In this situation, Vietnam can now avail of many opportunities to position itself as a major exporter of various agricultural products. Vietnam can accelerate and even boost the supply of commodities such as rice and seafoods across the globe. On the other hand, Vietnam still has to deal with rising input material costs for its various domestic industries.
Ban on food exports
In mid-May this year, India announced a ban on wheat exports after the hot summer weather affected their entire wheat crop, which then led to domestic wheat prices suddenly skyrocketing. Even though India is not a major wheat exporter, this ban on wheat exports caused wheat prices to skyrocket. Earlier in March, the Ukrainian government had banned the export of wheat, oats and many staple foods which are important to the global food supply chain. Also in March, Russia issued a ban on the export of white sugar, raw sugar, wheat, barley, and corn, to countries in the Eurasian Economic Union.
Another factor that also attracted the attention of many countries was Indonesia's decision to ban all exports of crude palm oil and cooking oil at the end of April. Although this ban lasted only for around three weeks, it had an impact on countries that buy palm oil from Indonesia. On 23 May when Malaysia issued a ban on chicken exports after the country faced a severe shortage, it led to an escalation of prices. This move by Malaysia caused much concern in Singapore because the country is heavily dependent on food supplies from Malaysia.
According to statistics from Fitch Solutions, the global credit rating company, since the outbreak of the Russia-Ukraine war, about thirty countries have implemented strict measures to contain volumes of their food exports. This measure has disrupted the global food supply chain, causing prices of many essential food commodities to skyrocket. Fitch Solutions also warned that agricultural protectionism is at its highest level since the 2007 to 2008 food price crisis.
The United Nations (UN) recorded that world food prices have increased by more than 70% since the middle of 2020 and are now close to reaching a record level after Russia launched military operations in Ukraine. The ongoing Russia-Ukraine war has now blocked exports of many essential commodities and disrupted the global supply chain. From 18 May to 23 May, the UN held three meetings on global food security, and warned of a high risk of food insecurity. On 23 May, the UN General Assembly also adopted a resolution on “State of Global Food Insecurity".
Vietnam has many advantages in agriculture that can be accessed to counter food insecurity with the country playing an important role in providing food to countries across the globe. Ambassador Dang Hoang Giang, Head of Vietnam's Permanent Delegation to the UN, affirmed that through innovative and sustainable agricultural models Vietnam can aspire to become a hub for food products in the region, and the country is determined to continue to make meaningful contributions towards joint efforts to address global food insecurity.
Opportunity for Vietnam
Rice is one very important export commodity that can help in increasing exports from Vietnam in the near future. Mr. Pham Thai Binh, General Director of Trung An Hi-tech Agriculture JSC, said that rice cannot replace wheat so quickly, but in the current context the opportunity for rice is huge, especially for countries that are among the top ten rice exporters in the world, such as Vietnam. From now until the end of the year and throughout 2023, the demand for rice will increase in many countries around the world. Vietnamese rice is now at par with the best in the world and can compete with rice species from other rice exporting countries such as Thailand.
According to data received from the Ministry of Agriculture and Rural Development, rice exports from Vietnam in the first four months of the year reached about 2.05 million tons, bringing in a total export revenue of around USD 1 bn, up by 4.4%. The price of rice in Vietnam remains higher than that of some traditional rice exporting countries such as India, Pakistan, and Myanmar. In May, Vietnam's rice exports to some key markets still maintained a good growth momentum. Especially in the early days of June, the price of rice for export continued to increase by USD 10 to USD 15 per ton as compared to the previous month of May.
When asked whether Vietnam should control rice exports to ensure domestic food security, Mr. Pham Thai Binh said that Vietnam should take advantage of opportunities to boost exports, and not think about limiting exports to ensure food security. Mr. Binh believes that since Vietnam has rice crop harvests every three months, there is no necessity to focus on ensuring domestic food security within the country. However, in his opinion what is of concern now is that although the selling price has increased, it is still low for coping with the continually increasing input costs for the requirements of the agricultural industry.
Besides rice, seafood is also an important commodity that businesses are promoting for supply to the world market. According to an assessment of the Vietnam Association of Seafood Exporters and Producers (VASEP), although the seafood exporting industry cooled down in May, it still reached the USD 1 bn mark. Seafood has maintained a turnover of USD 1 bn for three consecutive months, bringing the total export turnover of the whole industry in the first five months of the year to touch USD 4.6 bn, up 42% over the same period last year. In the face of many food fluctuations in some regions of the world, Vietnamese seafood has the opportunity to thrive again.
In an analysis by Ta Ha, a pangasius market expert at VASEP, he said that currently inflation in Europe is reaching a record high, which is threatening to weaken the production recovery process of several economies after the damage caused by the Covid-19 pandemic. It is forecast that food prices in Europe will increase to prohibitive levels, hence this is an opportunity for pangasius businesses to return to this market after many years of stagnation. Moreover, the EU and US sanctions on Russian pollock, which is a strong competitor for pangasius, also significantly reduced the supply of white fish in this region. This is now a very good opportunity for Vietnamese pangasius enterprises to promote frozen pangasius exports to the EU market at such an opportune time.