US farm exporters look to southeast Asia for trade opportunities

In early October, the U.S. Department of Agriculture’s Foreign Agricultural Service announced a trade mission Vietnam, Thailand and Myanmar in southeast Asia as an opportunity for export growth. The three countries have about 221 million consumers all looking outside of their domestic agricultural production capacity for food, fiber and fuel.

The FAS reported that in 2018 the three countries imported more than $42 billion in agricultural goods—of which the United States accounted for $2.1 billion to Thailand, $4 billion to Vietnam and $126.7 million to Myanmar, formerly known as Burma. These are three of the fastest-growing economies in southeast Asia, and their people are in the market for higher quality agricultural products. 

USDA Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney led a trade mission to Vietnam for a week in October. McKinney said there is a renewed emphasis on expanding agricultural trade to many more nations than in the past, and this trade mission was the sixth of seven that is reaching out and reconnecting to new and developing markets. Over the course of the time in Vietnam, there were more than 665 meetings between U.S. contacts and buyers from Vietnam, Thailand and Myanmar, from 34 companies, 13 state departments of agriculture, and many U.S. commodity groups that were along on the trade mission. 

“The data is very early right now, but we asked companies to estimate what they might sell over a 12-month period,” McKinney said. After this initial round of meetings, the conservative estimate was the potential for $5.1 to 5.2 million in sales from this one meeting alone. 

Vietnam

Vietnam’s economy is a bright spot to the region and a beacon for U.S. ag interests.

“Vietnam was chosen for obvious reasons,” McKinney said. “It’s an enormously, rapidly growing economy, and frankly there is rapidly growing interest in purchasing U.S. food and ag products.” According to the FAS, Vietnam’s real Gross Domestic Product growth was 7.1% in 2018, and its unemployment rate was just 1.9%. 

Since diplomatic relations were restored in 1995, Vietnam has grown from the 95th largest market for U.S. agricultural products to now the seventh largest market destination. The Vietnamese consumer looks favorably upon U.S. agricultural products and commodities, with our country ranking well above 90% in likability among the people. 

Not only has Vietnam’s middle-class grown, but the country has also seen a boom in the hotel, restaurant and tourism sectors. This is, in turn, driving the demand for imported proteins such as beef, pork, and poultry. U.S. beef exports to Vietnam, according to the FAS, grew 35% from 2017 to 2018, to nearly $82 million. 

One recent opportunity for Vietnam is the possibility to step up their purchases of U.S. cotton for their growing spinning industry. Since the U.S.-China trade war, there’s been some indications of hope that the country will add more textile finishing and garment factories—all using U.S. cotton.

“Cotton purchases year-to-date were $1.1 billion U.S. dollars,” McKinney said. “There is a major market here for U.S. cotton.” Of the total U.S. ag exports to Vietnam, 49% is just U.S. cotton. 

Youthful consumers

Vietnam, and the entire region, has a growing youth population. McKinney said that 60% of Vietnam’s population is under 35 years of age. The country has kept its unemployment at just 1.9%, according to FAS, and with stable inflation at nearly 3% that means more than 90% of its population is above the national poverty line. As their economic futures soar, young Vietnamese are demanding more protein sources.

“They are fully attentive to the need for protein, because they saw that their parents and grandparents didn’t get that growing up,” McKinney said. “There is a zest, a zeal, a demand for protein of all sorts.” Pork, beef and poultry demand is growing, to be sure, but also there is a growing taste for dairy products.

Vinamilk is the largest dairy company in Vietnam, and has a 50% market share of dairy sales in the region, McKinney said. Vinamilk purchases a great deal of dairy powder, whey, lactose and other dairy products from the U.S. and the company sees customers demanding more because of the high quality. In 2018, U.S. dairy exports to Vietnam were $145 million, a 29% increase from the year before. This occurred despite the preferential tariffs from trade agreements with New Zealand, Australia and Europe, according to the FAS.

The combination of increasing populations, increasing disposable income, more attention paid to food safety, and a growth in modern grocery outlets with improved cold chain infrastructure, mean southeast Asian consumers have more options than ever available for their grocery dollars. And they want the high quality of U.S. dairy.

Challenges to the region

Of course, the U.S. goes into these discussions with a full understanding the region is suffering from African swine fever, a highly contagious disease that decimates swine herds. McKinney said that while ASF continues to be a problem in the region, feedback the delegation heard was that Vietnamese officials and producers are taking prevention measures seriously to work toward containment.

McKinney said there’s a rough estimate that the Vietnamese swineherd is down 20% based on ASF, which could spell trouble for the upcoming Lunar New Year or Tet celebrations in Vietnam and throughout the region, considering pork, poultry and beef are typically celebratory dishes on the menu.

“U.S. pork, despite facing strong competition from Europe, saw tremendous growth in 2018, growing by 191% to $35 million,” the FAS reported. And U.S. poultry exports to Vietnam hit $110 million in 2018, a record.

Reaching out to more countries

McKinney said the next major mission similar to southeast Asia will be to Ghana, as there is great opportunity in Africa for U.S. agricultural interests. And then, there’s another mission set for Mexico, to further cement the trading relationship between our two nations, he said. 

In the past three years the trade scene for U.S. agricultural goods has been upended. Whether it’s a trade war with China, withdrawal from the Trans-Pacific Partnership agreement, or the renegotiated U.S.-Mexico-Canada Agreement, U.S. ag interests have had to overcome challenges on many fronts. Work like this is expanding their outreach to other nations and regions to keep the grain and livestock products moving out of the bins and freezers.

Jennifer M. Latzke can be reached at 620-227-1807 or [email protected].