VietNamNet Bridge – Experts of the Institute for Policy and Strategy of Agriculture and Rural Development (IPSARD) have warned that Vietnam’s agricultural sector will continue to face tough times ahead due to fiercer competition and oversupply on global markets.

Farmers gather paddy (unhusked rice) at their farm in the Mekong Delta. According to IPSARD, Vietnam’s agricultural sector will continue to face tough times ahead due to fiercer competition and oversupply on global markets -- Photo: SGT

Speaking at a seminar on the impact of global developments on agriculture in Vietnam in Hanoi on Wednesday, IPSARD director Nguyen Do Anh Tuan said falling farm produce exports were attributable to the falls of regional currencies against the U.S. dollar which had put Vietnam in a disadvantageous position when exporting agro-aqua-forestry products.

In terms of price, Vietnam has seen the competitiveness of its rice falling compared to that of India and Thailand; coffee to Brazil and Colombia; shrimp to Thailand, India and Indonesia; and rubber to Indonesia and Malaysia.

Unfavorable economic developments on global markets, especially those in China recently, have hit Vietnam’s agricultural trade as 20% of Vietnamese farm products are sold to the northern neighbor. This percentage does not include exports made via small border gates.

Tuan gave an example that in the first seven months of this year, China imported 37% of total Vietnamese rice export volume, 47% of rubber products, 36% of fruits and vegetables, 13% of wooden products, 12% of cashew nuts and 7% of seafood.

Nguyen Trung Kien, acting head of the commodity markets division at IPSARD, said Vietnam’s agricultural growth relies heavily on export markets and described the farm export picture as bleak.

Outbound sales of farm produce in the first eight months of this year totaled US$9.2 billion, down 7.7% year-on-year.

Kien said the competitiveness of Vietnamese farm products has declined significantly compared to that of regional rivals. For instance, export prices of Vietnam’s 25% and 5% broken rice were lower than those of Thailand and India before but they are now almost equal due to the impact of monetary policies in Vietnam and other regional countries, especially after China’s strong devaluation of the yuan.

Vietnamese rice accounted for 66% of China’s total import of the commodity in 2013 but the proportion dropped to 47% in the first four months of this year as the northern neighbor increased imports from Thailand and Cambodia.

The price of Arabica coffee in Brazil and Colombia has fallen sharply due to the strong depreciation of their currencies, piling pressure on Vietnam’s Robusta coffee exports. Kien said importers prefer Arabica coffee and have increased purchases of this commodity when the gap between its price and that of Robusta coffee has been narrowed.

Rubber prices are in a downtrend due to weak demand of China and oversupply on the world market. Moreover, more producers have switched to using synthetic rubber rather than natural one because of lower prices as a result of the world oil price plunge.

Seafood is in the same boat as the export price of Vietnamese shrimp is higher than that offered by exporters in India, Thailand and Indonesia.

Therefore, Kien said price competition is one of the main problems with Vietnam’s agro-aqua-forestry exports and global demand for these products is unpredictable because the chance of a strong recovery of the world’s economy is low.

According to projections of the world’s major analysis organizations, prices of farm products like rice, coffee and shrimp could fall by 7-13% until 2020 compared to 2015. However, the price of rubber products is forecast to rise slightly.

IPSARD suggested that Vietnam should step up shipments of seafood, coffee, cashew nut, pepper and furniture to the United States to cash in on a firmer dollar against the local currency. At the same time, domestic enterprises need to find ways to boost sales of fruits, vegetables, rubber, cashew, wooden products and shrimp to China via official channels.

As for rice, the institute called for domestic enterprises to seek to secure export contracts with Indonesia, the Philippines and Malaysia as these countries are forecast to import more rice this year.

In the long term, Kien proposed the Government support local enterprises to diversify export markets and ship rice to Ivory Coast, Ghana, the U.S., Malaysia and the United Arab Emirates; coffee to South Korea, Ireland, Russia, Australia and Thailand; and rubber to Ireland and Turkey.