Required Report - public distribution

**Date:** 7/28/2004

**GAIN Report Number:** VM4046

VM4046

**Vietnam**

**Cotton and Products**

**Annual**

**2004**

**Approved by:**

![](media/image1.wmf)Henry Schmick

U.S. Embassy

**Prepared by:**

Bui Thi Huong/Truong Minh Dao

**Report Highlights:** Vietnam's domestic cotton production has
increased, but not achieved the ambitious target set by the Vietnamese
Government. The Government had hoped domestic production would quickly
reach 10 percent of consumption; however that goal still looks several
years away. Vietnam annually imports more than 90,000 metric tons of
cotton. The United States has been the leading cotton supplier to
Vietnam over the last three consecutive years. This report includes
production, supply and distribution tables.

Includes PSD Changes: Yes

Includes Trade Matrix: No

Unscheduled Report

Hanoi \[VM1\]

\[VM\]

TABLE OF CONTENTS

[PRODUCTION 3](#production)

[The 2003/04 and 2004/2005 cotton crop
3](#the-200304-and-20042005-cotton-crop)

[Table 1: Vietnam cotton production
3](#table-1-vietnam-cotton-production)

[Vietnam's ecological zones for cotton
3](#vietnams-ecological-zones-for-cotton)

[The VCC proposing a National Cotton Development program
4](#the-vcc-proposing-a-national-cotton-development-program)

[Vietnam's target to grow 47,000 ha of cotton by 2005
4](#vietnams-target-to-grow-47000-ha-of-cotton-by-2005)

[TRADE 4](#trade)

[Vietnam's 2003 cotton imports 4](#vietnams-2003-cotton-imports)

[Table 2: Vietnam cotton imports CY-2000/2004
4](#table-2-vietnam-cotton-imports-cy-20002004)

[Table 3: Vietnam's 2001/02-2003/04 cotton imports by months
5](#table-3-vietnams-200102-200304-cotton-imports-by-months)

[Table 4: U.S. cotton exports to Vietnam
5](#table-4-u.s.-cotton-exports-to-vietnam)

[CONSUMPTION 6](#consumption)

[Table 5: Vietnam cotton PS&D table
6](#table-5-vietnam-cotton-psd-table)

[POLICY 6](#policy)

[Cotton over-quota tariffs. 6](#cotton-over-quota-tariffs.)

[Table 6: Vietnam's cotton over-quota import tariffs
7](#table-6-vietnams-cotton-over-quota-import-tariffs)

# PRODUCTION

**Vietnam's 2002/03 cotton production**.

According to the General Statistical Office (GSO) and the Ministry of
Agricultural and Rural Development (MARD), Vietnam's 2002/03 seed cotton
production was 39,897 metric tons (mt), equivalent to 11,399 mt of
cotton fiber, a year-on-year increase of nearly 14%.

Cotton is grown in five broad regions including: (1) Tay Nguyen, the
Central Highlands, (2) South-East provinces, (3) South-Central Coast
provinces, (4) North Mountainous provinces, and the (5) Mekong River
Delta, the provinces south of Ho Chi Minh City.

Dak Lak province in the Tay Nguyen Highland had the largest 2002/2003
planted cotton area of 16,120 ha. The province's seed cotton production
was 21,663 mt, accounting for 54% of Vietnam total cotton production.

Binh Thuan province in the South East region was the second biggest
area. The cotton area planted in the 2002/03 crop in Binh Thuan province
was 5,157 ha and the seed cotton production was 2,180 mt.

## The 2003/04 and 2004/2005 cotton crop

Vietnam's 2003/04 cotton area dropped to 30,000 ha, a drop of 12%
compared with the previous year, due mainly to unfavorable weather.
However, production only dropped by 7% due to improved crop yields.

Average cotton yields in Vietnam are low (about 1.1-1.2 mt/ha) but they
are improving. The 2003/04 cotton yields increased to 1.24 mt/ha (from
1.17 mt/ha in the 2002/03), due to the application of high-yield cotton
varieties and improvement of cotton farming practices.

Post estimates Vietnam's 2004/05 cotton area rebounded and reached
35,000 ha for a production of 43,750 mt of seed cotton equivalent to
12,500 MT of fiber cotton, a year-on-year increase of nearly 18 percent
(see table 1).

## Table 1: Vietnam cotton production

  ----------------------------- ------------- ------------- ----------------
                                **2002/03**   **2003/04**   **2004/05 est.**

  Crop area (ha)                34,100        30,000        35,000

  Crop yield (mt/ha)            1.17          1.24          1.25

  Cotton seed production (mt)   39,897        37,200        43,750

  Cotton fiber production (mt)  11,399        10,624        12,500
  ----------------------------- ------------- ------------- ----------------

Source: MARD and Post estimate

## Vietnam's ecological zones for cotton

Vietnam's Cotton Corporation (VCC) has defined two ecological zones
suitable for growing cotton. The first zone includes Dak Lak and Gia Lai
provinces in the Tay Nguyen (Central Highlands); and Vung Tau, Dong Nai
and Binh Phuoc in the South East region. The South Coastal provinces
from Quang Nam to Binh Thuan will form the second zone. Agricultural
land suitable for growing cotton could reach 70,000 ha and 80,000 ha in
the first and second zone respectively.

## The VCC proposing a National Cotton Development program

The VCC is petitioning the Government to establish a National Cotton
Development Program under coordination between the Ministry of Industry
and the MARD. The key objective of the program is to develop cooperation
between the cotton sector with local farmers on development of cotton
growing zones with intensive application of high technologies (to build
infrastructure including irrigation systems and use of high yielding
cotton varieties such as Bt cotton.)

## Vietnam's target to grow 47,000 ha of cotton by 2005

According to the VCC, Vietnam hopes to grow 47,000 ha of cotton by 2005
with production reaching 61,000 mt of seed cotton. By 2010, Vietnam
hopes domestic production will supply 60% of the country's total demand
for cotton by producing 162,000 of seed cotton (equivelant to 60 tmt of
fiber cotton) on an area of 90-100 tha.

# TRADE

## Vietnam's 2003 cotton imports

Vietnam's CY-2003 cotton imports decreased in volume but increased in
value due to higher import prices. According to Vietnam's Customs
Department, Vietnam imported about 88,000 mt of fiber cotton in CY-2003,
a year-on-year decrease of about 6.4%. The lower import volume was
mainly due to increased import prices and cotton yarn imports from South
Asia (mainly from Pakistan). However, the import value in CY-2003
reached about \$105 million, a year-on year increase of 14%. The Western
African countries and the United States remained key cotton suppliers to
Vietnam. The United States was the leading cotton exporter to Vietnam
with exports of nearly 30,000 MT (see table 2 below). Western African
Countries were in the second rank with total of about 38,000 MT. Other
suppliers are Australia, Uzbekistan, Turkey, and several other
countries.

Vietnam imported about 52,032 mt of cotton in the first five months of
2004 (see table 2) with an import value of \$78 million. The average
import price in the January-May, 2004 period was \$1,500/mt, about 64%
higher than the average import price of \$979/mt in CY-2002.

## Table 2: Vietnam cotton imports CY-2000/2004

  ----------- ------------- ------------ ------------ ------------ -------------------
  Countries   **2000**      **2001**     **2002**     **2003**     **2004(Jan-May)**

  CIS         21,748        19,995       20,000       4,500        N/A

  African     18,929        17,600       33,000       36,000       N/A

  USA         12,540        26,180       31,000       29,528       20,916

  Australia   6,023         13,200       2,200        999          N/A

  Syria       1,060         1,070        1,370        N/A          N/A

  China       1,577         1,310        1,991        N/A          N/A

  Unknown     10,955        9,470        4,439        16,973       N/A

  TOTAL       **72,832**    **88,825**   **94,000**   **88,000**   **52,023**
  ----------- ------------- ------------ ------------ ------------ -------------------

Given a recent dip in cotton prices, Vietnam's cotton imports in the
second quarter of 2004 may set a new record for total imports.

Vietnam's 2001/02-2003/04 monthly cotton imports are presented in table
3.

Post revises Vietnam's 2001/02 cotton imports to 94.4 tmt and the
2002/2003 imports to 93.2 tmt (see PS&D table)

## Table 3: Vietnam's 2001/02-2003/04 cotton imports by months

  ---------------------------- ---------------- ------------ -------------
                               2001/02          2002/03      2003/04

                               August 2001      August 2002  August 2003

  Aug.                         *7,517*          7,862        8,866

  Sep.                         *7,254*          7,414        6,231

  Oct.                         *8,700*          7,421        8,929

  Nov.                         *8,044*          9,792        9,000

  Dec.                         *7,981*           *7,500*     6,000

  Jan.                         8,821            5,573        5,227

  Feb.                         7,853            5,046        7,172

  March.                       9,041            7,828        7,174

  April                        4,148            9,719        15,069

  May.                         8,494            8,092        15,500

  Jun.                         7,031            8,952        \*\* 8,000

  July                         9,523            7,808        \*\* 8,000

  **Total**                    **94,407**       **93,200**   **105,168**
  ---------------------------- ---------------- ------------ -------------

Source: Vietnam Customs Department **\*\*** Estimates

During August/2003-May/2004 Vietnam imported about 89,168 mt of cotton.
Post estimates Vietnam 2003/04 cotton imports at 105 thousand metric
tons and the 2004/05 cotton imports at 110 thousand metric tons
respectively (see PS&D table)

According to U.S. trade data, in CY- 2003, U.S. cotton exports to
Vietnam declined to 29,528 mt from last year level of 30,068 mt (see
table 4). However, the export value increased by 21% to \$33 million
because of higher export prices.

U.S. cotton exports to Vietnam in the first five months of 2004
increased by 32% in volume and 34% in value respectively compared to
last year.

## Table 4: U.S. cotton exports to Vietnam

  ------------- ------------ --------------- ------------- ----------------
                **2001**     **2002**        **2003**      **2004
                                                           (Jan-May)**

  Quantity (mt) 26,181       30,068          29,528        20,916

  Value         28,788       27,154          33,010        34,418
  (\$1,000)                                                
  ------------- ------------ --------------- ------------- ----------------

Source: BICO

Post estimates U.S. cotton exports to Vietnam will exceed 40 tmt in the
CY-2004 due to reasonable export prices.

# CONSUMPTION

Vietnam's domestic cotton consumption is climbing to meet increasing
demand from the expanding textile industry. Post estimates Vietnam's
2003/04 domestic cotton consumption at 110 tmt, an increase of 10%
compared with 2002/03 (see PS&D table). The cotton demand from the
textile industry in the 2004/05 production year is estimated at 125 tmt
(see PS&D table).

## Table 5: Vietnam cotton PS&D table

  ---------------------- ------------- ---------- ---------- ---------- ---------------- ---------- --
  **PSD Table**                                                                                     

  **Country**            **Vietnam**                                                                

  **Commodity**          **Cotton**                                     (HECTARES)(MT)              

                         2002          Revised    2003       Estimate   2004             Forecast   

                         USDA Official Post       USDA       Post       USDA Official    Post       
                         \[Old\]       Estimate   Official   Estimate   \[Old\]          Estimate   
                                       \[New\]    \[Old\]    \[New\]                     \[New\]    

  **Market Year Begin**                08/2002               08/2003                     08/2004    

  Area Planted           0             34,100     0          30,000     0                35,000     

  Area Harvested         35,000        34,100     37,000     30,000     0                35,000     

  Beginning Stocks       24,168        16,446     27,651     22,252     29,829           16,076     

  Production             12,193        11,399     13,064     10,624     0                12,500     

  Imports                111,041       93,200     119,750    105,000    0                110,000    

  TOTAL SUPPLY           147,402       122,252    160,465    126,076    29,829           133,576    

  Exports                0             0          0          0          0                0          

  USE Dom. Consumption   119,750       100,000    130,636    110,000    0                125,000    

  Loss Dom. Consumption  0             0          0          0          0                0          

  TOTAL Dom. Consumption 119,750       100,000    130,636    110,000    0                125,000    

  Ending Stocks          27,651        22,252     29,829     16,076     0                8,576      

  TOTAL DISTRIBUTION     147,401       122,252    160,465    126,076    0                133,576    
  ---------------------- ------------- ---------- ---------- ---------- ---------------- ---------- --

# POLICY

**Vietnam imposes import quota on cotton.**

In early 2004, the Ministry of Trade established 2004 import quotas for
several agricultural commodities, including cotton. However, the
Ministry did not quantify the cotton import quota amount as Vietnam's
textile industry relies heavily on cotton imports due to low domestic
cotton production (see VM 4002)

## Cotton over-quota tariffs.

On August 7, 2003 the Ministry of Finance issued Decision
No.126/2003/QD-BTC on over-quota tariffs charged in imports of tobacco,
salt and cotton. The over-quota tariff rates for cotton are presented in
the table 6.

## Table 6: Vietnam's cotton over-quota import tariffs 

  ---------- ---- ------- ----------------------------------------- -----------------
  **Code**                **Description**                           **Over-quota
                                                                    tariff (%)**

  5201       0    0       Cotton, not carded or combed              10

  5202                    Cotton waste (including yarn waste and     
                          garnetted stock)                          

  5202       10   0       \- Yarn waste (including thread waste)    20

                  ** **   \- Other                                   

  5202       91   0       \- - Garnetted stock                      20

  5202       99   0       \- - Other                                20

  5203       0    0       Cotton, carded or combed                  10
  ---------- ---- ------- ----------------------------------------- -----------------

Source: Ministry of Finance Decision No.126/2003/QD-BTC

Vietnam does not impose import tariffs on in-quota cotton.

**Vietnam is likely to grow Bt cotton soon**

According to different reports, Vietnam's scientists working in
biotechnology fields are waiting for the Government's approval of the
biosafety regulation to allow growing of Bt crops including cotton.
Reportedly, some research institutes are doing experiments on Bt crops
that are resistant to diseases, drought and salt.

Reportedly, VCC is waiting for the Government's permission to grow Bt
cotton to replace low yielding cotton varieties. By use of the Bt
varieties, Vietnam can increase cotton production considerably due to
its higher yields and disease resistant characteristics.