Vietnam Agribusiness

Sector Overview
Hanoi, Vietnam
March 2014
Presentation and Marketing Material
Table of Contents

Our research contacts for Content Page

this report are:

Thuan Nguyen, FCCA Sector Structure and Overview 34

CEO
thuan.nguyen@stoxplus.com
+84 98 389 0000 Livestock Sector 57
Harry Hoan Tran, CFA
Senior Analyst Farming Sector 8 10
harry.tran@stoxplus.com
+75 1597 1532
Sector summary 11
Lan Nguyen
Associate
Research Division About StoxPlus 12 17
lan.nguyen@stoxplus.com
+84 96 494 6760

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All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, StoxPlus , its Directors
and employees accept no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and StoxPlus makes no representation of warranty of any kind as to the accuracy or
completeness of any information hereto contained.

2
Sector Structure and Overview

Agriculture has 3 major components: Farming, Livestock, and Agri-service

Figure 1: Description of Agribusiness in Vietnam

Seeds

Farming Plantation

Processing

Feeds

Agriculture Livestock Raising

Processing

Agrichemicals
Agri-service

Agriproduct Retailing

Source: GSO

3
Vietnams agriculture industry was estimated at US$38.9bn in 2011

Vietnam boasts impressive figures in regards to its agricultural production. It is the worlds second-largest
exporter of rice, and one of the worlds largest exporters of coffee and cashews. It is also a major producer of
various fruits, sugar, rubber and cotton. This high output is mainly due to Vietnams climate and geography.

Figure 2: Breakdown of Vietnamese Agriculture Industry, 2011

Agriservice,
0.5US$bn,
1.3%

Livestock,
US$10.3bn, Farming
26.5%

Livestock
Farming,
US$28.1bn,
72.2% Agriservice

Source: StoxPlus from GSO

4
Livestock Sector

Livestock sector: pig farming is the most dominant segment

Figure 3: Meat Production - 2012 Market Size Estimation
Total market size: Out of total US$10.3bn total 000 tonnes Price/kg US$bn
market size of livestock, we have estimated that Pork 2,000 1.8 3.52
Poultry 750 1.0 0.75
total meat production for three categories namely
Beef & Veal 285 7.0 2.00
pork, poultry and beef amounting to 3,035 6.27
approximately US$6.3bn by 2012. Source: Production volume sourced from USDA. Price data is the average and picked
up from Hanoi market.

Segmentation: Within the Vietnamese livestock

industry, pig farming is by far the most dominant Figure 4: Production and Consumption : Pork, Poultry and Beef
(000 tons)
sector, with pork production comprising about
two-thirds of total meat production in 2011/12.
2007 2008 2009 2010 2011 2012
Actual Actual Actual Actual Actual Actual
Meat consumption: Meat consumption in
Vietnam has risen significantly over the last Pork production 1,832.0 1,850.0 1,910.0 1,930.0 1,960.0 2,000.0
decade, with per capita consumption rising by Pork consumption 1,822.0 1,826.0 1,891.0 1,912.0 1,940.0 1,980.0
87% from 2001 to 2011 to reach 36.7kg per year.
2007 2008 2009 2010 2011 2012
Actual Actual Actual Actual Actual Actual

Poultry production 359.0 417.0 467.0 616.0 708.0 750.0

Poultry consumption 403.0 499.0 502.0 655.0 750.0 793.5

2007 2008 2009 2010 2011 2012

Actual Actual Actual Actual Actual Actual

Beef & Veal production 316.0 320.0 300.0 295.0 290.0 285.0

Beef & Veal consumption 321.0 331.0 306.0 303.0 298.0 295.0

Source: Department of Livestock (MARD), BMI, USDA and StoxPlus

5
Livestock Sector
Livestock: Animal feed sector are dominated by foreign players
Figure 5: Animal feed players market shares by sale
volume 2011
Vietnam's feed industry is one of the world's fastest
growing agribusiness markets. The animal feed industry C.P.
Vietnam,
has been receiving significant - mainly foreign - 18%
investment in recent years.

Demand exceeds supply: The government has since Other, 41% Proconco,
12%
placed a high priority on the development of industrial
Cargill
farming and expects the use of industrial feed to increase Dabaco,
Vietnam,
3%
from 56% in 2010 to 70% in 2020 . Currently, the market Vietnam 8%
Green East Hope,
is still lucrative as supply only meets 60% of demand, Feed, 8% 10%
leaving a big slice of the pie unconsumed.
Source: StoxPlus from Vietnam Animal Feed Association
Local firms are disadvantaged as foreign firms enjoy
economies of scale. The good prospect of the domestic Figure 6: Breakdown of total feed supply
animal feed sector has attracted huge interest from 100%
foreign firms with newer technology, build large-scale 90% 18% 20% 18%
80%
operations, lower production cost. In contrast, local firms 14% 13% 12%
70%
are relatively small in terms of production capacity. 60%
50%
In total, 58 joint ventures and foreign-invested enterprises 40%
56% 67% 70%
produce about 6.9 million tonnes of industrial feed, 30%
20%
controlling 60% of output. The remaining 172 local firms 10%
only produce 4.5 million tonnes (the other 40%). 0%
2010 2015 2020
Industrial feed Self-made Import
Source: StoxPlus from Vietnam Animal Feed Association

6
Livestock Sector
Livestock: Animal feed sector are dominated by foreign players
Figure 7: Industrial Feed: Demand vs. Supply (mn
Pricing power in the hands of Big Four: In tonnes)
25
developed countries such as the US and Canada, 20
animal feed accounts for 50-55% of the cost of 20 18
15 16
pork. 15 13
11
In Vietnam, it is near 75% - underscoring the 10 9

impact of animal feed price fluctuations on livestock 5

2
breeding.
0
With 30% market share combined, the foreign Big 2000 2005 2010 2015

Four firms (i.e. C.P., Proconco, East Hope and Demand Supply
Cargill), have enough pricing power to fully pass Source: StoxPlus from Vietnam Livestock Industry Development Strategy till 2020

through increase in input costs. Figure 8: Key Players in Animal Feed: Designed
Capacity and Sales Volume, 2012
Other smaller, domestic producers like Dabaco,
3000 120%
can generally follow the Big Fours pricing but are 100%

Thousand tonnes
2500 82% 100%
only able to pass through about three-quarters of 80%
2000 66% 67% 80%
the price increase. 48%
1500 44% 60%

1000 40%

500 20%

0 0%

Designed Capacity Sales Volume % Utilisation

Source: Company Data, StoxPlus

7
Farming Sector
Coffee: Vietnam is the largest producer of Robusta coffee with total export value
of US$3.7bn in 2012
Production and Supply
Figure 9: Vietnam Coffee Production & Consumption,
Vietnam's coffee sector has grown significantly over 2007-2012
the last 20, the area planted expanding from 42,000
hectares (ha) to more than 509,000ha. Coffee Production Coffee Consumption

30,000
Vietnam is the world's biggest producer of robusta
24,800
coffee. 25,000

Coffee plantation is mainly in the Central of Vietnam 20,000

19,500
18,500
19,600

'000 60kg bags

18,000
16,980
(top coffee harvesting provinces are Daklak, Lam
15,000
Dong, and Gia Lai).
10,000
Coffee consumption and export
Domestic consumption is about 6% of total 5,000

750 850 950 1,200 1,335 1,635

production. The 94% export (mainly robusta coffee) 0
2007 2008 2009 2010 2011 2012E
is amounting to US$3.7bn in 2012.
Vietnam accounts for approximately 17.7% of the Source: Vietnam Coffee Association

worlds total coffee exports. Exports made to more

than 80 countries.
On average, coffee consumption in Vietnam is
1.07kg per capita in 2012. Many forecast that coffee
consumption will reach 1.7kg per capital by 2017.

8
Farming Sector
Rice: Vietnam is the largest rice exporter by volume yielding US$3.7bn value in
2012
Overview Large scale rice farming program

Rice is the main food staple for Vietnamese.
Vietnam currently has about 4 million ha rice farming
with total production volume of about 26.9 million
tonnes in 2012.
Vietnam becomes the largest exporter of rice
recently with total export volume of 7.5mn tonnes in
2012. However rice export prices are normally 20-
25% discount comparing to peers such as Thailand
and India.
The Cultivation Department of the Ministry of
Agriculture and Rural Development of Vietnam is
endeavoring to develop a large-scale rice farming
model whereby neighboring farmers work with
businesses and government officials to increase
rice yields.
Figure 10: Vietnam Rice Production & Consumption,
2007-2012
Rice Production Rice Consumption

In fact, there are 264 rice export companies by 2012 30,000

26,300 26,900
24,993
in Vietnam. However, there will be a consolidation 25,000 22,922
24,375 24,393

because of the new governments regulation about 19,400 19,400 19,788

20,000 18,775 19,000 19,150
exporter.

'000 tonnes
15,000
Foreign restriction removed
10,000
After 2011, foreign traders are allowed to directly
undertake rice trading in the country. 5,000

Under WTO commitments, the Vietnamese rice 0

2007 2008 2009 2010 2011 2012E
market opening up to foreign traders from 2011.
Source: Ministry of Agriculture and Rural Development of Vietnam

9
Farming Sector

Sugar: Vietnam has 40 mills with annual of 1.3mn tonnes in 2012

Figure 12: Vietnam Sugar Production & Consumption,

Overview 2007-2013
1,800
Vietnam has 40 sugar mills with total refining Sugar Production Sugar Consumption
1,600
1,600 1,500
capacity of 129,200 tonnes of sugarcane per day. 1,420 1,425 1,450
1,400 1,398 1,400
1,370 1,330
1,400
1,230
Total production volume in 2011/2012 is 1.3m 1,200 1,150 1,148
1,090

'000 tonnes
tonnes of sugar, a 13.5% y.o.y increase. 1,000
970 1,000 980
820
Vietnam sugarcane yield is 61.7 tonnes/ha in the 800

2011/2012 crushing season which is 25% lower 600

than the Thais yields. Main reasons for this is the 400

low sugarcane quality from the fragmented 200

farmland. 0
2005 2006 2007 2008 2009 2010 2011 2012 2013E

Sugar distribution in Vietnam and cross-holding Source: StoxPlus from Ministry of Agriculture and Rural Development of Vietnam
issue
Figure 13: Key Sugar Players and Capacity as of YE2012
About two-thirds of Vietnams sugar is consumed
in the south of the country. The Vietnamese sugar Ticker Company name Market Cap Capacity
market is highly underdeveloped, with no formal US$mn tons/day
distribution systems. SBT Bourbon Tay Ninh 85.9 9,800
LSS Lam Son Sugar 31.2 10,500
BHS Bien Hoa Sugar 22.4 6,000
NHS Ninh Hoa Sugar 20.3 3,400

SEC Gia Lai Sugar & Thermoelectric 12.2 3,500

172.0 33,200
Source: StoxPlus from Bloomberg, MBKE

10
Sector summary

No Content Sector Summary

Sector Structure In this report, we focused on Agribusiness. Vietnam is the worlds second-largest
1
and Overview exporter of rice, and one of the worlds largest exporters of coffee and cashews.

Base on our a research, pig farming is the most dominant segment with total size of this
Sector sector is estimated at US$10.3bn in 2012. And the Animal feed market is still lucrative as
2
Livestock supply only meets 60% of demand, leaving a big slice of the pie unconsumed that
attracted huge interest from foreign firms.

Vietnam is the largest exporter of Rice and Robusta coffee with total Rices export
volume of 7.5mn tons and total Robusta coffees export value of US$3.7bn in 2012.
3 Sector Farming Sugar is also a Vietnam potential exported product but Its yield is not high (only 61.7
tons/ha in 2011/2012, 25% lower than the Thailands yield) because of the fragmented
farmland.

11
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14
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+84 (0) 98398 0000
thuan.nguyen@stoxplus.com
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Lan Nguyen
Research Associate
+84 (0) 35626962 (ext. 108)
+84 (0) 96 494 6760
lan.nguyen@stoxplus.com