Q1 2015 www.businessmonitor.com VIETNAM AGRIBUSINESS REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1759-1740 Published by:Business Monitor International Vietnam Agribusiness Report Q1 2015 INCLUDES 5-YEAR FORECASTS TO 2018 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: November 2014 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 © 2014 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 Q1 2015 CONTENTS BMI Industry View SWOT 10 Agribusiness 10 Industry Forecast 12 Grains Outlook 12 Table: Corn Production & Consumption (Vietnam 2013-2018) 13 Table: Corn Production & Consumption (Vietnam 2008-2013) 17 Rice Outlook 18 Table: Rice Production & Consumption (Vietnam 2012-2018) 19 Table: Rice Production & Consumption (Vietnam 2008-2013) 22 Dairy Outlook 24 Table: Butter Production & Consumption (Vietnam 2013-2018) 25 Table: Cheese Production & Consumption (Vietnam 2013-2018) 25 Table: Milk Production & Consumption (Vietnam 2013-2018) 25 Table: Whole Milk Powder Production & Consumption (Vietnam 2013-2018) 26 Table: Butter Production & Consumption (Vietnam 2008-2013) 31 Table: Cheese Production & Consumption (Vietnam 2008-2013) 31 Table: Milk Production & Consumption (Vietnam 2008-2013) 31 Table: Whole Milk Powder Production & Consumption (Vietnam 2008-2013) 31 Livestock Outlook 33 Table: Beef Production & Consumption (Vietnam 2013-2018) 34 Table: Pork Production & Consumption (Vietnam 2013-2018) 34 Table: Poultry Production & Consumption (Vietnam 2013-2018) 34 Table: Beef Production & Consumption (Vietnam 2008-2013) 39 Table: Pork Production & Consumption (Vietnam 2008-2013) 39 Table: Poultry Production & Consumption (Vietnam 2008-2013) 40 Coffee Outlook 41 Table: Coffee Production & Consumption (Vietnam 2013-2018) 42 Table: Coffee Production & Consumption (Vietnam 2008-2013) 49 Featured Analysis 50 Vietnam's Uncompetitive Sugar Sector At Risk From ASEAN Integration 50 Table: VIETNAM SUGAR PRODUCTION & CONSUMPTION, 2013-2018 55 Agribusiness: Winners And Losers From AEC 56 Table: Selected Risk Ratings 57 Table: ASEAN Economic Community - Winners & Losers In Selected Agribusiness Sectors 58 Commodities Price Analysis 64 Monthly Softs Strategy 64 Table: Select Commodities - Performance & BMI Forecasts 73 Monthly Grains Strategy 75 Table: Selected Commodities - Performance & BMI Forecasts 83 © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 Upstream Analysis 84 Asia GM Outlook 84 Table: Select Countries - GM Crops Use 90 Asia Machinery Outlook 91 Table: China Grain Public Production Support Programme (CNYbn) 91 Table: Selected Countries - Average Size Of Farms, Hectares 95 Asia Fertiliser Outlook 99 Table: India - Fertiliser Subsidies, INR/kg 103 Downstream Analysis 105 Mass Grocery Retail 105 Table: Mass Grocery Retail Sales By Format - Historical Data & Forecasts (Vietnam 2013-2018) 109 Table: Grocery Retail Sales By Format (%) 109 Drink 110 Alcoholic Drinks 110 Table: Alcoholic Drinks Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Vietnam 2013-2018) 112 Hot Drinks 113 Table: Hot Drink Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Vietnam 2013-2018) 114 Soft Drinks 115 Table: Soft Drinks Sales, Production & Trade (Vietnam 2013-2018) 116 Food 118 Food Consumption 118 Table: Food Consumption Indicators - Historical Data & Forecasts (Vietnam 2011-2018) 119 Canned Food 120 Table: Food Consumption Indicators - Historical Data & Forecasts (Vietnam 2011-2018) 120 Confectionery 121 Table: Confectionery Value/Volume Sales, Production & Trade - Historical Data & Forecasts (Vietnam 2011-2018) 125 Pasta 126 Table: Pasta Volume Sales, Production & Trade - Historical Data & Forecasts (Vietnam 2013-2018) 126 Dairy 127 Table: Dairy Volume Sales, Production & Trade - Historical Data & Forecasts (Vietnam 2013-2018) 127 Regional Overview 128 Table: China - Ongoing And Future Agricultural Policy Reforms 129 Table: ASEAN Economic Community - Winners And Losers In Selected Agribusiness Sectors 130 Competitive Landscape 133 Table: Major Agribusiness Companies (USDmn) 133 Demographic Forecast 134 Table: Population Headline Indicators (Vietnam 1990-2025) 135 Table: Key Population Ratios (Vietnam 1990-2025) 135 Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 136 Table: Population By Age Group (Vietnam 1990-2025) 136 Table: Population By Age Group % (Vietnam 1990-2025) 137 Methodology 139 Industry Forecast Methodology 139 © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 Sector-Specific Methodology 140 © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 BMI Industry View BMI View: Recent developments in the country's economic and business environment outlooks add further weight to our positive view on Vietnam's agribusiness sector The industry holds strong growth opportunities in terms of production, exports and retail sales, particularly with regard to the rice, coffee, livestock and dairy sectors Moreover, the upcoming economic and financial integration in South East Asia will benefit Vietnam's exports of rice, dairy and coffee However, Vietnam is facing growing competition in its key markets, and the fulfillment of its promising potential will only be achieved if the country steps up its competitiveness and improves both product quality and supply chain efficiency Vietnam will have to significantly ramp up investments on crop productivity in order to not be left behind, and if it does, it will be able to produce more value-added crops and maintain its status as an export spearhead Agribusiness Market Value BMI Market Value By Commodity (2005-2018) 55 50 45 40 35 30 25 20 15 10 2005 2007 2006 2009 2008 2011 2010 Grains market value, % of total Livestock market value, % of total 2013e 2012 2015f 2014f 2017f 2016f 2018f Sugar market value, % of total e/f = BMI estimate/forecast Source: FAO, BMI © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 Key Forecasts ■ Rice consumption growth to 2018: 5.1% to 22.1mn 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 ■ Corn production growth to 2017/18: 32.9% to 6.4mn 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 2017/18: 60.3% to 721,400 tonnes Dramatic increases in cattle numbers and increased public and private sector investment - part of an effort to reduce the country's growing import dependency - will be the main boosts to growth Commercialisation will also play a key role as larger, more efficient farms come to play a greater role in milk production ■ 2015 BMI Universe Agribusiness Market Value: USD37.3bn (down 0.4% year-on-year (y-o-y) from USD37.4bn estimated in 2014; growth expected to average 2.2% annually between 2015 and 2018) ■ 2015 real GDP growth: 6.4% (up from 5.7% expected in 2014; predicted to average 6.5% over 2015-2018) ■ 2015 consumer price index: 5.3% year-on-year (y-o-y) (down from 5.8% expected in 2014; predicted to average 5.0% over 2015-2018) ■ 2015 central bank policy rate: 6.00% (down from 6.50% expected in 2014; predicted to average 6.00% over 2015-2018) Key Revisions To Forecasts ■ Milk production to 2017/18 revised up, as the continued pace of private investment into the sector will boost production capacity We now see liquid milk output growing by a robust 9.9% annually between 2013/14 and 2017/18, reaching 721,000 tonnes (compared with a previous estimate for production to be at 485,000 tonnes by 2017/18) Key Developments After decades of active support to the rice sector, Vietnam is shifting its attention to corn and soybean production in order to address its soaring animal feed deficit and to avoid rice oversupply This plan is likely to take years before farmers switch away from rice and manage to improve yields for alternative grains and oilseeds The eventual increase in domestic feed output is likely to favour the development of the livestock sector This policy will slightly reduce area under rice cultivation in the coming years As a result, we expect rice production growth will come from yield improvements © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 Due to decline in exportable supply and fiercer competition from traditional competitors, Vietnam's rice exports will broadly stagnate in 2014/15 Thailand ended its rice scheme in 2014, which resulted in a drop of Thai rice export prices The return of Thailand on international markets will strongly limit Vietnam's rice exports in 2015 In the longer term, Vietnam will continue to gain competitiveness and eat into Thailand's market share The integration of the Association of Southeast Asian Nations (ASEAN) countries also bodes well for Vietnam's rice exports Vietnam's beef production slipped in 2012/13, and coupled with surging demand from overall economic growth and changes in Vietnam's foodservice industry, it is providing a strong impetus for beef importers and distributors Imported beef - mainly from eligible supplying countries Australia, India and the United States - has been on a strong uptick since 2013 Imports of live cattle, for the meat and dairy industries, have been particularly strong, and Vietnam will surpass China to become the second-largest importer of Australian cattle in 2014, behind only Indonesia Vietnam is seeing a wave of private investment in its upstream (farming) and downstream (product manufacturing and distribution) dairy sector These investments bode well for the future of Vietnam's milk production in the coming years Vinamilk, Vietnam's largest dairy company, is one of the most active in terms of investment Vietnamese companies operating in other sectors than diary are also turning their eyes to the milk industry, including Vinacafe Bien Hoa Company and property developer Hoang Anh Gia Lai Group However, the wave of private investment in Vietnam's dairy sector also has its downsides, the main one being the rise in competition Growth in domestic dairy prices has slowed down and margins in the sector have been on a downtrend since 2013 © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 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 ■ Vietnam enjoys relatively good international price competitiveness for rice and coffee ■ 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 ■ A move towards higher-quality products, especially in the coffee and dairy sectors, will help to improve Vietnam's product competitiveness © Business Monitor International Page 10 Vietnam Agribusiness Report Q1 2015 Regional Overview BMI View: The agricultural products trade in the Asia Pacific region is set to soar in the coming years as demand grows rapidly, on the back of population and income growth and changing consumption habits More specifically, trade among Asia Pacific countries is likely to intensify, especially in the livestock, sugar, cocoa and dairy markets The region boasts large producing countries with established companies that can provide countries in deficit with the needed products Investment within the region, as well as in Africa, will also increase in the coming years Overall, food security will remain satisfactory and will improve in India if the newly elected government puts in place the announced agricultural reforms Agricultural Reform In Asia: Key Changes Ahead China and India are on the right path to implementing key changes to their agricultural policies that will boost production prospects and food security in the coming years China will accelerate its land, input and liberalisation reforms, which will enable the country to maintain an elevated level of food self-sufficiency With a newly elected reformist government, India looks set to put in motion a long overdue improvement of its supply chain and agricultural infrastructure This would boost productivity and domestic supply, helping India to become a large and stable exporter of key commodities It will also eventually help undernourishment regress in the country © Business Monitor International Page 128 Vietnam Agribusiness Report Q1 2015 Table: China - Ongoing And Future Agricultural Policy Reforms End of stockpiling policy Ongoing Trend Further reform For cotton and soybean, the government has switched to a new system to support production, involving direct subsidies for farmers Corn, sugar will likely follow High 2015-2016 We believe that China will have little choice but to adopt GM plantings for various crops, specifically rice and corn China has lately been clearing new varieties of GM corn and soybean from Latin America and the US, suggesting a trend of growing acceptance towards bioengineered High in the seeds long term 2017-2018 Livestock, dairy: In order to boost production in the medium term, the government is implementing tighter safety and quality regulations and is ramping up supervision for domestic production, which will ultimately lead to the creation of large and more productive companies Stricter regulations to be implemented in terms of quality and safety More controls High 2014-2018 While sticking to collective land ownership, the Chinese government is easing strict regulations on land use Farmers are now allowed to transfer or mortgage their contracted land, or turn the rights into shares in large-scale farming entities China will continue to relax land use and transfer policy, while making sure arable land is not lost to residential or industrial developments High 2014-2018 Creation of an insurance scheme to help boost farmers' income Development of domestic commodities futures market (futures contracts) Medium-High 2014-2018 Inputs - relaxing the GM crop policy (allowing GM crops for China already grows GM crops, grains and oilseeds) but GM seeds are limited nonconsumed and peripheral crops (cotton and some fruits and vegetables) Fostering consolidation and industrialisation Land reform Development of financial services for agriculture Financing reform & pricing reform, towards more market driven prices Proba-bility Time-frame Source: BMI Agribusiness: Winners And Losers Of ASEAN Integration The objectives of the ASEAN Economic Community (AEC) regarding the agribusiness sector are unlikely to be fully implemented in the short-term and we believe both tariff and non-tariff barriers to trade in the Association of Southeast Asian Nations (ASEAN) region will remain over the next three to five years Should the AEC be fully implemented, we believe Thailand (livestock and sugar exports), Malaysia (sugar © Business Monitor International Page 129 Vietnam Agribusiness Report Q1 2015 and cocoa processing sectors) and Vietnam (rice exports) will benefit the most Indonesia will remain relatively insulated from the increased competition in the agricultural sector for now, as the country maintains elevated agricultural subsidies and is reluctant to change its protective tariff system Table: ASEAN Economic Community - Winners And Losers In Selected Agribusiness Sectors Winners Winners Food processing benefiting from Growth in exports & cheaper imports market share of raw products Rice Vietnam, Cambodia, Myanmar Sugar Thailand Livestock & feed Thailand, Malaysia Vegetable oils Malaysia, Indonesia (palm oil) Cocoa Winners Losers Attracting foreign direct investment from ASEAN Countries Losing out: no Cheaper imports growth in exports posing risk to despite large domestic production supply Malaysia, Philippines, Indonesia Malaysia Losers Thailand Cambodia, Myanmar, Laos Philippines, Vietnam Vietnam, Cambodia Philippines, Vietnam Philippines (coconut oil), Thailand (palm oil) Malaysia Vietnam Dairy Malaysia, Vietnam, Thailand Cambodia Coffee Vietnam Laos Thailand Source: BMI Asia Cocoa Sector Boom At Risk Of Bean Scarcity The ongoing boom in investment in the cocoa processing sector in Asia should intensify in the coming years, as trading firms and chocolate makers try to tap Asia's robust demand for chocolate In spite of strong demand fundamentals for the cocoa and chocolate sectors in Asia, headwinds are growing in the processing industry First, the ongoing wave of investment in cocoa processing plants has led to overcapacity and depressed margins in Malaysia and Indonesia Moreover, dwindling cocoa bean supply from Indonesia will make Asian countries dependent on West Africa, where production is volatile © Business Monitor International Page 130 Vietnam Agribusiness Report Q1 2015 Indonesia Overtaking Malaysia Selected Countries - Malaysia & Indonesia Cocoa Grindings & Grinding Capacity ('000 tonnes) Note: Grinding capacities are local associations' estimates Source: ICCO, Indonesia Cocoa Association, Malaysia Cocoa Board, BMI Lasting Profitability Woes For Palm Oil Downstream Sector The operating environment for palm oil companies in Indonesia and Malaysia will remain challenging over the rest of 2014 and in 2015, as the fundamentals for the industry remain unfavourable Profits will be limited by slowing sales growth and rising costs Upstream companies will fare better, as stronger palm oil prices in 2014 and 2015 will boost their margins Meanwhile, overcapacity in the refining segment will continue to weaken profitability in the downstream sector Interestingly, most of the pure upstream companies not plan to diversify into the downstream sector in the coming years, probably as a result of the uninspiring profitability in the sector for the time being Asia's Dairy Supply Deficit: Attractive Opportunities Asia will remain a large importer of dairy products in the coming years, as production expansion does not keep up with robust consumption growth We see attractive opportunities to fill the continent's growing dairy products deficit As domestic and foreign interest in China's dairy industry has swollen in recent years © Business Monitor International Page 131 Vietnam Agribusiness Report Q1 2015 and led to large investments in capacity and efforts to tap the import market, all eyes are now turning to the next driver of dairy consumption growth: South East Asia This region is home to some of the most interesting trends, as consumption recently started to bloom, while production growth has limited room to grow Import Growth Across The Board Selected Countries - Dairy Imports, 2009 & 2013 ('000 tonnes) Source: International Trade Centre, BMI Slow And Complicated Implementation Of New Biofuel Mandates With a ballooning current account deficit that is partly due to oil imports, Indonesia is trying to accelerate its palm oil-based biodiesel programme and implement a B10 blend into gasoline Malaysia is eager to follow suit to support its palm oil sector earnings We believe these countries' efforts to boost domestic biofuel demand will have only mild positive effects for their local palm oil industries, as the enactment of ambitious mandates will prove difficult We think that Indonesia will be more aggressive in implementing the mandates while palm oil prices are relatively low, which will provide floor price support for palm oil prices in the coming years © Business Monitor International Page 132 Vietnam Agribusiness Report Q1 2015 Competitive Landscape Table: Major Agribusiness Companies (USDmn) Company Sub-Sector Revenue Fiscal Y/E Market Capitalisation Employees Viet Nam Dairy Products JSC (Vinamilk) Dairy 1472.8 12/2013 4634.3 6167 Kinh Do Corp Food Manufacturing (confectionery & snacks) 217.0 12/2013 621.0 7020 Vinacafe Bien Hoa JSC Coffee & Food Manufacturing 109.4 12/2013 223.9 573 Hung Vuong Seafood 525.5 12/2013 187.8 806 Societe De Bourbon Tay Ninh Sugar & Real Estate 105.6 12/2013 82.0 778 Tuong An Vegetable Oil JSC Edible Oils & Fats 204.2 12/2013 39.9 770 Lam Son Sugar Sugar & Alcohol 87.9 12/2013 22.5 771 Minh Phu Seafood Seafood 528.8 12/2013 294.8 14405 Southern Seed Crop Seeds 28.7 12/2013 37.0 431 Viet Thang Feed JSC Animal Feed 190.3 12/2013 57.5 613 Source: BMI, Bloomberg © Business Monitor International Page 133 Vietnam Agribusiness Report Q1 2015 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 essential to understanding issues ranging from future population trends to productivity growth and government spending requirements The accompanying charts detail the population pyramid for 2015, the change in the structure of the population between 2015 and 2050 and the total population between 1990 and 2050 The tables show indicators from all of these charts, in addition to key metrics such as population ratios, the urban/rural split and life expectancy Population (1990-2050) 150 100 50 2050f 2045f 2040f 2035f 2030f 2025f 2020f 2015f 2010 2005 2000 1990 Vietnam - Population, mn f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 134 Vietnam Agribusiness Report Q1 2015 Vietnam Population Pyramid 2015 (LHS) & 2015 Versus 2050 (RHS) Source: World Bank, UN, BMI Table: Population Headline Indicators (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f 68,909 80,887 84,947 89,047 93,386 97,057 99,811 na 1.1 0.9 1.0 0.9 0.7 0.5 Population, total, male, '000 33,892 39,827 41,830 43,970 46,158 47,980 49,302 Population, total, female, '000 35,017 41,060 43,117 45,077 47,228 49,076 50,508 Population ratio, male/female 0.97 0.97 0.97 0.98 0.98 0.98 0.98 Population, total, '000 Population, % y-o-y na = not available; f = BMI forecast Source: World Bank, UN, BMI Table: Key Population Ratios (Vietnam 1990-2025) Active population, total, '000 Active population, % of total population Dependent population, total, '000 Dependent ratio, % of total working age © Business Monitor International 1990 2000 2005 2010 2015f 2020f 2025f 39,197 50,153 56,330 62,305 66,093 68,401 70,001 56.9 62.0 66.3 70.0 70.8 70.5 70.1 29,712 30,733 28,617 26,741 27,292 28,655 29,810 75.8 61.3 50.8 42.9 41.3 41.9 42.6 Page 135 Vietnam Agribusiness Report Q1 2015 Key Population Ratios (Vietnam 1990-2025) - Continued Youth population, total, '000 1990 2000 2005 2010 2015f 2020f 2025f 25,778 25,543 23,038 20,918 20,950 20,690 19,395 65.8 50.9 40.9 33.6 31.7 30.2 27.7 3,934 5,190 5,578 5,823 6,342 7,964 10,414 10.0 10.3 9.9 9.3 9.6 11.6 14.9 Youth population, % of total working age Pensionable population, '000 Pensionable population, % of total working age f = BMI forecast Source: World Bank, UN, BMI Table: Urban/Rural Population & Life Expectancy (Vietnam 1990-2025) 1990 Urban population, '000 2020f 2025f 13,957.7 19,715.6 23,174.6 27,064.2 31,383.5 35,771.3 40,027.3 Urban population, % of total Rural population, '000 2000 20.3 24.4 2005 27.3 2010 30.4 2015f 33.6 36.9 40.1 54,952.2 61,172.3 61,773.2 61,983.2 62,003.1 61,285.7 59,783.9 Rural population, % of total 79.7 75.6 72.7 69.6 66.4 63.1 59.9 Life expectancy at birth, male, years 66.1 69.0 69.9 70.7 71.7 72.7 73.7 Life expectancy at birth, female, years 75.1 78.5 79.6 80.2 80.7 81.2 81.7 Life expectancy at birth, average, years 70.6 73.8 74.8 75.5 76.2 77.0 77.8 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, total, '000 9,314 7,127 6,897 7,228 7,012 6,574 5,922 Population, 5-9 yrs, total, '000 8,606 9,253 7,023 6,790 7,180 6,968 6,535 Population, 10-14 yrs, total, '000 7,856 9,162 9,117 6,898 6,757 7,147 6,936 Population, 15-19 yrs, total, '000 7,359 8,492 9,050 9,011 6,865 6,725 7,116 Population, 20-24 yrs, total, '000 6,644 7,672 8,332 8,873 8,936 6,802 6,664 Population, 25-29 yrs, total, '000 6,005 7,065 7,470 8,111 8,772 8,837 6,717 Population, 30-34 yrs, total, '000 5,138 6,351 6,909 7,285 8,021 8,680 8,747 Population, 35-39 yrs, total, '000 3,888 5,803 6,241 6,763 7,207 7,939 8,596 Population, 40-44 yrs, total, '000 2,462 4,994 5,719 6,147 6,684 7,127 7,856 Population, 45-49 yrs, total, '000 2,016 3,753 4,935 5,647 6,054 6,588 7,031 © Business Monitor International Page 136 Vietnam Agribusiness Report Q1 2015 Population By Age Group (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 50-54 yrs, total, '000 1,968 2,345 3,699 4,855 5,521 5,926 6,457 Population, 55-59 yrs, total, '000 2,045 1,885 2,237 3,541 4,677 5,330 5,733 Population, 60-64 yrs, total, '000 1,668 1,790 1,734 2,068 3,352 4,443 5,079 Population, 65-69 yrs, total, '000 1,411 1,770 1,609 1,562 1,906 3,104 4,134 Population, 70-74 yrs, total, '000 1,027 1,322 1,530 1,399 1,379 1,695 2,776 Population, 75-79 yrs, total, '000 752 984 1,080 1,263 1,166 1,159 1,437 Population, 80-84 yrs, total, '000 429 596 731 814 964 900 903 Population, 85-89 yrs, total, '000 223 336 385 482 545 653 617 Population, 90-94 yrs, total, '000 71 132 177 209 267 306 372 Population, 95-99 yrs, total, '000 15 40 52 74 89 115 133 Population, 100+ yrs, total, '000 11 16 23 30 38 f = BMI forecast Source: World Bank, UN, BMI Table: Population By Age Group % (Vietnam 1990-2025) 1990 2000 2005 2010 2015f 2020f 2025f Population, 0-4 yrs, % total 13.52 8.81 8.12 8.12 7.51 6.77 5.93 Population, 5-9 yrs, % total 12.49 11.44 8.27 7.63 7.69 7.18 6.55 Population, 10-14 yrs, % total 11.40 11.33 10.73 7.75 7.24 7.36 6.95 Population, 15-19 yrs, % total 10.68 10.50 10.65 10.12 7.35 6.93 7.13 Population, 20-24 yrs, % total 9.64 9.49 9.81 9.97 9.57 7.01 6.68 Population, 25-29 yrs, % total 8.72 8.73 8.79 9.11 9.39 9.11 6.73 Population, 30-34 yrs, % total 7.46 7.85 8.13 8.18 8.59 8.94 8.76 Population, 35-39 yrs, % total 5.64 7.17 7.35 7.60 7.72 8.18 8.61 Population, 40-44 yrs, % total 3.57 6.17 6.73 6.90 7.16 7.34 7.87 Population, 45-49 yrs, % total 2.93 4.64 5.81 6.34 6.48 6.79 7.04 Population, 50-54 yrs, % total 2.86 2.90 4.36 5.45 5.91 6.11 6.47 Population, 55-59 yrs, % total 2.97 2.33 2.63 3.98 5.01 5.49 5.74 Population, 60-64 yrs, % total 2.42 2.21 2.04 2.32 3.59 4.58 5.09 Population, 65-69 yrs, % total 2.05 2.19 1.90 1.75 2.04 3.20 4.14 Population, 70-74 yrs, % total 1.49 1.63 1.80 1.57 1.48 1.75 2.78 Population, 75-79 yrs, % total 1.09 1.22 1.27 1.42 1.25 1.20 1.44 Population, 80-84 yrs, % total 0.62 0.74 0.86 0.92 1.03 0.93 0.91 © Business Monitor International Page 137 Vietnam Agribusiness Report Q1 2015 Population By Age Group % (Vietnam 1990-2025) - Continued 1990 2000 2005 2010 2015f 2020f 2025f Population, 85-89 yrs, % total 0.32 0.42 0.45 0.54 0.58 0.67 0.62 Population, 90-94 yrs, % total 0.10 0.16 0.21 0.24 0.29 0.32 0.37 Population, 95-99 yrs, % total 0.02 0.05 0.06 0.08 0.10 0.12 0.13 Population, 100+ yrs, % total 0.00 0.01 0.01 0.02 0.03 0.03 0.04 f = BMI forecast Source: World Bank, UN, BMI © Business Monitor International Page 138 Vietnam Agribusiness Report Q1 2015 Methodology Industry Forecast 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 Common to our analysis of every industry is the use of vector autoregressions Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis Such single-variable analysis is called univariate modelling We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA) In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting BMI mainly uses ordinary least squares estimators In order to avoid relying on subjective views and encourage the use of objective views, we use 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, if poor weather conditions impede agricultural output, dummy variables are used to determine the level of impact Effective forecasting depends on appropriately selected regression models We select 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 multicollinearity; © Business Monitor International Page 139 Vietnam Agribusiness Report Q1 2015 Human intervention plays a necessary and desirable role in all or our industry forecasting Experience, expertise and knowledge of industry data and trends ensure analysts spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not Sector-Specific Methodology Within the Agribusiness industry, issues that might result in human intervention could include but are 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 that the explanatory variables for both are quite similar, but the underlying economic theory is different 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 © Business Monitor International Page 140 Vietnam Agribusiness Report Q1 2015 ■ ■ ■ 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 (eg 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, ie agricultural machinery Higher real lending rates discourage investment, which in turn reduce production ■ BMI assumes that 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 141 Reproduced with permission of the copyright owner Further reproduction prohibited without permission [...]... experienced It is estimated that 50-100 of the 243 Vietnamese animal feed producers had to close in 2012 and 2013 Mainly Emerging Countries Vietnam - Corn & Soybean Imports By Origin, 2012/13 (% of total imported volume) Source: BMI, ITC, UNCTAD © Business Monitor International Page 15 Vietnam Agribusiness Report Q1 2015 Consumption Driven By Feed Vietnam - Corn (LHC) & Wheat (RHC) Consumption ('000... will come from yield improvement Vietnamese yields currently stand well above neighbouring countries, but still have room to reach Australian rice yields of 9.2 tonnes/ha, which are the world's highest © Business Monitor International Page 20 Vietnam Agribusiness Report Q1 2015 Vietnam And Thailand On Par Select Countries - Rice Export Prices (USD/tonne) Note: Thailand, Vietnam = 5% broken rice prices;... (Vietnam 2013-2018) e/f = BMI estimate/forecast Source: FAPRI, BMI Table: Milk Production & Consumption (Vietnam 2013-2018) Milk production, '000 tonnes Milk production, % y-o-y Liquid milk consumption, '000 tonnes e/f = BMI estimate/forecast Source: National sources, BMI © Business Monitor International Page 25 Vietnam Agribusiness Report Q1 2015 Table: Whole Milk Powder Production & Consumption (Vietnam. .. only publicly traded dairy producer in Vietnam) The company's operating margins have been broadly stagnating since FY09 (at elevated levels) and declined over Q11 4-Q314 © Business Monitor International Page 27 Vietnam Agribusiness Report Q1 2015 In light of the increase in competition and growing limits on domestic prices for dairy products, traditional players in Vietnam' s dairy sector, including Vinamilk,... will remain one of the world's top rice exporters © Business Monitor International Page 18 Vietnam Agribusiness Report Q1 2015 Table: Rice Production & Consumption (Vietnam 2012-2018) Rice production, '000 tonnes Rice production, % y-o-y Rice consumption, '000 tonnes Rice consumption, % y-o-y 2012 2013 2014f 2015f 2016f 2017f 2018f 27,150.0 27,500.0 27,780.0 27,752.2 28,501.5 29,214.1 29,915.2 3.0... in Vietnam, where rice production has long been the focus Incentivised by elevated public subsidies for rice production, farmers have planted the grain across the country, even in areas with unfavourable soil conditions As a result, rice production has grown by a healthy 2.3% annually since 1999/00 © Business Monitor International Page 13 Vietnam Agribusiness Report Q1 2015 Booming Feed Imports Vietnam. .. area harvested The plan aims to expand this to 1mn ha in 2015, or approximately 10% of total area harvested for rice We believe that this plan poses salient upside risks to our forecast for rice production growth © Business Monitor International Page 23 Vietnam Agribusiness Report Q1 2015 Dairy Outlook BMI Supply View: We hold a positive outlook on Vietnam' s dairy sector and expect it to maintain its strong... region unless active protection policies are implemented This would then weigh on production growth in two of Vietnam' s main agriculturalproducing regions © Business Monitor International Page 11 Vietnam Agribusiness Report Q1 2015 Industry Forecast Grains Outlook BMI Supply View: Corn is one of Vietnam' s most important food crops, along with rice Corn output has grown by a hefty 9.5% annually since 2000... conditions However, corn production in the country did dip by 3.7% y-o-y in 2008/09 on the back of tighter credit regulations throughout Vietnam during that time © Business Monitor International Page 17 Vietnam Agribusiness Report Q1 2015 Rice Outlook BMI Supply View: Vietnam is a key grower and world provider of rice Production is growing fast, boosted by higher yielding rice varieties and better culture... times that of Dutch Mill, Thailand's leading milk producer In Cambodia, where Thai milk used to dominate the market, cheaper Vietnamese dairy products have been gaining market share © Business Monitor International Page 29 Vietnam Agribusiness Report Q1 2015 Mostly New Zealand Vietnam - Milk & Milk Product Imports By Country, 2010 (% of total) Source: BMI, USDA We believe that Thai dairy farmers' fears ... Monitor International Page Vietnam Agribusiness Report Q1 2015 Sector-Specific Methodology 140 © Business Monitor International Page Vietnam Agribusiness Report Q1 2015 BMI Industry View... predicted to average 6.5% over 201 5-2 018) ■ 2015 consumer price index: 5.3% year-on-year (y-o-y) (down from 5.8% expected in 2014; predicted to average 5.0% over 201 5-2 018) ■ 2015 central bank policy... Monitor International Page 16 Vietnam Agribusiness Report Q1 2015 Table: Corn Production & Consumption (Vietnam 200 8-2 013) Corn production, '000 tonnes Corn production, % y-o-y Corn consumption, '000