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Agriculture: Profit Does Not ‘Accompany’ Export Turnover

Agriculture: Profit Does Not ‘Accompany’ Export Turnover

This year’s agricultural exports have achieved encouraging results, but contrary to the optimistic figures regarding the total export value, the overall industry’s gross profit margin has been decreasing since 2020.

Vietnamese dragon fruit has been removed from supermarkets in the UK due to excessive pesticide residues.
Vietnamese dragon fruit has been removed from supermarkets in the UK due to excessive pesticide residues.

Record-Breaking Agricultural Exports in Vietnam

The Vietnamese agricultural sector has continuously broken export records, with results of over $48.6 billion and $53.22 billion in 2021 and 2022, respectively, resulting in a trade surplus of approximately $6 billion in 2021 and $8.5 billion in 2022. This has raised hopes that farmers can prosper from rice cultivation, flower farming, and aquaculture. Unfortunately, this remains just a dream.

A FiinGroup report on the Situation and Prospects of the Vietnamese Agricultural Industry in July 2023 indicates that the profit margin of the agricultural sector seems to be approaching saturation.

Contrary to the export value and trade surplus, the gross profit margin of the entire agricultural sector decreased from 13.2% in 2021 to 11.9% in 2022. For rice production, profits decreased from 17% to 13.5% in 2022. As for the coffee industry, the corresponding figures were 8.1% in 2021 and 6.6% in 2022.

According to FiinGroup experts, this trend reflects a decline in the industry’s profit-making ability due to escalating production costs, primarily driven by rising input costs such as fertilizers, seeds, and machinery.

Challenges Facing Vietnamese Agriculture and Prospects for Self-Sufficiency

Indeed, the limitations of the agricultural sector were acknowledged at a National Assembly meeting in June 2022. Specifically, despite Vietnam being an agricultural country, we have not been self-sufficient in critical agricultural production inputs. According to the government, Vietnam imports 60% of its food ingredients and 42% of fertilizers.

Regarding crop varieties, information from a workshop held in August 2022 showed that Vietnam is self-sufficient in only 60% of corn varieties and 10% of vegetable seed varieties.

The short-term future is not optimistic, according to FiinGroup. Experts predict a significant drop in profit prospects in the first half of 2023. Trade tensions and climate change risks are reducing the attractiveness of agricultural businesses. The number of new businesses is decreasing, and the gap between businesses ceasing operations and resuming activities is widening.

Guidelines for Coping and Creating Opportunities in Agriculture

Increasing self-sufficiency in agricultural production is a persistent goal. Of course, results cannot be achieved overnight.

Partnering with foreign-invested businesses (FDIs) in the agriculture sector is a trusted option for many. Choosing production support partners should be carefully considered. The advantages in terms of capital and technology of the FDI sector can be disadvantageous for domestic businesses.

Optimizing logistics and post-harvest technology can generate profits for agriculture. These measures also apply to agricultural product manufacturing. Addressing weaknesses in logistics and finding outlets for agricultural products are necessary.

Even for the “bright star” of durian, there have been reports of some batches of Vietnamese durians being too unripe to ripen or of poor quality in the markets of Japan and China. In September 2023, Vietnamese dragon fruit was removed from British supermarkets due to excessive pesticide residues.

Since 2022, Thailand has imposed a 3-year prison sentence and a 60,000 baht fine for unripe durians. Clearly, for Vietnamese agricultural exports, if you can’t do well, at least do it right.

Hoàng Hạnh Source: Kinh tế Sài Gòn online

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