Opportunities for Australian agricultural exports in Vietnam

Rising incomes and a growing food manufacturing sector are expected to drive strong growth in consumption of agricultural products in Vietnam over the next decade.

Australian agricultural, fisheries and forestry (AFF) exports to Vietnam benefit from a strong bilateral relationship, counter-seasonality and geographical proximity. Differences in climatic zones, topography and farming practices allow Australia to supply Vietnam with produce that cannot be produced locally or at sufficient scale.

Australia is especially well placed to meet growing Vietnamese demand for:

• meat
• wheat
• cotton
• dairy products
• premium seafood
• premium horticultural products.

Key drivers of rising agricultural imports

The value of Vietnam’s AFF imports rose by 2,054% from US$1.2 billion in 2000 (A$2.1 billion) to US$26.7 billion in 2020 (A$38.5 billion) (Source: UN Comtrade 2022).

This was caused by:

• rising incomes: GDP per capita in Vietnam rose by 644%, from US$500 in 2000 to US$3,720 in 2021. High growth rates are forecast to continue with GDP per capita rising to US$6,680 by 2027 (Source: IMF 2022).
• a growing population: Vietnam’s population of almost 100 million is forecast to rise to 104 million by 2030 (Source: Our World in Data 2022).
• changing consumer preferences: Increasingly wealthy consumers are eating more animal proteins and dairy products. This pattern has been observed in other growing economies, including China.
• growing demand for inputs by the manufacturing sector: Vietnam’s food manufacturing, animal feed and textile production capacity is expanding. This is driving demand for agricultural commodities used in the production process.

Vietnam agricultural market snapshot

Vietnam is both a large producer and importer of AFF products. Vietnam’s climate and geography mean that imports of meat, grains, fibres and dairy products are particularly important.

Australian AFF products have a strong and growing presence in Vietnam. Australia exported a record A$3.4 billion of AFF products to Vietnam in 2021–22. This was a 39.2% increase from A$2.4 billion in 2020–21 (see Figure 1). The rise was caused by substantial increases in wheat and cotton exports.

Figure 1: Australian AFF exports to Vietnam, FY 2017–18 to FY 2021–22

Australia’s trade agreements with Vietnam lower tariffs and help facilitate trade. These include:

• ASEAN-Australia-New Zealand Free Trade Agreement
• Comprehensive and Progressive Agreement for Trans-Pacific Partnership
• Regional Comprehensive Economic Partnership.

Australian exporters benefit from counter-seasonality. Many of our major competitors, such as the United States and the European Union, are in the Northern Hemisphere.

Australia’s proximity to Vietnam also reduces freight costs and increases product shelf-life compared to major competitors such as the United States, Argentina, Brazil and European Union.

The Vietnamese meat market                       

Meat consumption in Vietnam has risen substantially as the country has industrialised and incomes have risen. OECD-FAO forecasts Vietnam’s meat consumption to rise 15.1% from 12,050 kilotonnes (kt) in 2021 to 13,875 kt in 2031 (see Figure 2). This 1,825 kt increase is almost double the 944 kt of beef Australia exported to the world in total in 2021–22.  

Figure 2: Vietnamese meat consumption, 1990 to 2031

• In 2021, fish was the most consumed meat, followed by pig meat, poultry and beef. Sheepmeat consumption remains low but is growing steadily, albeit from a low base.
• Figure 2 shows beef consumption falling. However, this is a result of the substantial decline in cross-border trade of Indian buffalo. Prior to 2020, approximately 90% of all Indian buffalo imported to Vietnam was re-exported to China. In 2021, only 15% of Indian buffalo imports were re-exported (Source: MLA 2021).
• Demand for Australia’s high-quality beef is expected to continue to grow as consumers become wealthier. Beef is regarded as a superior meat and is enjoyed in Vietnam’s foodservice sector.
• Over time, increasing affluence will see Vietnamese consumers trade up to better cuts of meat, as in other Asian markets. This is expected to benefit Australia’s beef sector.
• In 2021, Australia accounted for 83% of the fresh or chilled bovine meat exports to Vietnam and 15.2% of frozen bovine meat exports. India was the main supplier of frozen bovine meat to Vietnam, accounting for 60% of exports (Source: ITC Trade Map 2022).
• India exports buffalo, which is considered lower quality than Australian beef by most Vietnamese consumers.

The Vietnamese wheat market

Vietnam’s wheat imports have grown considerably since 1990. Steady growth is expected to continue over the coming decade (see Figure 3).

The increased consumption of wheat-based food products and the use of wheat in animal feed is driving demand for wheat. As wheat is not commercially produced in Vietnam, this demand will be met by increased imports.

• Australian wheat exports to Vietnam are primarily used in bread, noodles and sweet biscuits (Source: AEGIC 2021). Vietnamese consumption and exports of these products is expected to increase.
• Vietnam imports animal feed to support its growing livestock industry (Source: USDA 2021). Demand for feed wheat is forecast to grow by 30.1%, from 1,250 kt in 2021 to 1,626 kt in 2031. Demand for feed wheat in the livestock industry will partly depend on the price of substitutes, particularly maize.
• Vietnam’s large aquaculture industry will support ongoing demand for feed wheat used in aquafeeds (Source: AEGIC 2021).

Figure 3: Vietnam wheat consumption by use, 1990 to 2031

The Vietnamese cotton market

Vietnamese cotton imports have grown substantially to support the rapidly expanding textile and apparel industry. FAO-OECD forecasts Vietnam cotton imports to rise by 60.4%, from 1,540 kt in 2021 to 2,470 kt in 2031.

Figure 4: Vietnamese cotton imports and production, 1990 to 2031

• Domestic cotton production cannot meet the demand from Vietnam’s spinning mills (see Figure 4). Cotton is only grown for artisanal purposes and is not produced on a commercial scale.
• Vietnamese spinning mills import raw cotton and transform it into cotton yarn. The yarn is used in the Vietnamese textile and apparel industry or re-exported abroad, mainly to China (84.6%) and South Korea (7.5%) (Source: ITC Trade Map 2022).
• In 2021, Vietnam was the largest exporter of cotton yarn to China. The country accounted for 44% of total Chinese imports (Source: ITC Trade Map 2022).
• In the second half of 2021, Australia became the largest supplier of cotton to Vietnam, overtaking the United States. This was due to good seasonal conditions in Australia, logistical advantages and port congestion in the United States (Source: USDA 2022).

The Vietnamese dairy products market

OECD-FAO forecasts Vietnam’s dairy consumption will rise by 40.4%, from 1,320 kt in 2021 to 1,853 kt in 2031. Highly processed dairy products such as milk powders are forecast to grow substantially over the next decade (see Figure 5).

Figure 5: Vietnam dairy products by consumption, 1990 to 2031

• Dairy consumption in Vietnam per capita remains low. For example, milk consumption per capita in 2017 was only 8.7 litres. This was far below China at 24.1, India at 106.1 and Australia at 219.5 (Source: Our World in Data 2022). However, as consumers become wealthier and the population ages, dairy consumption is forecast to increase.
• Most dairy consumption growth is forecast to come from increased skim milk powder consumption. Most of Vietnam’s milk powder is imported.
• There are also opportunities for plant-based milks such as soy, almond, rice and oat milk.
• In 2021, Australia was Vietnam’s fourth largest source of dairy imports after New Zealand, the United States and the European Union.
• Vinamilk, a Vietnamese multinational, has a 56% share of the dairy consumption market by value (Source: Vinamilk 2021).

Resources

The Manual of Importing Country Requirements has information about Vietnam’s import conditions.

Austrade has more information about market opportunities in Vietnam.

The Australian Government’s network of Agriculture Counsellors provided information for this article. More information about the Agriculture Counsellor network, including contact details, is available on the Department of Agriculture, Fisheries and Forestry website.