Good Morning Vietnam

R.E. HICKS

OCEAN SPRINGS, MISSISSIPPI

Here we are highlighting the fifth and last article on the top five rice producers in the world. The “Nam”, Please excuse my slang but this was the conflict of my generation. In researching this piece I was struck by the fact of how far along the Marxist/Socialist utopia has managed to prosper on the backs of the capitalists overlords. Another fact I encountered was the concept of poor farmers in the rice trade. I thought everyone in a Marxist economy were equal, but I digress. Please excuse my skepticism when it comes to government run enterprises. I do view Vietnam as one of the real culprits in the rice price wars as the “NAM” is the second largest exporter of rice behind Thailand. I think India has the ability to be a problem as well as they are growing an increasing larger surplus that has to go somewhere. These countries are the ones to watch because they not only raise rice as a staple, they are doing it to sell.

While Vietnam has hundreds of varieties of rice they are generally divided into two main growing types. Wet and dry. These designations do not indicate a grade or quality but simply denote how they are grown. Wet rice the dominate effort, is exactly what it sounds like. It is grown in paddies. The dry rice is generally confined to the poorer regions and from what I have heard can be irrigated as well. The two most popular types are Jasmine and sticky rice. Rice is the main staple food and is generally served in some manner with every meal. As with the other Asian countries it is difficult to pin down when production actually began, but a good guess would be five to seven thousand years ago.

Vietnam has three major rice production regions. The largest growing area in Vietnam is colloquially  known as the “rice bowl”.  This region is the “Big gun”. The area is centered around the Mekong Delta, a bit south of Saigon. (Ho Chi Minh city) The delta is filled with hundreds and hundreds of miles of rivers and canals. The Mekong Delta covers nearly four million hectares. This region accounts for about one half of the countries production and ninety percent of exportable rice. There is an estimated one to two million rice farmers here with another estimated fifteen million involved in the trade. Agricultural production is the main economic engine. The Mekong also produces seventy percent of the fruit and sixty percent of the seafood. In researching some facts for this article I stumbled across the VC Ministry of Agricultural website. I was encouraged by the fact Victor Charlie has fully embraced climate change and they are rapidly implementing various programs aimed at saving the world and the Delta. Perhaps these programs may help to set production back a notch. There was also an interesting piece on how they intend to target the lucrative US and EU markets. Chairman Ho would be proud. This area is what I would call the breadbasket or the Mid-West of Vietnam. Without the region I doubt Vietnam would be self-sufficient in food production. They would have, in my view, no chance for any exports. The government appears to be fully aware of this situation. Only time will tell if the steps they are taking for “Sustainable Green” will work.

 The second largest area is the Red River Basin. This region is centered in the north and includes the cities of Hanoi and Haiphong. While a significantly smaller region, it is more densely populated and includes many other industries. The region produces about twenty percent of the total rice production. This is what I would consider the area with what we call urban sprawl. The cities and industries are growing and slowly encroaching on productive agricultural lands. A process we see every day here in the US. The region is also more subject environmental issues due to the rising population and urbanization. The Red River basin as stated earlier is the smallest and most populated. Given this fact I do not see a large increase in production from this region, quite to the contrary, increase yields without better farming practices and genetics will likely keep production near present levels.

 The third and perhaps the most interesting region is what they call hill rice or dry rice. These areas grow rice not for the export market but apparently many farmers in these regions are subsistence farmers. They do not seem to me to be overly concerned about the export markets. They are growing rice to survive. Many of the parts of the socialist utopia lack basic necessities. For years these hill farmers lacked electricity, gas and many modern conveniences. Of the approximately sixty percent of the population involved in Vietnamese farming, this group ranks at the bottom. Estimates are as high as sixty one percent of all Southeast Asians lack adequate food on a daily basis. It does not take much to figure out these people are likely in the group. While this hill or dry land crop is not significant, it does do one thing, without it these people would be consuming exportable rice. So, they are an intergral part of the economic picture. This region is the one where most old fashioned farming practices are found.

I am always fascinated by the structural changes in centrally planned economies. Many years ago we were introduced to the Convergence Theory of Economics. At that time some economists applied it in the east vs west comparison. Planned economies will become freer, capitalist ones will become more restrictive. Perhaps, I cannot recall, but todays context seems to only apply to globalism and how less economically developed countries converge on developed ones. Both scenarios seem to be working. Either way this struck me to take a look deeper into the “NAM” in 1965 at the height of the war, Vietnam was a net importer of rice. After 1976 and with the help of the bureaucrats, production did not improve much. In 1986 the government started a lease policy allowing farmers to farm their “own” ground. Surprise production stabilized and started to climb. Fast forward forty years and Vietnam is the fifth largest rice producer and the second largest exporter behind Thailand. Amazing how the Marxists, time and time again have to revert to capitalism to make the system work. This effort reminds me of the NEP New Economic Policy the Leninists started during the revolution. The program worked so well all the NEP men went to the gulag.

I am diving deep into this because Vietnam is one of the countries we alluded to in an earlier piece. India is capable of producing more rice than they consume. This is a problem. Vietnam is worse as they are producing and exporting rice at a rapid pace. The country has partnered with other countries in the region. They are working hand in hand on how to produce more product.  We feel Vietnam will continue to be the country to watch. Vietnam is still a largely rural economy. While they have a long way to go to compete with other Asian economies when it comes to consumer goods. They are growing fast. While I doubt they will be entering the aerospace industry soon they are making strides. Until then farming is and always will be the easiest way to increase standards of living. Once you are self-sufficient in food you can turn your efforts to other industries.

In conclusion, this outfit worries me more than the others, their effort seems to me to be completely export driven. I do not believe they will stop. I do not know if they have reached peak output given size restrictions. Hopefully, future increases will be confined by better genetics and better farming practices. This should limit huge increases in output.   ∆

RICHARD HICKS IS THE MANAGING DIRECTOR OF THE R.E. HICKS GROUP LLC AN NFA REGISTERED INDEPENDENT IB.

I can be reached at 618-301-2244, 618-363-0252 sat phone 1-254-219-7336.

Note: Past Performance Is Not Indicative Of Future Results.