms come to play a greater role in milk production ■ BMI universe agribusiness market value: US$25.4bn in 2013 (down from US$27.3bn in 2012); growth expected to average -0.5% annually between 2012 and 2017 ■ 2013 real GDP growth: 7.0% (up from 5.0% in 2012; predicted to average 6.7% over 2012-2017) ■ 2013 consumer price index: 6.5% year-on-year (y-o-y) (down from 9.3% in 2012; predicted to average 6.1% over 2012-2017) ■ 2013 central bank policy rate: 9.00% (similar than in 2012; predicted to average 6.67% over 2012-2017) Key Revisions To Forecasts ■ 2012/13 coffee production forecast revised down, to 19.6mn 60kg bags (compared to a previous estimate at 22.3mn bags) The decline is mainly due to weather fluctuations, with rains hampering cherry development during the coffee flower blossoming period, followed by a dry spell in July and August ■ 2012/13 rice production forecast revised up, to 27.0mn tonnes (compared with a previous estimate at 26.7mn tonnes) Favourable weather conditions during planting allowed for expanded crops in the Mekong River Delta region for spring and autumn crops Key Developments After a strong 2012 year for exports, with Vietnam managing to benefit from the drop in Thai exports, restrained by its uncompetitive prices, the 2013 export outlook is less buoyant for Vietnam Thailand, the traditional largest exporter, is set to revive its exports and to release part of its bulky stocks India, which had withdrawn from exports for four years until September 2011, has made a strong comeback and exports lower quality rice exports, eating into Vietnam's traditional segment India is likely to maintain high exports in 2012/13 A bright spot among bleak news is the current strength of China's imports The country has stood out as the main destination for Vietnamese rice for the past year, and is likely to maintain high imports in 2012/13 owing to insufficient supply and high domestic prices Coffee has proven to be one of main agricultural export engines of the Vietnamese economy and the bulk of Vietnam's coffee production is for exports Only about 6% of total production is for domestic consumption In 2012/13, exports should be strong, on the back of 2011/12 strong production and ending stocks They are © Business Monitor International Page Vietnam Agribusiness Report Q2 2013 likely to reach 20.5mn bags, up 5.7% y-o-y Vietnam mainly exports, but is slowly increasing soluble coffee exports Vietnam now accounts for 17.7% of the world's total exports and exports to more than 80 countries, with Germany, the US, Italy and Spain as its biggest clients Vietnam overtook Colombia as the second largest exporter in 2000, and its impact on international markets has been steadily growing ever since The animal feed industry has been receiving significant - mainly foreign - investment in recent years, given the attractive prospects of the livestock and aquaculture industries of the country Foreign-invested feed companies continue to meet most of the domestic demand, such as Thailand's Charoen Pokphand Group and US-based Cargill, according to the Ministry of Industry and Trade Vietnam currently has 59 foreign-invested firms and joint ventures which hold 70% of the domestic animal (compound) feed market share while 180 local firms retain the remaining 30%, according to the Vietnam Animal Feed Association We believe the consolidation of the sector is likely to continue, with foreign livestock and feed companies buying local assets and rising their exposition to the sector © Business Monitor International Page Vietnam Agribusiness Report Q2 2013 SWOT Agribusiness SWOT Analysis Strengths ■ The natural fertility of Vietnam around the Red River Delta in the north and the Mekong River Delta in the south provides the country with a strong agricultural base ■ Vietnam is the world's second largest exporter of rice and coffee It also enjoys relatively high rice yields compared with its regional counterparts ■ Agricultural productivity has improved considerably since the opening up of the economy in 1986 Weaknesses ■ Much of Vietnam's agriculture is based on small-scale farms with poor yields relative to more developed international competitors ■ Transportation and production infrastructure is often poor, making getting crops to market difficult and negatively affecting quality Opportunities ■ Since the opening up of the economy in 1986, which allowed more private involvement in agriculture, yields have improved dramatically and look set to continue doing so ■ Vietnam's fast-growing population of more than 80mn provides a large market for agro-food products ■ With BMI forecasting Vietnamese GDP per capita to grow rapidly over our forecast period, consumers will have more money to spend on food, spurring growth in agricultural production © Business Monitor International Page 10 Vietnam Agribusiness Report Q2 2013 Carbonates Volume Sales, Production & Trade - Historical Data & Forecasts, 2010-2017 - Continued 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f Carbonated soft drink exports, litres mn, % change y-o-y 4.44 3.64 1.75 2.30 2.25 2.29 2.34 2.32 Carbonated soft drink imports, litres mn 14.47 14.56 14.75 14.90 15.06 15.21 15.37 15.53 Carbonated soft drink imports, litres mn, % change y-o-y 2.68 0.60 1.28 1.07 1.02 1.03 1.04 1.05 Carbonated soft drink balance, litres mn 24.69 26.03 26.55 27.35 28.14 28.98 29.85 30.74 Carbonated soft drink balance, litres mn, % change y-o-y 5.51 5.42 2.01 2.98 2.92 2.97 3.02 2.97 Mass Grocery Retail Mass Grocery Retail Mass Grocery Retail  MGR sales CAGR, 2012 to 2017: +12.26% b> Sales 2010-2017  Supermarket sales CAGR, 2012 to 2017: +12.87%  Hypermarket sales CAGR, 2012 to 2017: +12.38%  Convenience store sales CAGR, 2012 to 2017: +9.86% We expect Vietnam's mass grocery retail (MGR) sales to have grown 12.2% in 2012, slowing from 13.9% growth in 2011 The Vietnamese consumer came under pressure in 2011 as elevated inflation f = BMI forecast Source: Company information, Trade and tight credit conditions dampened consumer press, BMI purchasing power However, with inflationary pressure continuing to wane and the State Bank of Vietnam loosening its monetary policy stance, this is likely to provide some reprieve to domestic demand © Business Monitor International Page 104 Vietnam Agribusiness Report Q2 2013 Nonetheless, retail activity in 2012 was expected to have witnessed some moderation as the global headwinds of a potential hard landing in China, economic uncertainties in the US and sovereign debt concerns in the eurozone weighed on consumer confidence, already dented by rising unemployment in the manufacturing sector Reflecting the long-term potential of the Vietnamese MGR sector, we forecast a local currency CAGR of 12.26% for overall MGR sales between 2012 and 2017 This growth forecast marks Vietnam as one of the most attractive propositions in the Asia Pacific region, led by supermarkets and hypermarkets Due to the higher profitability per store for supermarkets and hypermarkets, these store formats will continue to garner the bulk of investment attention Vietnamese consumers are most familiar with the standard supermarket format and are increasingly showing a penchant for hypermarkets owing to their popular combination of food and non-food items Retail Fundamentals Remain Strong In Longer TermFavourable demographics and robust economic growth largely underpin our optimism in the Vietnamese MGR growth story According to our estimates, Vietnam's population is roughly 89mn and is forecast to grow at a healthy clip of 0.9% per annum to 2021 More importantly, Vietnam has a youthful demographic profile, implying attractive opportunities in the mass market Moreover, Vietnam's rapid economic development is likely to assist the emergence of a new consumer class - in major urban centres at least - that has an interest and can afford to participate in modern consumption methods such as mass grocery retailing GDP per capita in Vietnam is forecast to more than double from an estimated level of US$1,502 in 2012 to US$4,348 by 2021 This rise in purchasing power will only trigger a swathe of consumer spending across the country's retail scene Vietnam Unlikely To Reach Full Retail Potential In Near TermAlthough Vietnam is equipped with the aforementioned elements that are necessary to support strong growth in mass grocery retailing, the country is unlikely to reach the full potential of its retail growth story in the near future Organised retail accounts for only 15% of overall grocery sales in Vietnam, highlighting the prevalence of mom-and-pop shops The relative immaturity of the Vietnamese MGR sector can be partly attributed to the country's restrictive business climate Vietnam remains a risky place to business, with the lack of transparency of laws and regulations as well as restrictions on foreign investment deterring less-hardy retailers from setting up shop in the country The lack of an established transport infrastructure further complicates distribution efforts for MGR operators © Business Monitor International Page 105 Vietnam Agribusiness Report Q2 2013 Foreign Interest Picking UpDespite the challenges, foreign interest in the Vietnamese MGR sector will very likely continue to grow steadily over the coming years given the sector's hugely untapped potential We believe the bulk of multinational investment in the near future is likely to come from bigger retail names such as Aeon and Groupe Casino, which are eager to expand their emerging market footprint and have the financial capacity to deploy the necessary distribution infrastructure in the sector After receiving the regulatory permit from the Vietnamese government, Japanese retailer Aeon plans to develop around 20 retail and trade centres nationwide by 2020, which will house both local and foreign MGR operators Interest from less-hardy foreign investors will also pick up, in our view, although such investment will largely take the form of joint ventures as foreign retailers leverage on the local market expertise and financial strength of their local counterparts As a case in point, South Korean MGR player E-Mart recently reached an agreement with U&I Investment Corporation to establish a joint venture in Vietnam with an aim of setting up retail stores in the country Similarly, Singapore MGR operator NTUC Fairprice and Vietnam's Saigon Union of Trading Co-operatives are looking to establish a chain of hypermarkets in Vietnam through their local joint venture Supermarket And Hypermarket Sectors As The OutperformersWhile the supermarket and hypermarket sub-sectors will feature most prominently on investors' radars, the convenience retail sector can be expected to increasingly attract interest from retailers Accordingly, the demand for convenience with the pay-off of higher prices is not yet on the agenda for most consumers However, with purchasing power on the rise, this will bring the concept of convenience retailing more within reach of the average consumer If there can be a downside in the case of such an impressive retail growth forecast, it comes in the form of Vietnam's majority rural population, which drags down food consumption in the market to unattractive levels The risk for retailers is that as soon as the country's major cities start to become saturated with business opportunities, few other communities exist that can currently support modern retail development Even the low prices offered by discounters would be unlikely to attract buyers in rural communities, for whom self-sufficiency and wet markets remain the sole methods of consumption However, this point is still a long way off Retailers will invest in Vietnam in line with their own need to expand, confident of the country's economic development and growing consumer base Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2010-2017 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f Supermarkets (VNDbn) 57,060 65,374 73,643 82,328 93,630 105,978 120,106 134,933 Hypermarkets (VNDbn) 22,804 26,270 29,714 33,238 37,494 42,126 47,368 53,256 © Business Monitor International Page 106 Vietnam Agribusiness Report Q2 2013 Mass Grocery Retail Sales By Format - Historical Data & Forecasts, 2010-2017 - Continued 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f Convenience Stores (VNDbn) 17,962 19,828 21,664 23,387 25,702 28,406 31,385 34,668 Total mass grocery retail sector (VNDbn) 97,826 111,472 125,022 138,953 156,825 176,509 198,860 222,858 Total mass grocery retail sector growth, VND, (y-o-y) 25.14 13.95 12.16 11.14 12.86 12.55 12.66 12.07 Supermarkets (US$bn) 2.98 3.17 3.50 3.96 4.55 5.21 5.98 6.75 Hypermarkets (US$bn) 1.19 1.27 1.41 1.60 1.82 2.07 2.36 2.66 Convenience Stores (US$bn) 0.94 0.96 1.03 1.12 1.25 1.40 1.56 1.73 Total mass grocery retail sector (US$bn) 5.11 5.40 5.94 6.68 7.63 8.68 9.89 11.14 Table: Grocery Retail Sales By Format (%) 2012e 2022f Organised/MGR 15 28 Non-organised/Independent 85 72 © Business Monitor International Page 107 Vietnam Agribusiness Report Q2 2013 Trade Trade  Import value CAGR, 2012 to 2017 (US$): +10.42%  Export value CAGR, 2012 to 2017 (US$): +11.16% We see growing downside risks to our outlook for Vietnam's food and drink exports A sputtering economic recovery in the US, sovereign debt concerns in the eurozone and an imminent hard landing in China are placing increasing pressure on our export outlook for the Vietnamese food and f = BMI forecast Source: UNCTAD, BMI drink sector On the other hand, the Vietnamese consumer looks to be in a stronger shape than its regional peers to shoulder the burden of slower economic growth As such, we expected import growth in 2012 to have outperformed that of export growth, coming in at 8.3% and 6.5%, respectively Over the five years to 2017, the outlook for Vietnam's food and drink trade balance is relatively stronger, as the country is forecast to maintain a healthy and growing trade balance While exports are forecast to experience growth of 11.2% on a compound annual average growth basis between 2012 and 2017, imports are forecast to experience compound annual average growth of 10.4% over the same period A major driver behind the growth in exports is sustained government efforts to improve local food production and agricultural industries This will boost output and make more produce available for export, as well as improve the quality competitiveness of local exports Over the long term, increasing urbanisation and continued exposure to Western influences are expected to generate growing import demand, and increasingly busy lifestyles and rising interest in branded produce will lead to growth in the processed-food industry In order to meet this demand, local manufacturers will be forced to import the necessary raw ingredients Beyond 2017, the government is likely to be hopeful that its investments and efforts to attract foreign investors will pay off, and that much of this new and specific type of demand will be able to be accommodated domestically © Business Monitor International Page 108 Vietnam Agribusiness Report Q2 2013 Table: Trade Indicators - Historical Data & Forecasts, 2010-2017 2010 2011 2012f 2013f 2014f 2015f 2016f 2017f Exports (US$mn) 12,168.3 15,707.1 16,721.8 18,661.7 20,651.4 22,913.6 25,510.7 28,379.7 Imports (US$mn) 3,815.0 4,061.8 4,397.4 4,896.2 5,400.7 5,957.9 6,550.5 7,219.4 Balance (US$mn) 8,353.3 11,645.4 12,324.4 13,765.6 15,250.7 16,955.8 18,960.1 21,160.3 © Business Monitor International Page 109 Vietnam Agribusiness Report Q2 2013 Competitive Landscape Table: Vietnam - Major Agribusiness Companies (US$mn) Company Sub-Sector Viet Nam Dairy Products JSC (Vinamilk) Dairy Kinh Do Corp Market CapitaliReve-nue Fiscal Y/E sation Employees 1,273.2 12/2012 4,118.7 4,845 Food Manufacturing (confectionery & snacks) 205.7 12/2011 353.4 5,946 Vinacafe Bien Hoa JSC Coffee & Food Manufacturing 101.4 12/2012 243.5 716 Hung Vuong Seafood 373.8 12/2012 111.3 586 Societe De Bourbon Tay Ninh Sugar and Real Estate 94.8 12/2012 103.4 810 Tuong An Vegetable Oil JSC Edible Oils & Fats 193.2 12/2012 37.3 760 Lam Son Sugar Sugar & Alcohol 98.1 12/2011 36.7 890 Minh Phu Seafood Seafood 340.9 12/2011 97.7 12,150 Southern Seed Crop Seeds 22.0 12/2012 26.7 na Viet Thang Feed JSC Animal Feed 177.5 12/2012 25.8 621 Source: BMI, Bloomberg © Business Monitor International Page 110 Vietnam Agribusiness Report Q2 2013 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail Vietnam's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy The tables show key datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split Source: World Bank, UN, BMI © Business Monitor International Page 111 Vietnam Agribusiness Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 2015f 2020f 67,102 74,008 78,758 83,161 87,848 89,730 92,443 96,355 0-4 years 9,340 9,212 7,002 6,776 7,186 7,186 7,026 6,529 5-9 years 8,685 9,193 9,124 6,921 6,703 6,885 7,143 6,982 10-14 years 7,504 8,604 9,142 9,038 6,844 6,539 6,668 7,104 15-19 years 7,127 7,408 8,535 9,064 8,963 8,161 6,806 6,628 20-24 years 6,492 7,003 7,305 8,420 8,954 9,115 8,892 6,745 25-29 years 5,893 6,361 6,879 7,167 8,284 8,602 8,862 8,803 30-34 years 4,884 5,779 6,250 6,765 7,058 7,475 8,202 8,779 35-39 years 3,965 4,794 5,688 6,163 6,677 6,770 6,991 8,131 40-44 years 2,420 3,884 4,710 5,614 6,086 6,304 6,609 6,925 45-49 years 2,039 2,358 3,802 4,653 5,548 5,761 6,012 6,536 50-54 years 1,933 1,968 2,287 3,739 4,580 4,936 5,449 5,914 55-59 years 1,946 1,843 1,887 2,201 3,617 4,001 4,446 5,305 60-64 years 1,544 1,822 1,737 1,767 2,076 2,573 3,455 4,268 65-69 years 1,283 1,391 1,659 1,582 1,621 1,649 1,927 3,233 70-74 years 919 1,084 1,194 1,439 1,389 1,384 1,438 1,729 1,127 1,305 1,559 1,852 2,264 2,388 2,516 2,743 Total 75+ years f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 112 Vietnam Agribusiness Report Q2 2013 Table: Vietnam's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012 2015f 2020f 0-4 years 13.92 12.45 8.89 8.15 8.18 8.01 7.60 6.78 5-9 years 12.94 12.42 11.58 8.32 7.63 7.67 7.73 7.25 10-14 years 11.18 11.63 11.61 10.87 7.79 7.29 7.21 7.37 15-19 years 10.62 10.01 10.84 10.90 10.20 9.10 7.36 6.88 20-24 years 9.68 9.46 9.27 10.13 10.19 10.16 9.62 7.00 25-29 years 8.78 8.60 8.73 8.62 9.43 9.59 9.59 9.14 30-34 years 7.28 7.81 7.94 8.14 8.03 8.33 8.87 9.11 35-39 years 5.91 6.48 7.22 7.41 7.60 7.55 7.56 8.44 40-44 years 3.61 5.25 5.98 6.75 6.93 7.03 7.15 7.19 45-49 years 3.04 3.19 4.83 5.59 6.32 6.42 6.50 6.78 50-54 years 2.88 2.66 2.90 4.50 5.21 5.50 5.89 6.14 55-59 years 2.90 2.49 2.40 2.65 4.12 4.46 4.81 5.51 60-64 years 2.30 2.46 2.21 2.12 2.36 2.87 3.74 4.43 65-69 years 1.91 1.88 2.11 1.90 1.85 1.84 2.08 3.36 70-74 years 1.37 1.46 1.52 1.73 1.58 1.54 1.56 1.79 75+ years 1.68 1.76 1.98 2.23 2.58 2.66 2.72 2.85 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 113 Vietnam Agribusiness Report Q2 2013 Table: Vietnam's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 Active population, % of total Active population, total, '000 Youth population, % of total working age Youth population, total, '000 1990 1995 2000 2005 2010 2012 2015f 2020f 75.5 71.2 60.5 49.7 42.1 40.9 40.6 41.6 28,859 30,790 29,679 27,609 26,006 26,031 26,717 28,321 57.0 58.4 62.3 66.8 70.4 71.0 71.1 70.6 38,243 43,218 49,079 55,552 61,842 63,699 65,725 68,034 66.8 62.5 51.5 40.9 33.5 32.4 31.7 30.3 25,529 27,009 25,268 22,735 20,732 20,610 20,837 20,615 8.7 8.7 9.0 8.8 8.5 8.5 8.9 11.3 3,330 3,780 4,411 4,874 5,274 5,421 5,881 7,706 Pensionable population, % of total working age Pensionable population, '000 f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+ Source: World Bank, UN, BMI Table: Vietnam's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015f 2020f Urban population, % of total 20.3 22.2 24.3 26.4 28.7 29.7 31.2 33.9 Rural population, % of total 79.7 77.8 75.7 73.6 71.3 70.3 68.8 66.1 Urban population, '000 13,438.6 16,201.6 18,865.4 21,940.1 25,212.5 26,649.9 28,842.1 32,664.4 Rural population, '000 52,761.4 56,778.4 58,770.0 61,166.2 62,635.9 63,080.4 63,600.5 63,690.7 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 114 Vietnam Agribusiness Report Q2 2013 Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and causal/econometric modelling The precise form of model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use of objective views, BMI uses a 'general-to-specific' method BMI mainly uses a linear model, but simple non-linear models, such as the log-linear model, are used when necessary During periods of 'industry shock', for example poor weather conditions impeding agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately-selected regression models BMI selects the best model according to various different criteria and tests, including, but not exclusive to: ■ R2 tests explanatory power; Adjusted R2 takes degree of freedom into account ■ Testing the directional movement and magnitude of coefficients ■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value) ■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity BMI uses the selected best model to perform forecasting It must be remembered that human intervention plays a necessary and desirable role in all of BMI's industry forecasting Experience, expertise and knowledge of industry data and trends ensures that analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Within the Agribusiness industry, this intervention might include, but is not exclusive to, technology development that might influence future output levels (for example greater use of biotechnology), dramatic changes in local production levels due to public or private sector investment, the regulatory environment and specific areas of legislation, such as import and export tariffs and farm subsidies, changes in lifestyles and general societal trends, the formation of bilateral and multilateral trading agreements and political factors The following two examples show the demand (consumption) and the supply (production) of rice Note: the explanatory variables for both of them are quite similar, but the underlying economic theory is different © Business Monitor International Page 115 Vietnam Agribusiness Report Q2 2013 Example of Rice Consumption Model: (Rice Consumption)t = β0 + β1*(Real Private Consumption per capita)t + β2*(Inflation)t + β3*(Real Lending Rate)t + β4*(Population)t + β5*(Government Expenditure)t + β6*(Food Consumption)t-1 + εt Where: ■ β are parameters for this function ■ Real Private Consumption per capita has a positive relationship with Rice Consumption, if rice is a normal good in a particular country If rice is an inferior good in a country, the relationship is negative So the sign of β1 is determined by a specific product within a specific country ■ When Inflation is high, people with rational expectations will consume 'today' rather than wait for 'tomorrow's high price to come Higher rice demand in Year t due to higher inflation in that year leads to an assumed positive sign of β2 ■ The relationship between Real Lending Rate and Rice Consumption is expected to be negative When real lending rates increase, disposable incomes, especially for those with mortgage burdens etc, will decrease So the sign of β3 is expected to be negative ■ Of course, other things being equal, growth in rice consumption can also be caused by growth in population Consequently, positive sign of β4 is expected ■ ■ ■ Government Expenditure typically causes total disposable incomes to rise So the sign of β5 is expected to be positive Human behaviour has a trend: A high level of food consumption in previous years means there is very likely to be a high level of food consumption the next year So the positive sign of β6 is expected ε is the error/residual term Example of Rice Production Model: (Rice Production)t = β0 + β1*(Real GDP per capita)t + β2*(Inflation)t + β3*(Real Lending Rate)t + β4*(Rural Population)t + β5*(Government Expenditure)t + β6*(Food Production)t-1 + εt Where: ■ The same as above, the relationship between Real GDP per capita and rice production depends on whether rice is normal or inferior good in that country ■ If high inflation is caused by food prices increasing, farmers will be more profitable Then they will supply more agricultural product (e.g rice) to increase their marginal (extra) profit, although this is tempered by the rising cost of other inputs in line with inflation ■ There is a global move towards corporate farming, away from small holdings, in order to achieve greater agricultural productivity Corporate farming means more investment in the modes of production i.e agricultural machinery Higher real lending rates discourage investment, which in turn reduce production © Business Monitor International Page 116 Vietnam Agribusiness Report Q2 2013 ■ BMI assumes only the rural population has a positive effect on agricultural product supply ■ With supportive government policy, other things being equal, rice production is expected to go up Government Expenditure is likely to play some role in supporting agribusiness ■ Again, previous food production positively affects this year's prediction © Business Monitor International Page 117 Reproduced with permission of the copyright owner Further reproduction prohibited without permission [...]... of Vietnam' s livestock sectors and is expected to fall by 6.7% to 266,000 tonnes over the forecast period to 2016/17 © Business Monitor International Page 22 Vietnam Agribusiness Report Q2 2013 Strong Consumption Potential Vietnam - Population (mn) & GDP Per Capita (US$, % chg y-o-y) Source: BMI, Asian Development Bank, Vietnam General Statistics Office, UN BMI Demand View: Meat consumption in Vietnam. .. self-sufficient Moreover, Thailand has higher dairy cow efficiency © Business Monitor International Page 18 Vietnam Agribusiness Report Q2 2013 than Vietnam and China, as dairy cows yield, per year, 3,380kg of milk per head, compared with 2,060kg/ head in China and 2,170kg/head in Vietnam Lower Productivity In Vietnam Select Countries - Dairy Cow Yields (kg/head) f = BMI forecast Source: BMI, FAO, FAPRI Strong... International Page 11 Vietnam Agribusiness Report Q2 2013 Business Environment SWOT Strengths ■ Vietnam has a large, skilled and low-cost workforce, which has made the country attractive to foreign investors ■ Vietnam' s location - its proximity to China and South East Asia, and its good sea links - makes it a good base for foreign companies to export to the rest of Asia and beyond Weaknesses ■ Vietnam' s infrastructure... and rising their exposition to the sector © Business Monitor International Page 27 Vietnam Agribusiness Report Q2 2013 Imbalances To Be Maintained Vietnam - Poultry & Pork Production & Consumption ('000 tonnes) f = BMI forecast Source: BMI, USDA Lacklustre 2012 Results For Pig Farming In 2012, Vietnamese media agencies reported that some farms used banned growth hormones (eg Clenbuterol) in pig production,... consumption forecasts, as it places the dairy industry at risk of a health scandal, which would further tarnish the image of dairy products in Vietnam © Business Monitor International Page 21 Vietnam Agribusiness Report Q2 2013 Livestock Outlook BMI Supply View: Within the Vietnamese livestock industry, pig farming is by far the most dominant sector, with pork production comprising about two-thirds of total... goods and the ongoing spread © Business Monitor International Page 13 Vietnam Agribusiness Report Q2 2013 of modern, organised retail will all prove supportive of strong dairy consumption growth, even if forecast higher global dairy prices limit the growth outlook to some extent Table: VIETNAM Milk Production & Consumption 2012e 2013f 2014f 2015f 2016f 2017f Milk Production, '000 tonnes 1,2 331.0 343.0... Monitor International Page 23 Vietnam Agribusiness Report Q2 2013 Table: Poultry Production, Consumption 2012e 2013f 2014f 2015f 2016f 2017f Poultry Production, '000 tonnes 1 750.0 780.0 820.0 863.0 907.0 954.0 Poultry Consumption, '000 tonnes 1 793.5 837.1 887.4 940.6 1,001.8 1,071.9 Notes: e BMI estimates f BMI forecasts Sources: 1 USDA Table: Pork Production, Consumption 2012e 2013f 2014f 2015f 2016f... Sources: 1 USDA Table: VIETNAM Beef & Veal Production, Consumption 2012e 2013f 2014f 2015f 2016f 2017f Beef & Veal Production, '000 tonnes 1 285.0 280.0 275.0 272.0 269.0 266.0 Beef & Veal Consumption, '000 tonnes 1 295.0 302.4 316.0 331.8 348.4 365.8 Notes: e BMI estimates f BMI forecasts Sources: 1 USDA © Business Monitor International Page 24 Vietnam Agribusiness Report Q2 2013 Fragmented Domestic... Labour unrest remains a lingering threat A failure by the authorities to boost skills levels could leave Vietnam a second-rate economy for an indefinite period © Business Monitor International Page 12 Vietnam Agribusiness Report Q2 2013 Industry Forecast Dairy Outlook BMI Supply View: We are positive on Vietnam' s dairy sector We expect it to maintain high-growth momentum owing to a growing customer base,... could pose upside risks to our forecasts © Business Monitor International Page 30 Vietnam Agribusiness Report Q2 2013 Coffee Outlook BMI Supply View: Vietnam' s coffee sector has grown significantly over the last 20 years, with yields doubling and the area planted expanding from 42,000 hectares (ha) to more than 509,000ha Vietnam is the world's biggest producer of robusta coffee, with more than 95% of ... Monitor International Page Vietnam Agribusiness Report Q2 2013 likely to reach 20.5mn bags, up 5.7% y-o-y Vietnam mainly exports, but is slowly increasing soluble coffee exports Vietnam now accounts... predicted to average 6.7% over 201 2-2 017) ■ 2013 consumer price index: 6.5% year-on-year (y-o-y) (down from 9.3% in 2012; predicted to average 6.1% over 201 2-2 017) ■ 2013 central bank policy rate:.. .Vietnam Agribusiness Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 2013