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Next destination for Canadian soybeans: Vietnam

Count Vietnam as a new market opportunity for Canadian soybeans and a potential for premium demand by 2012.

As demand increases for premium quality Vietnamese soy beverages, Canada’s IP system will be in a better position to compete on an international level.

Although some may view Vietnam with a certain amount of suspicion or at least hesitation, the country has advanced quickly to take advantage of political reforms since 1986. That year, the ruling Communist Party of Vietnam implemented free market reforms, including private ownership of farms and companies, which had been under the rule of the government since 1976. Foreign investment also was encouraged, to the point where Vietnam became one of the fastest growing economies in the world.

In January 2007, the World Trade Organization welcomed Vietnam into its international circle and with it, the chance for Canadian exporters and growers to access a growing market. The present demand for soybeans is thought to be more tied to conventional quality soybeans as opposed to IP premium contracts; the disposable income of the average Vietnamese demands only that they eat, not eat well. But that is likely to change.

According to Michelle McMullen, manager with the Canadian Soybean Council, the speed with which news came of this emerging market potential was a little overwhelming. A trip to Asia in February 2007 included a stopover in Vietnam, and came at the suggestion of a Canadian trade commissioner. “We met with Bruce Howard, the lead in southeast Asia, and he talked about where Vietnam is now, as a market and where they will grow to in the future,” details McMullen. The Vietnamese junket marked at least three recent Asian tours and delegations in which she has participated since 2005. “Howard mentioned that while it is an emerging market, it may not become apparent for another five years.”

The chance to market to Vietnam is important on several different levels: from a strict calorie intake perspective, as an economy that processes soybeans into soy beverages, and as an exporter of those beverages to customers in other countries. At present, Vietnam imports most of its soybeans from Cambodia, which makes for an ideal opportunity for Canadian soybeans, even from a nondescript standpoint. It could spell some competition from the US, at least for conventional crush soybeans, particularly during this initial calorie intake phase. “The Vietnamese per capita gross domestic product (GDP) in 2005 was US$625, so I would say that their main priority is basic sustenance,” says McMullen. “But in regards to how quickly this effort to entice Vietnam moved ahead just from going there in March, is that a lot of the companies are interested in importing high quality soybeans.”

Everything in stages
Vietnam is home to several beverage makers and membership in the WTO has had its reciprocal effects. It has opened the door for the world to sell into Vietnam, while opening the eyes of many in that country as to the opportunity that awaits their processors.

Developing a business relationship with the Vietnamese has been coming together quickly, with both sides learning from visits to Asia and a return to Canada, says Jim Gowland (left).    Photo Courtesy Of Michelle McMullen, Canadian Soybean Council.

“That’s where the opportunity lies with Vietnam, they’re expanding into other markets, other than their domestic markets,” says Jim Gowland, current chair of the Canadian Soybean Council. “It may well be Japan’s market, or Hong Kong or Europe or even North America. In that situation, there’s the sudden recognition and realization that they need to look for a source of soybeans that has that whole segregation, traceability and quality aspects all the way through.”

If that spells into non-GMO, food grade quality soybeans with their corresponding premiums, all the better says Gowland, who is also the first vice-chair of the Ontario Soybean Growers and farms near Holyrood, Ontario.

Growers in the US continue to grapple with shortages of IP soybean seed and their infrastructure is not tailored to meet specific demands. This is where Canadian soybeans can make the largest impact. “We had four individuals from three companies that represented probably 75 percent of the soy beverage market in Vietnam, so there was some pretty major exposure there,” relates Gowland. “They were a little bit suspicious when we were in Vietnam back in February 2007 about all these things we were telling them, but now that we’ve shown them, I think they have a very clear picture of exactly what we can do.”

Confidence also an issue
During a tour of Japanese business people in 2006, the word ‘confidence’ was uttered constantly from all sides. Growers and processors spoke of confidence the Japanese had in Canadian soybeans and their handling. Japanese buyers and processors spoke of the confidence they had in building relationships with Canadian interests. Yet the hurdle in establishing confidence was time; it takes time to nurture the trust that comes with confidence in order to build those working relationships. Some may view it as a cultural divide, yet it is a reality that must be dealt with early on and throughout the process.

However, Linda Malcolmson does not see that same hurdle with the Vietnamese. While there might be some initial hesitation or reluctance, it is understandable; Vietnam is still under communist rule, although the freer market economy is making strides on a world stage. “It’s a cultural thing, and of course, you’re always going to have some period of time where creating that confidence is necessary,” says Malcolmson, the director of special crops, oilseeds and pulses with the Canadian International Grains Institute, based in Winnipeg. “From a confidence perspective, that won’t be an issue, but I think whether things will move as fast as we’d like them to will really depend on how much progress the company involved can make, breaking into those markets.”