The Time For Corn

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SaigonTimes English - 44 month(s) ago 16 readings

The world may suffer from a food crisis, the Food and Agriculture Organization has warned. Rice does not pose such a risk, but corn does. However, it may give an opportunity for corn, an underdog among Vietnam’s food plants.

The Time For Corn

By Nguyen Dinh Bich

The world may suffer from a food crisis, the Food and Agriculture Organization has warned. Rice does not pose such a risk, but corn does. However, it may give an opportunity for corn, an underdog among Vietnam’s food plants.

Statistics from the Food and Agriculture Organization (FAO) show that prices of the three major varieties of wheat sold by the U.S. and Argentina on the global market was US$349 per ton, a record high since April 2008. Prices of these two countries’ main varieties of corn also reached US$304 per ton in early March, an all-time record. On the contrary, the price of Thai 100% B rice now sells for US$531 per ton. Although the price of this high quality rice is slightly higher than the average of US$518 per ton in 2010, it has dropped for three consecutive months, way below the average of US$695 in 2008.

The price increases of corn and wheat are unusual on the global scale. On average, since 2000, the global monthly corn price has been only 38.5% of the rice price. However, it has now soared to 57.3%, a jump of 18.8 percentage points. In case of wheat, the corresponding figures are 73.2%, 89.75 and 16.5 percentage points, respectively.

The change in the rank stems from the fact that the three “baskets” are in opposite position. A forecast released in mid-March by the U.S. Department of Agriculture indicates that although the global rice consumption has increased steadily, it is outpaced by rice production. Rice reserves will therefore rise from 89 days of consumption to 91 days. This is the fourth crop in a row when the world’s “rice basket” becomes fuller. In comparison, during the 2007-2008 crops, rice reserves lasted for only 65 days.

Meanwhile, as wheat production this year is forecast to fall by almost 35 million tons, its consumption will rise by 10.5 million tons. The steep rise will cut the global wheat reserves from 110 days to 100 days. Corn is even far worse off. The global corn production this year will see a drop in two consecutive years, down by 27.7 million tons. In reverse, consumption has been climbed for eight years in a row. The result is that the global corn reserves will fall to 51 days, a decrease in three consecutive years.

In the backdrop of the global food market, Vietnam’s animal husbandry and animal feed industry which have been heavily dependent upon imports are facing even more awesome tasks. Statistics from FAO and the International Trade Center show that Vietnam imported 50,000 tons of corn in 2001, and 670,000 tons in 2008. This volume soared to almost 1.5 million tons in 2009. Similarly, only 742,000 tons of wheat was imported in 2001, but the figure rose to 2.2 million tons in 2010.

While importing wheat is the only way to satisfy the domestic demand for this kind of food, imported corn is mostly used for the local animal feed industry. This is an absurdity of domestic production. According to Prof. Tran Hong Uy, former director of the Institute for Corn Study and Development, international experts used to rank Vietnam’s hybrid corn development program as one of the best in the world. During the 12 years from 1995 to 2007, in this regard, production rose four times, productivity and cultivation area were double. However, ever since, it seems that the situation has grown out of policy planners’ control. Estimates by the Department of Animal Husbandry under the Ministry of Agriculture and Rural Development show that Vietnam needed some 4.5 million tons of corn for animal feed production, but only 3.8 million tons was available from domestic production, and 670,000 tons had to be imported. The projected import volumes are 912,00 tons in 2015 and more than 1 million tons by 2020.

In reality, corn production in recent years has lost its momentum. During the 2005-2009 period, corn cultivation area increased only 1.86% and productivity 5.25% a year, way too low versus other industrial plants. This has led to escalating corn and wheat imports. The situation may be worse off in the coming years as corn production rises by only 5.25% and the growth of the animal husbandry industry is projected to be 8-10% annually until 2020.

Therefore, without dramatic growth in both corn production and productivity, Vietnam will rise through the ranks to become a “middle-class” corn importer in the international market like Colombia, the Netherlands, Egypt, China and Spain.

The global corn price is projected to remain high in the long run. FAO has forecast that in this decade, the world’s corn production and consumption will rise from 1.1 billion tons to 1.3 billion tons, three-fourths of which will be used for animal feed. Meanwhile, the global corn price will fluctuate around the highest level in 2010.

FAO has predicted that instead of being 38.5% of the rice price, the world’s average corn price will rise to 44.4% from now till the end of the decade. The corresponding figures for wheat are 73.2% and 87%, respectively. In other words, corn will be the best food in terms of price in the remaining part of this decade.

At the end of the day, Vietnam should do away with its tepid strategy for corn as it has been the case in recent years. Instead, Vietnam should enthusiastically steep up her corn production to meet at least the domestic demand.

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