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Vietnam's Middle Class Lifts Food, Feed Demand

Vietnam's Middle Class Lifts Food, Feed Demand

25 April 2012

ANALYSIS - The growth in China has garnered a lot of attention lately, but China's neighbor - Vietnam - is another emerging market that is building our global middle class and increasing grain demand, writes Sarah Mikesell, TheCropSite senior editor.

By 2020, 600 million households, primarily in the developing world, are going to join in the global middle class, said Thomas Dorr, US Grains Council president and CEO, at the Commodity Classic in early March. These new markets, in terms of sheer size and dollar value, will exceed existing middle class markets in the US, Europe and Japan within the next decade.

Vietnam Emerges in a New Way

Vietnam is one of the emerging new markets. With a population of nearly 90 million, it's larger than any European country. Dorr said it's an excellent example of a country that is 20 years behind China on the development curve at this point, but it won't take the same 20 years for them to catch up, because Vietnam is learning from the China example.

Thomas Dorr, US Grains Council president and CEO, speaks to US farmers at the Commodity Classic in early March.

"The ability to communicate and inform people is speeding up Vietnam's development process," he said. "It is going to be replicated throughout the world as these two emerging economies grow. It's also clearly defining significant new growth opportunities for US agriculture producers, as well as agribusinesses."

Vietnam and other emerging markets will be unable, due to land, water and other resource constraints, to build out their food systems on a US-style commodity production system, he said.

While developing a strong middle class and a corresponding food demand, Vietnam is going to meet that demand by creating new systems for production and marketing that are likely to be very different from the legacy systems that the US and developed countries have now.

Meat Consumption Drives Demand

Grain demand is being driven by meat consumption increases in Vietnam. For the last five years, their domestic production has fallen short of domestic consumption and domestic feed consumption. Imports for US corn in 2011 dropped from 1.7 million tons down to 1 million ton. Dorr said the drop was due to Vietnam replacing US imports with feed imports from Argentina.

Looking at corn-for-feed demand projections through 2015, Vietnam is growing at about a 30 per cent rate, and the corn growth from local production is growing at about a 30 per cent rate, Dorr said. However, local production is starting from a much smaller base, which means there will be a continuous increase in demand for corn.

As for total US ag exports to Vietnam, in 2006 it equaled $215 million and in five years that has grown to $1.3 billion, suggesting that the investments of time, effort and capacity and working on the political policy side of the programs was quite effective, Dorr said.

Dried Distiller Grains (DDGs). Photo courtesy of the US Grains Council.

Feed Opportunity

Overall, Vietnam is the fastest growth market for US feedstuffs, with the majority being soybean meal. Today, Vietnam is the eighth largest market for US feedstuffs. They are the fastest growing market in the ASEAN community - that excludes Japan, Korea and Taiwan.

Vietnam is the number one market for US Dried Distiller Grains (DDGs) in Southeast Asia, and it's the fourth largest in the world behind China, Mexico and Canada. Last year, Vietnam imported close to a half million tons of DDGs.

Dorr said the USGC is seeing a mix of intensive, large-scale commercial livestock operations moving into countries like China and Vietnam. These operations provide a huge opportunity for feed products.

Currently, a dairy operation is being built in Vietnam that will result in 130,000 cows under one management structure. There are 10,000 cows currently in production, and the project is being implemented by a team of 20 Israeli animal scientists and technologists.

"They will build a very sophisticated dairy processing facility, and I can assure you that this particular project is designed to provide more than just dairy products for Vietnam," he said.

Building a Standardized System

The US Grains Council (USGC) became active in Vietnam immediately after the US and Vietnam normalized relations. Dorr said the USGC immediately began to develop policy recommendations for Vietnam's Ministry of Agriculture, creating their first five-year development plan.

"Building on those opportunities and policy changes and the ability of the USGC and its partners to develop credibility, we were able to access the government," he said. "We have been effective collaboratively to build up capacity in Vietnam's meat, milk and poultry industries to ensure consumers can have a higher level of confidence and a larger level of variety in their domestic food systems."

The USGC, the United Soybean Export Council and the US Meat Export Federation have developed a relationship with the Ministry of Agriculture in Vietnam. This relationship resulted in the teams assisting with writing the Vietnam Animal Health Law, their plant laws and other laws relative to Vietnam's food systems, as well as developing the regulatory implementation needed to make the laws effective.

"The team of US collaborators developed an international standardized system that was not inherently designed to detract from the development of trade," he said. "As a result, we now have a platform which all of our industries collectively can trade in a WTO-compliant, regulatory-compliant manner throughout Vietnam, and it's been built on a well-defined scientific base. And that is going to facilitate growth in this economy."

Headline photo: Hanoi has an estimated population of 6.5 million making it the second largest city in Vietnam. Photo courtesy of skphotography /

Sarah Mikesell, Senior Editor

Sarah Mikesell, Senior Editor

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