Time for Vietnamese Cassava to Leave the Billion-Dollar Club

Cassava

Japan

Vietnam

Published Jan 22, 2020

In spite of the obstacles to export Vietnamese cassava and cassava products to China, the average price is expected to remain at the same level or even increase, due to the supply shortage in Vietnam and Thailand.

Cassava, which is grown all over Vietnam, plays an important socio-economic role in the country. While the crop is a primary source for food and feed in the north of the country, in the south it is a raw material predominantly used for processing into a wide range of products. As such, the crop generates significant cash flow and employment in the rural sector. Despite having been considered a key export commodity of Vietnam, cassava will soon leave the billion-dollar club due to decreasing demand from China.

Poor Performance in Chinese Market

Vietnam is the fourth largest exporter of cassava and cassava products in the world after Thailand, Indonesia, and China, but its prestige as a major exporter is threatened these days.

China has been the largest export market for Vietnamese cassava for decades, accounting for 90% of Vietnam's export value. However, the export volume to China shrunk by 22% in 2019 compared to 2018. The export of Vietnamese cassava chips saw an even more dramatic decline: quantity decreased by 65% and value by 69.8%.

The main reason for the decline in exports is that China adjusted the exchange rate to a low level against USD, creating less incentives to import cassava, whilst domestic substitutes such as corn were sold for a low price. China's strict regulations on labeling and packaging for Vietnamese cassava starch products are presumed to have negative impacts as well.

Outlook on 2019/2020 Vietnamese Cassava Season

In spite of the obstacles to export to China, the average export prices of Vietnamese cassava and cassava products are expected to remain at the same level or even increase due to the supply shortage in Vietnam and Thailand.

In 2020, it is forecasted that exports of cassava and cassava products will remain difficult due to harsh competition with some Southeast Asian countries, such as Thailand, Laos, and Cambodia. China has sought to diversify its cassava imports, which has become increasingly important as an industrial raw material, in order to reduce dependency on Vietnamese suppliers. As a result of the government's efforts, Chinese import of cassava and cassava products from Cambodia and Laos increased by 74.5% and 246.6%, respectively. Experts in the sector, therefore, emphasize the necessity of efforts to sell to alternative markets, such as South Korea and Japan, to help Vietnam's agricultural industry reduce its dependence on the Chinese market.

In spite of the obstacles in China that Vietnam has been facing - the currency issue, trade barrier, and the competition with other Southeast Asian countries - the average export prices of cassavas and cassava products are expected to remain at the same level or even increase. Reduction of yield in Thailand, which suffered from drought and disease, as well as in the central highlands of Vietnam, are expected to lead to a 50% reduction in the harvest in the upcoming 2019/2020 season, and this will ultimately prevent the average price from falling.