FOOD SECURITY IN VIETNAM – CHALLENGES AND POLICY

Nguyen Trung KienActing Director, Commodity Markets Division

Institute of Policy and Strategy for Agriculture and Rural Development - IPSARD

Contents

1. Food security situation in Vietnam

2. Possible risk scenarios of food security in Vietnam

3. Policy for managing food security risks

Food Security Situation

3

Food Availability by Commune

Northern provinces achieved food sufficiency

Per capita milled rice Per capita foodgrain

Kg of milled rice equiv. per capita in 2006

0 - 5051 - 100101 - 200201 - 500501 - 15001501 - 30003001 - 6763

Southern provinces produced surplus food (rice) for export

Surplus supply now concentrated on: “Core Rice Belt’ in six provinces

Vietnam per capita rice consumption has begun to decline, this will likely to accelerate

P.C. Rice Consumption in Asia (Kg/Yr)

Myanmar 160

Vietnam 135

Philippines 128

Indonesia 104

China 95

South Korea 88

Malaysia 80

India 77

Japan 45 50 70 90 110 130 150 170 1900

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

PC Rice Consumption and PC Income: China, Vietnam, Malaysia, Thailand, and Philippines,

1995-2005

Domestic Market Growth: Changing size/composition of food expenditure

2010: $30 billion 2020: $65 -70 billion?

30

2010

10

15

87

Cereals/Tubers Meat Fr/Veg FishOut of home Beverages Sugar/Sweets

15

24

1315

20

85

Cereals/Tubers Meat Fr/Veg Fish Out of homeBeverages Sugar/Sweets

Source: WB

Changing economic role of rice

1996 2000 2005 2010 20300

2

4

6

8

10

12

14

16

18

Share of Rice + Rice Processing in National GDPShare of Rice in Average Household Expenditures

Source: Steve Jaffee, WB, 2011

Food Affordability

Poverty Rate (%) Domestic Food Price (VND/kg)

2006 2010

Vietnam 15.5 10.7

Urban 7.7 5.1

Rural 18 13.2

By region    

Red River Delta 10.1 6.5

North East 22.2 17.7

North West 39.4 32.7

North Central Coast 26.6 19.3

South Central Coast 17.2 14.7

Central Highlands 24 21

South East 4.6 3.7

Mekong Delta 13.3 11.4

2002 2004 2006 2008 20100

20

40

60

80

100

120

140

0.0

5.0

10.0

15.0

20.0

25.0

Rice (1000 VND/kg) Pork (1000 VND/kg)Beef (1000 VND/kg) Buffalo meat (1000 VND/kg)Poultry (1000 VND/kg) CPI (%)Real income growth (%)

Source: VHLSS 2002 – 2012

Food AffordabilityHigh margin attained but income from rice production is still

below $1 Per Capita/day

An Giang 2009/10 (MDI Survey Results)

Total Cost/KG (vnd 000)

Profit/KG (vnd 000)

Profit/Cost Profit Per HH (VND Million)

Profit Per HH ($)

Winter – Spring

2.87 1.53 53% 8.7 527

Summer Autumn

3.96 (0.03) -1% (0.1)

Autumn Winter

3.30 1.90 61% 8.0 485

Average 3.33 1.09 33% 1012

Average household size is 4.4 members

Average profit per capita $230/year = VND 3.8 million or 316,250/month. Current poverty line is VND 400,000/person/month

Food UtilizationThreat of Undernourished Children

Percentage of Under-5 Children Undernourished (weight for age)

Group/Region PercentageVietnam 20.2VietNam - Kinh/Chinese 18VietNam - Other Minorities 29.7Red River Delta 18.5North East 22.3North West 28.8North Central Coast 21South Central Coast 23.7Central Highlands 23.2South East 10.8Mekong River Delta 20.4

…. More rice cannot solve all problems of food insecurity…

Indicators 90-92 95-97 00-02 05-07

Malnutrition rate (%) 31 22 17 11

Number of malnourished

people (million)

21.0 16.7 13.3 9.6

Minimum calorie request

(Kcal/person/day)

1710 1740 1780 1810

Calorie consumption

(Kcal/person/day)

2090 2310 2520 2770

Source: FAO, http://www.fao.org/hunger/en/

Mekong Delta: malnutrition with food surplus

Malnutrition rate is higher in the specialized area of rice production in comparison with areas with agricultural diversification

There are correlations between poverty and malnutrition rate (1999-2009) Source: CASRAD, 2011

Food Security Risk

13

Chỉ số giá LT thế giới (2002-04 = 100)

World food market has witnessed 3 times of price shock since 2007, with amplitude 50% higher than the last 2 decades, and strong correlates with energy prices

Source: FAO

World Food Price Index

The rate of fertilizer price increase is higher than the rate of production growth and rice price increase

Source: Agroinfo

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5

2008 2009 2010 2011 2012 2013 2014

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000 Giá lúa tẻ thường

Giá NPK

Giá UrePrice of nitrogen fertilizer

Price of rice

Price of NPK fertilizer

Source: GSO, Vietnam Animal Feed Association

Import and price of material for animal feed is increasing

2009 2010 2011 2012 2013200.0

250.0

300.0

350.0

400.0

450.0

500.0

550.0

600.0

650.0

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

Giá trị XK gạo (000USD)

Giá trị NK TACN vàNguyên liệu(000USD)

Gía gạo XK (USD/Ton)

Gía Ngô NK

Gía Đậu tương NK

Rice export price

Corn import price

Rice export value

Animal feed and inputs import value (000 USD)

Soybean import price

Land use changes by land class and scenario, 2007 -2030

Source: Van Dijk et al., 2013

Climate change and impact on crop yield

Source: Van Dijk et al., 2013

Source: MONRE, 2009

Impact of climate change in Vietnam, 2020 - 2010

Flood Risk

Area with high flood risk in high climate change impact scenario

Source: Van Dijk et al., 2013

National Centre for Hydrometeorological Forecasting, MONRE 2010 Central Committee for Flood and Storm Control, 2010

Impacts of natural disasters on agriculture

Paddy & cultivation area loss due to natural calamity (000 ha)

Number of flash flood over years

Food Security Policy

21

Policy Objectives

Focus on rice self-sufficiency Policy objectives:

• To ensure national food security• To ensure food supply sources• To meet nutrition needs• To ensure benefit of rice farmers• To ensure people’s accessibility to food• To increase efficiency of paddy land• To improve international position of Vietnam

Food Security Policies

Supply intervention:

1. Policy to ensure supply sources

2. Policy to fix floor price for rice procurement

3. Procurement policy for temporary storage

4. Policy to fix conditions for the rice export enterprises

5. Direct support policy for paddy farmers

Demand intervention:

6. Policy to restrict export in emergency case

7. Policy to stabilize price by fixing the retail price

8. Rice provision for poor households

To ensure supply sourcesObjective: To ensure national food security

Content: Planning and keeping 3.8 million ha of paddy land by 2020, of which 3.2 million ha is irrigated for >2 crops/year

Effectiveness: It is an important policy to ensure food security Vietnam remain to have enough domestic supply with only 3 million ha of

paddy land To improve income, farmers still convert the planned paddy land to other

annual crops Need to consider rice export strategy to grasp the multi-dimensional benefits

of rice production.

24

Supply Interventions (1)

Vietnam’s Rice Balance in 2030 in the Worst ScenarioYield: 5.8 tons/ha. Post-harvest losses: 10%

25

ScenariosProjection in 2030

Paddy quantity

Rice consumption

Rice export

3.8 mil ha 40.3 12.7 5.2

3.6 mil ha 38.2 12.7 4.1

3.3 mil ha 35.0 12.7 2.4

3.0 mil ha 31.8 12.7 0.8

Source: WB, 2011

2030: Population:

110, 4 million

Consumption: 120 kg per head

Urbanization rate: 41,8%

Efficiency Question

26

Paddy Coffee

Export value (billion USD) 3.7 2.7

Area (million ha) 4.1 0.5

Water use (billion m3) 101.4 9.1

Household number (million households) 9.3 0.5

Source: AgroCensus

Policy to fix floor price to ensure a minimum profit of 30% production costs for farmers

Objective: Ensure income of paddy farmers

Content:• Food enterprises purchase paddy at floor price . • MOF, MARD set up method; provincial authorities estimate and declare

floor price• Provincial authorities monitor and manage the process of procurement.

Effectiveness:• It is difficult to calculate production costs• Mainly apply in MRD, not for other regions

27

Supply Interventions (2)

Households by Farm size (%)

Source: agrocensus 2011

Red Rive

r Delt

a

Northern

midlan

ds and m

ountain ar

eas

North Cen

tral a

nd Centra

l coast

al are

as

Centra

l High

lands

South Ea

st

Mekong R

iver D

elta

0.0

20.0

40.0

60.0

< 0.2 ha 0.2 ha - 0.5 ha 0.5 ha - 2 ha >=2ha

Income Source of Paddy Farmers in MRD, 2010

29

Farm sizeThe average income per capita of a rural household (VND/month)

Total average income per capital (000 VND)

Contribution by paddy production (%)

1 ha

1.070.500

859 19%

1 – 2 ha 1183 26%

3 ha 1930 36%4 ha 1972 68%

Procurement policy for temporary storage

Objective: increase demand to push procurement price

Content: Support 100% interest rate for enterprises procuring for temporary storage

within 3 months The amount of procurement is proposed by VFA at market price to stabilize

national reservation, consumption and export. 

30

Supply Interventions (3)

Source: Agroinfo data

Unclear impact of the storage procurement policy

20/9 buy 0.5 mil tons

Thailand 5% broken rice price (USD/ton)

Vietnam whole sale rice price (USD/ton)

Conditionalities on rice export enterprises

32

Objectives: Develop long-term relationship between enterprises and paddy farmers to stabilize market

outlets and income for farmers Ensure the balance between export and domestic consumption Stabilize rice market, enhance efficiency of export

Content:

Setting conditions for enterprises to participate in rice export: > 5000-ton specialized storage >1 milling factory with capacity of >10 tons/h Located in province/cities with rice surplus for export and international seaport .

=> Maintain the minimum storage, equivalent to 10% of export volume of rice in 6 months ago=> if the domestic price of rice increase suddenly, the storage will provide rice to meet demand

Source: Decree No. 109/NĐ-CP/2010

Supply Interventions (4)

Direct support to paddy farmers

33

Objectives: Support to protect and develop paddy land

Content: Supporting 500.000 VND/ha/year for organizations, households, privates producing on specialized

land of wet rice; Supporting100.000 VND/ha/year for organizations, households, privates producing on the other

paddy land except the area of upland rice can expand themselves without following any regulations and plans of paddy land use.

Effectiveness: Support famers directly Difficult to implement and monitor Difficult to identify upland rice area in land use planning Low effectiveness: Income of paddy farmers do not improve significantly => Move to other crops

or to non-farm activities

Source: Decree No. 42/2012/NĐ-CP issued 11/05/2012

Supply Interventions (5)

General Support

34

Objective: to increase income of farmers from agricultural production

Content:

Exempting agricultural land use tax to the poor households, agriculture households in the disadvantaged areas, reduce 50% of agriculture land use tax for the others.

Support in borrowing loans to buy facility, materials with priority interest rate. Exempting irrigation fee R&D Seed subsidy Rural infrustructure New rural village program .....

Supply Interventions (6)

Policy to restrain export in emergency case

35

Objectives: Reduce inflation, stabilize domestic consumption price and ensure food security

Content: In 2008, crisis of global food price => The guidance of Prime Minister

to stop signing any new contracts of rice export The Government imposes tax on rice export (period of validity: from

21/7-19/12/2010)

Source: Decision No.104/2008/QĐ-TTg issued 21 /7 /2008,

Demand Intervention (1)

36

Export restriction time (25/3/2008)

US Okays Japan export stock (5/2008)

Policy to restrain export in emergency caseProfit analysis of stakeholders in the period of price fluctuation in 2008

(USD/ton)

Retail price stabilization

37

Objectives: Support the low income group in case of high inflation

Content: Subsidize the sale of basic foods: tax concession and interest rate subsidies for retailers (focus on supermarket system)

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5

2008 2009 2010 2011 2012

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000 CT: 03/2008/CT-BTC (01/12/2008)

CT: 03/CT-BTC (31/12/2009)

CT: 05/CT-BTC (22/12/2010)

CT: 03/CT-BTC (12/12/2011)

Movement of retail price of rice (VND/kg)

Demand Interventions (2)

Direct food support

38

Objective: Direct food support

Content: Poor households involved in forestation and forest protection will

receive 15 kg rice per capita per month during the period when they are not able to provide themselves with staple food (not over 7 years).

Poor household in the border areas will be granted 15 kg rice/person/month until they can self- sufficient in food.

Support for food-deficit provinces before the harvest Direct food support for provinces suffered from natural disasters

Demand Interventions (3)

Changing Approach

39

Current Approach New Approach

Protect paddy land Protect agricultural land

Rice self-sufficiencyIncrease farmer income and improved nutrition

Resource intensiveTechnology intensive and environmental friendly practices

Production focus Post-harvest and trade focus

Small farm and middleman domination Large scale and value chain linkageAdministrative control Market-based intervention

Food export Utilize the benefit of international integration

Inflation controlTarget to poor and vulnerable groups of consumers