Still A Volatile Market
By Bui Minh Nguyet & Pham Quang Dieu
The prices of meat and other foodstuffs were considered relatively stable in the third quarter of 2009. However, drastic changes in supply and demand are likely to push prices up again.
Figures from the General Department of Customs show that the import bill for meat and by-products has been falling year-on-year since early 2008. Import expenditures on meat plunged by a whopping 60% year-on-year in January 2009. The decrease in subsequent months ranged from 16% to 66%. In particular, August and September saw import spending on this product shrink drastically, by 62.8% and 66.1% respectively, due to new regulations concerning the quality of imported meat (Document 1167 and Document 1168, issued on July 14).
Apart from the new regulations on the quality of imported meat, the authorities have also imposed more stringent requirements regarding the necessary procedures for importing commodities. Consequently, meat imports dropped considerably in the third quarter and are forecast to continue dwindling in the rest of 2009.
The plummeting supply of imported meat may drive up domestic prices for meat. Still, this is necessary in order for consumers to have access to high-quality, hygienic meat and will help the animal husbandry industry develop in the long run, with a focus on transforming the profile and boosting the growth of the agricultural sector.
Feeble demand pulls down prices
Consumer demand in the third quarter of 2009 remained lackluster, causing the prices of meat and foodstuffs in big markets to remain fairly stable. The retail prices for pork rump slid to VND63,000 per kilo in HCM City in July 2009 and VND53,000 per kilo in Hanoi in the third quarter of 2009, down by some 14% from that in the second quarter. The price of processed chicken in Hanoi also plummeted to VND77,500 per kilo in August, down 7.2% month-on-month and 12.5% from that in June, and continued to slide by VND2,500 per kilo month-on-month to reach VND75,000 per kilo in September.
Meat prices remained low from late June to the end of the third quarter because of shrinking demand in the big markets. Coupled with high input costs, the animal husbandry industry ran into severe trouble. Data from the Ministry of Agriculture and Rural Development show that the sector only grew slowly in the third quarter. This, in turn, is expected to hamper the market for meat and other foodstuffs at the year’s end, when purchasing power is on the rise. After all, Vietnam’s market is plagued with alternating bouts of plunging and soaring prices due to the glaring divergence between supply and demand.
Market prospects
In late 2009, consumer demand is surging, causing the prices of necessities such as rice, meat and vegetables to jump. The ongoing economic recovery may also play a role, albeit not vital, in driving up prices. AGROMONITOR remarks that unstable supply is the main reason for the expected price hike. The devastating floods in central Vietnam in late September and early November, the small scale of the animal husbandry sector, the scarcity of breeding animals and costlier animal feed will cause meat supply to fluctuate at the end of the year and during the Lunar New Year.
The Ministry of Industry and Trade forecasts that consumer demand and prices will rise, albeit not dramatically. Figures from AGROMONITOR show that the prices of key foodstuffs such as pork rump and legs of beef are expected to climb by 3-5% in the fourth quarter. Chicken prices will rise more significantly (4-6%) as the domestic supply is unlikely to offset the fall in imports.
While the animal husbandry industry is gearing up for the Lunar New Year, big producers have decided to hike the price of animal feed. This may hamper the growth of the sector in the future. AGROMONITOR expects the growth of the animal husbandry industry in the fourth quarter to remain lackluster (about 4% quarter-on-quarter). In late 2009, as demand escalates, farmers will be able to increase prices in response to soaring input costs. Therefore, stability will be scarce in the market for foodstuffs in the Lunar New Year even though the authorities in Hanoi and HCM City are stockpiling commodities and plan to intervene where necessary.