Investing in processing is one of the most effective solutions in increasing added value for agricultural products, and the processing industry has proved its important role in agriculture amid the complicated developments of COVID-19.
|Workers at Hung Viet Co., Ltd. (Hai Duong Province) process carrots for export. (Photo: NDO/Quang Khanh)
Processing "rescuing" agricultural products
Since early February, the outbreak of COVID-19 in China has been causing delays in trade at border crossings, leading to congestion of farm produce such as dragon fruit and watermelon at border gates due to being unable to gain customs clearance. Hundreds of thousands of tonnes of dragon fruit in major production localities such as Binh Thuan and Long An are at risk. In such context, chef Kao Sieu Luc, who runs his ABC Bakery chain, has made “dragon fruit bread” using the fruit as an ingredient to help “rescue” farmers who could not export their dragon fruit to China. Kao Sieu Luc said that ABC developed a new formula, replacing 60% of water in the flour mixture with dragon fruit smoothies to produce batches of fresh pink bread. This innovation quickly attracted the attention of customers, forcing ABC to raise its production capacity to 20,000 loaves a day and limit customers to buying five pieces each turn. This interesting story shows that, thanks to deep processing, dragon fruit is not only a fresh export item but it has also become a material for a new best-selling product with higher value. In particular, it opens up a new direction for the use of dragon fruit products in the long run.
Also focusing on processing, ATK Vietnam Production and Trading Co., Ltd. (in Khanh Ha Commune, Thuong Tin District, Hanoi), which specialises in vegetable, tuber and fruit farming, has produced refined products, such as dried vegetable powder for children, detox products for adults and nutritional products for patients. The company’s current products, such as vegetable flour, vegetable noodles, herbal tea and rice vinegar, are trusted by consumers and bring about much higher economic value than the original products. In particular, local agricultural products no longer suffer from redundancy with cheap prices; on the contrary there are times the company has suffered shortage of raw materials for their production. Therefore, the company is also expanding its association with other raw material producing areas in different localities to ensure the regular manufacturing of its products.
From such stories, it can be seen that the processing of agricultural products to diversify them from the normal rice, fruits, vegetables, etc. has partly solved the problem of agricultural congestion at border gates and lack of cold storage. Processing always plays an important role in the development of agricultural production, and in the present context, it proves even more so. According to assessment from associations of agricultural product processing and export, amid the prevalence of COVID-19, processed products (canned, frozen, concentrated, dried) are expected to be see strong consumption rates due to convenience in transportation and consumption, especially in markets where Vietnam has already gained their trust that are affected by the COVID-19 epidemic, such as China, the Republic of Korea, Japan and the EU.
Actively accessing markets, adding value
Along with contributing to the "rescue" of agricultural products, processing also plays an important role in helping businesses to take initiative in consumption markets, thereby maintaining their commodity prices and raising the stature of Vietnamese agricultural products in the world market. Typically, it is necessary to mention the processing and exporting activities at Dong Giao Foodstuff Export JSC (DOVECO). According to DOVECO's Board Chairman Dinh Cao Khue, most of the company's products are deep-processed vegetables and tubers, with long shelf lives and suitable for many markets in the world. Therefore, there is not much concern about the issue of farm produce congestion in the material areas or other objective risks. That's why when COVID-19 broke out, most of the company's products have continued to be exported as normal. Agricultural products in raw material areas have been still purchased and processed by the company on schedule. Currently, DOVECO has invested in fruit and vegetable processing plants in the two provinces of Ninh Binh and Bac Giang, with the latest being the inauguration of a centre for processing fruit and vegetables in Gia Lai Province, with the capacity to process a wide range of vegetable, tuber and fruit products such as bananas, pineapples, dragon fruit, passion fruit, avocado, mango, durian, sweet corn, and sweet potato, among others.
Meanwhile, regarding seafood, Deputy General Secretary of Vietnam Association of Seafood Exporters and Producers (VASEP) Nguyen Hoai Nam stated that when export markets fluctuate, enterprises will have advantages if they promote processing. It is the same regarding the current situation, with the prevalence of COVID-19 forcing many countries to stop importing fresh products, opting for canned and frozen goods instead. Therefore, processed products are expected to continue to dominate the market in the near future. In addition, the preservation of deep-processed goods is also much more convenient than fresh goods, so businesses would minimise the risk from perishable inventory.
For the forestry industry, processing has brought very high added value to the sector, as stated by General Secretary of the Vietnam Timber and Forest Product Association, Ngo Sy Hoai. In 2019, export turnover from wood and wood products reached US$11.2 billion – an impressive figure for not only the nation but also the international market. Vietnam's wood processing industry has become a “hen that lays golden eggs”. This is because the industry has undergone a dramatic transition from outsourcing to proactively designing its own brands, from producing cheap goods to high value-added furniture. Currently, there have been Vietnamese businesses that signed interior decoration contracts worth tens of millions of US dollars for luxury hotels in the US, European countries or castles in the Middle East. It can be said that Vietnam has not only exported its wooden products but also brought its Vietnamese brand of architectural and living space to the world, and in turn has generated high economic value.
According to the Ministry of Agriculture and Rural Development (MARD), from 2013 to 2019, the agricultural product processing industry witnessed a strong development on both scale and level compared to the previous five years (2007-2012). Accordingly, the annual growth rate of added value was about 5-7% and exports accounted for about 65% of the total processing value. As a result, in recent years, eight groups of products with annual export turnover of US$1 billion or more have been maintained, of which four items have reached over US$3 billion in export turnover.
However, Vietnam’s agricultural product processing industry still suffers shortcomings and limitations, reflecting in the limited processing capacity in some product chains and lack of processing facilities, especially in peak harvest season. Meanwhile, the country’s processing technology level is only at the average compared to the world. These issues have lowered the quality of Vietnamese agricultural products and reduced their competitiveness in both the domestic and international markets.
Great challenges need major solutions
Regarding the challenges ahead for the agricultural processing industry, MARD Minister Nguyen Xuan Cuong said that Vietnam is one of the five countries in the world which are most affected by climate change, threatening production of agricultural and raw materials for processing. While the export market of processed products is increasingly demanding on quality and food safety and hygiene, Vietnam’s agricultural sector is facing a major obstacle given the fact that the country has not really formed a large modern agricultural production model.
Therefore, Minister Cuong emphasised the need for implementing major solutions, including the linking value chains in the production, processing and consumption of agricultural products to improve the ability to provide raw materials for processing, thus ensuring sufficient quantity and quality, as well as reasonable prices and stability for all items. On the basis of consumption markets (including market shares, tastes, prices), it is important to promote comparative advantages of each region and take into account the impacts of climate change to build concentrated raw material areas, with priority given to the development of the key national products and commodities with insufficient raw materials for processing, such as seafood, wood and tea.
Alongside this comes the promotion of research and application of modern and high technology to production, while widely implementing quality and food safety management in the chain from the initial stage of farming to the final stage of preservation and processing, as well as gradually shifting from the model of inspection and examination of food quality and hygiene to an active prevention model with risk monitoring and classification in a public and transparent manner.
Vietnam is integrating more and more deeply into the world economy, especially with the participation of new generation of free trade agreements, which will create favourable conditions for the country’s agricultural products to expand to other markets when the tariff barriers have been removed as committed. However, at the same time, there are non-tariff barriers, including requirements for quality, deep processing content and food safety, which will surely be erected and will likely be increasingly dense, requiring Vietnam's agricultural sector to quickly implement large groups of solutions to develop the processing industry to adapt to and dominate export markets.
In the past 10 years, Vietnam's agro-forestry and fishery processing industry has made significant progress, with a growth rate of added value at about 5-7% a year and a large capacity agricultural product processing industry system has been established. All provinces and cities across the nation have developed processing enterprises for the main agro-forestry and aquatic products. Processing in agriculture, forestry and fishery has created direct jobs for about 1.6 million labourers with average monthly incomes ranging from VND5-7 million per person.
By 2030, Vietnam has set a target to bring its agro-forestry and fishery processing industry into among the Top 10 in the world, turning the nation into a global centre for deep processing and logistics of agricultural products. Specifically, an average growth rate for deep processed product output at 7% per year has been set, with the proportion of the output of deeply processed and high value-added products in all industries at 30% or higher.