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Vietnam Agribusiness Report Q2 2009
Business Monitor International, April 2009, Pages: 48
The United Kingdom Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on United Kingdom's agribusiness service.
In the Vietnam Agribusiness Report for Q2 2009, we introduce the new Business Environment chapter. Here we give an overview of agriculture in Vietnam and its significance to the overall economy and labour market. We discuss the industry's key products including the important aquaculture sector. We also cover the government support available to agriculture.
Having recently downgraded the forecast for 2009 GDP growth to 2.9%, the Vietnamese economy is in trouble. In 2010 we forecast GDP growth to pick back up to 5.0%, still low compared to the decade's previous years. As demand for Vietnam's manufacturing exports slows and jobs in urban areas become scarce, the flow of people from the fields into the towns and cities is likely to be reversed as unemployed migrant workers head back to their villages. The contribution of agriculture to overall GDP, which has been falling for the past couple of decades, could also increase as other sectors struggle.
The agricultural sector will not be immune to the global economic turmoil, however. Falling prices for most of Vietnam's agricultural products will hit farmer's profits. Exports are also likely to suffer as demand for high-value products such as coffee and farmed shrimp falters. The falling prices for commodities will also lead to lower export earnings. Having said that, prices for Vietnam's major export commodities such as rice and coffee are still reasonably high on a historical basis despite the rapid slump since the first half of 2008. Farmers will also be offered some relief by the falling price of oil, which will lead to reduced spending on fuel and, in time, fertiliser. Falling grain prices should also help livestock and dairy farmers, who suffered greatly over 2008 as prices for inputs rose much faster than those for meat. Exports of rice could also increase in 2009 as export bans imposed in the wake of soaring prices have been eased. In 2008 despite the volume of rice exports being little changed from the previous year, the value more than doubled owing to high world prices. In 2009, this effect will likely be reversed as the value of rice exports falls despite a rise in the volume.
With around 50% of the labour force still employed in agriculture, the government will have to pay close attention to the needs of the country's farmers if social stability is to be retained. Now that many farming families are likely to be suffering from reduced incomes both from the fall in prices for their products and a fall in the amount of money sent back home from sons and daughters working in the cities, protests from farmers could soon flare up as has been the case in other countries in the region such as Thailand in the past few months. For this reason, we expect government support for agriculture to hold up through the current problems.
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