Vietnam Agriculture, Organic Fertilizer Use on the Rise
Vietnam’s Imported Organic Fertilizer Market, No Leading Companies, No Opportunity to Enter
Overview of Vietnam’s Organic Fertilizer Market
From 2015 to 2022, the production scale of Vietnam’s primary industry (agriculture, fisheries, etc.) is estimated to grow by an average of 5.6% annually, from USD 31.19 billion in 2015 to USD 46.89 billion in 2022.
<Trends in the production scale of Vietnam’s primary industry from 2015 to 2022>
(Unit: USD billion, %)
Note: The exchange rate of the State Bank of Vietnam (SBV) as of October 26, 2023 is 1 USD = 24,095 VND
[Source: General Statistics Office of Vietnam (GSO)]
In particular, although agricultural production is developing remarkably, the environmental pollution caused by the increased use of fertilizers is deepening the concerns of Vietnamese farmers and government authorities. In this situation, organic fertilizers are evaluated as a more environmentally friendly and sustainable alternative than the synthetic fertilizers commonly used in Vietnam.
According to Decree No. 04/VBHN-BNNPTNT on Fertilizer Management in Vietnam, organic fertilizers are fertilizers produced using natural organic substances as the main raw material, excluding synthetic organic substances, and are produced through physical processes such as drying, crushing, sieving, mixing, and moisturizing, or biological processes such as maturing, fermentation, and extraction.
Organic fertilizers used in agriculture in Vietnam are divided into traditional organic fertilizers and industrial organic fertilizers. Traditional organic fertilizers include animal fertilizers made from the excrement of livestock such as chickens, pigs, and cows; vegetable fertilizers made from vegetable waste such as food waste and leaves; and vermicompost made from earthworm excrement. Industrial organic fertilizers include bio-organic fertilizers, microbial organic fertilizers, and mineral organic fertilizers.
Growth factors of Vietnam’s organic fertilizer market
The organic fertilizer market in Vietnam has grown significantly in recent years due to the following factors:
The first factor is the increasing preference of suppliers. As Vietnamese farmers pursue more sustainable and environmentally friendly farming methods, the demand for organic fertilizers is increasing. In addition, consumers’ interest in organic food is also increasing. Currently, Vietnam is experiencing a growing middle class along with urbanization. According to the World Bank, the middle class in Vietnam is expected to reach 26% of the total population by 2026. They are sensitive to health products and are becoming more daring in spending on such products. In fact, according to a survey conducted by two research institutes (Rakuten Insight and Statista) on Vietnamese consumers this year, 51% of respondents said they are willing to consume organically grown food even if it costs up to 25% more than conventionally grown food.
<Survey on Vietnamese Consumers’ Purchasing Intention to Buy Organic Food (2023)>
(Unit: %)
[Source: Rakuten Insight, Statista]
The third factor is the trend of vegetable and flower cultivation in urban areas in Vietnam. Vietnamese people are relatively fond of flowers compared to other countries, so most households with balconies in urban areas grow ornamental plants, flowers, or vegetables. These households regularly apply fertilizers to provide nutrients to the plants, and organic fertilizers are more often used than inorganic fertilizers.
The last factor is government support for the organic fertilizer industry. The Vietnamese government has recognized the potential benefits for farmers and the environment and has supported the organic fertilizer industry. According to the ‘Action Plan to Increase Organic Fertilizer Production and Use 2022-2025’ of the Ministry of Agriculture and Rural Development (MARD), Vietnam aims to increase the use of organic fertilizers by 1.5 times in 2025 compared to 2020.
Vietnam Organic Fertilizer Market Size and Outlook
According to the Ministry of Agriculture and Rural Development of Vietnam, in 2020, the third year of the implementation of the ‘Organic Agriculture Development Project (OADP) 2020-2030’, the area of organic farming areas nationwide reached about 240,000 hectares. In terms of area, it has grown significantly compared to about 53,000 hectares in 2016, but in terms of production, it is still slow. According to another data from the Ministry of Agriculture and Rural Development, Vietnam uses more than 10 million tons of fertilizers annually. In 2020, Vietnam’s fertilizer consumption is estimated at 10.23 million tons, of which 7.6 million tons were inorganic fertilizers and 2.63 million tons were organic fertilizers. This seems to be because Vietnamese farmers still prefer to use inorganic fertilizers, raising doubts about the effectiveness of organic fertilizers rather than being concerned about the long-term harm of inorganic fertilizer abuse. According to Director V of H Company, which exports bananas to Japan, Korea, and China, organic fertilizers are more positive in terms of sustainability, but farmers may not be familiar with them yet because using organic fertilizers requires more effort than using inorganic fertilizers.
Organic products have high growth potential as demand for healthy products that do not contain chemicals such as synthetic fertilizers, pesticides, and growth promoters increases. With the global market share of organic products increasing, Vietnam also has a good opportunity to transition from traditional agriculture to organic agriculture. According to a market research firm (Modor Intelligence), Vietnam’s organic fertilizer market is expected to grow by an average of 6.7% per year from 2023 to 2028.
Production trends
Organic fertilizers produced in Vietnam are currently produced through traditional composting or industrial production. Composting mainly utilizes waste or crop residues from livestock farms or households, and it takes about 4 to 8 months to complete composting. In the case of industrial production, rapid composting technology is used on a large scale, and the processing period can be shortened to a few weeks.
According to Phung Ha, Secretary General of the Vietnam Fertilizer Association (VFA), by 2022, Vietnam will have a total of 792 fertilizer production facilities. Of these, 261 are inorganic fertilizer production facilities, 161 are organic fertilizer production facilities, and 308 are mixed organic and inorganic fertilizer production facilities.
According to VFA, organic fertilizer production in Vietnam has developed significantly in recent years. The production capacity of organic fertilizers in 2022 is 4.7 million tons, more than four times that of 2017 in five years. As of 2022, the actual production of organic fertilizers was 2.91 million tons, up 13.9% year-on-year, and the import volume was 460,000 tons.
The Vietnamese government is encouraging farmers to reduce the use of chemical fertilizers and switch to bio-based organic alternatives to practice green agriculture. In November 2022, the Ministry of Agriculture and Rural Development (MARD) set a target of increasing the proportion of organic fertilizer products licensed for distribution to 25% by 2025.
Competition Trends
The organic fertilizer market in Vietnam developed relatively late. This is because the production scale is small and the production facilities are scattered across the country, so the raw material supply line is not concentrated in one place. Nevertheless, Vietnamese fertilizer companies are gradually entering the organic fertilizer market. It seems that companies in the existing inorganic fertilizer market are trying to expand their industrial base to the organic fertilizer market. In the case of imported organic fertilizers, they are imported from manufacturers in various countries such as Japan, Korea, Australia, and the European Union (EU), and there is no leading company to date.
<Organic fertilizers distributed in the Vietnamese market>
(Unit: VND)
Note: The exchange rate of 1 USD = 24,095 VND from the State Bank of Vietnam (SBV) as of October 26, 2023
[Source: Shopee, Tiki]
Major Companies in the Vietnamese Organic Fertilizer Market
The following are Vietnamese companies with high local market share.
<Overview of Major Vietnamese Organic Fertilizer Companies>
[Data: Each company’s website]
National technical regulations on fertilizer quality
The National Technical Regulation on Fertilizer Quality (QCVN 01-189:2019/BNNPTNT) is specified in the Circular No. 09/2019/TT-BNNPTNT of the Ministry of Agriculture and Rural Development, which has been in effect since January 1, 2020. The Circular contains specific standards for the content of organic fertilizer ingredients, some of which are as follows:
<Standards for organic matter content in organic fertilizers>
[Data: QCVN 01-189:2019/BNNPTNT]
Cases of Korean companies entering the market and implications
Korean fertilizer companies can use strategies to encourage agricultural workers to use their products by cooperating with local agricultural development programs in Vietnam. In fact, there is a case of Nongbi Fertilizer Company successfully entering Vietnam by exporting organic fertilizer products Dig Gold and Poong Jak Yi, which has implemented this strategy.
FAVRI (Fruit and Vegetable Research Institute) Vietnam is implementing a project to test Nongbi’s Dig Gold and Poong Jak Yi products on rapeseed, melon, dragon fruit, tea and coffee in Northern Vietnam. Through this project, FAVRI is conducting training and technical assistance projects on how agricultural cooperatives in Vietnam should use these organic fertilizers.
The tea cooperative participating in the project announced that it has confirmed the quality of organic fertilizer distributed by Nongbi Company, including improving the condition of tea plants, increasing productivity by 20% and improving the taste of tea after processing.
Meanwhile, Director H of the Plant Protection Department of the Ministry of Agriculture and Rural Development of Vietnam said in an interview with the trade office, “The Ministry of Agriculture and Rural Development is cooperating with local administrative organizations to encourage farmers to produce and use organic fertilizers using available raw materials.” Accordingly, it is believed that domestic companies can also consider entering the local market through exports of organic fertilizer-related products, such as exporting compost preparations that enable them to produce compost using locally available agricultural waste.
Author: Tang Thi Thanh Lam
Data: Shopee, Tiki, Vietnam National Technical Regulation QCVN 01-189:2019/BNNPTNT, each company’s website, Clip Art Korea
<Copyright: ⓒ KOTRA & KOTRA Overseas Market News>
