THE RICE SITUATION IN SOUTH VIETNAM

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78T02095R000800020039-7
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: May 31, 2006
• Sequence Number: 39
• Publication Date: November 1, 1968
• Content Type: OUTLINE

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'4 5
A. Varieties of Rice
B. Geographical Distribution
C. Output
D. Control of Production
III. Internal and Foreign Trade
A. Internal Movements
B. Foreign Trade
IV. Consumption
A. Population
B. Per Capita Consumption
C. VC/NVA Rice Consumption
V. The Situation in 1968
State, USAID, ARMY reviews completed
On file Department of Agriculture release instructions
apply.
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The Rice Situation in South Vietnam
I. Introduction
The production of rice is by far the single most important economic
activity in the agricultural economy of South Vietnam. Roughly three-
quarters of the agricultural land presently under cultivation is devoted
to the growing of rice and roughly three-fifths of the total Vietnamese
labor force is actively engaged in rice cultivation. Moreover, rice is
an important commodity consumed, accounting for roughly 30 percent of
the total cash expenditures on food in South Vietnam. Because of the
importance of rice in the overall economy of South Vietnam, a great deal
of attention has been devoted to the rice situation by both the GVN and
US in recent years. The problem appears to be largely one of declining
availability of domestically-produced rice which has led a country that
was once an exporter of rice to become a major importer.
Unfortunately, statistics on rice production and consumption and
other data, such as population, necessary to assess the rice situation
are of poor quality. In the absence of reliable data, fanciful theories
on the rice situation in South Vietnam abound, especially on the problem
of divergence between official production figures and the amount of rice
that comes to market. It has been assumed by some, for example, that
large quantities of rice have escaped the country or that the Viet Cong
have absorbed large quantities of rice. While there is much uncertainty,
particularly in view of the fact that two key aggregates -- rice production
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and population -- are unknown with any degree of precision, it is
possible to discern the broad lines of the rice situation. This memo-
randum will analyze the situation by presenting some of the salient
characteristics of the present rice economy, and by attempting to
reconcile different views on the availability of rice in South Vietnam.
II. Production
A. Varieties of Rice
More than 1,500 varieties of rice are grown in Vietnam, but for
ease of classification they can be divided into four major types:
single transplant, double transplant, floating, and upland. Single
transplant rice is the most commonly grown, accounting for an estimated
70 percent of total cultivated rice lands. Double transplant rice is
grown on 4 percent and upland rice on 5 percent of rice lands. The
remainder of the rice area is planted in floating red rice which is an
inferior type grown mainly in the five delta provinces along the
Cambodian border.
The main planting season throughout the country begins in June
and the major harvesting period extends from September through February,
although some rice is harvested in South Vietnam every month of the year.
Because of the shortage of water during the three to four month dry
season (December-March), most rice farmers produce only one crop of rice
annually. Some double cropping takes place along the central lowlands.
B. Geographical Distribution
Rice is grown in all 44 provinces of South Vietnam, but as Table
1 indicates, most of this rice is produced in the southern regions,
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primarily in the delta area. In 1967, for example, roughly two-thirds
of the crop was produced in IV Corps, 15 percent in III Corps, 10
percent in II Corps, and 9 percent in I Corps. Traditionally, the delta
has been the surplus-producing area. Most of the remainder of South
Vietnam produces less than it consumes and consequently, imports rice
from the delta or from outside sources. (See Sections III and IV, below.)
Geographically, the rice producing areas of the delta can be
divided into three distinct sub-areas: (a) provinces along the Cambodian
border which are subject to annual floods that can cover rice fields
several feet in depth during the rainy season and which produce floating
rice, (b) provinces that border the sea where the major difficulty is
salt water intrusion during the dry season, and (c) provinces that lie
in the center of the delta where potential for increased production by
double cropping is good.
Production of Paddy, by Corps, 1963-68
(Percent)
Year)
I Corps II Corps
III Corps
IV Corps Tot
l
a
1963
8.5
8.9
15.7
66.9
100.0
1964
9.9
8.2
13.7
68.2
100.0
1965
9.1
9.8
13.4
67.7
100.0
1966
8.2
9.4
13.9
68.5
100.0
1967
8.7
9.7
15.5
66.1
100.0
1968
8.5
8.3
13.1
70.1
100.0
a. Crop year ends 31 May of year shown.
11 Unless otherwise indicated, years shown in this memorandum are crop
years ending on 31 May of the year shown.
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C. Output
Table 2 shows the area, production, and yield of rice in South
Vietnam since 1960. These statistics are official GVN statistics
gathered by the Agricultural Economics and Statistics Service of the
GVN Ministry of Agrarian Reform and Agriculture and based on sample
cutting and census techniques. It should be noted, however, that the
quality of these statistics is poor and has been declining for several
years partly because of increased insecurity and the difficulties of
maintaining a competent staff in view of the draft and more lucrative
employment in the private sector. Some AID officials maintain that GVN
data on rice production are overstated as a result of pressure on
province chiefs during the Diem regime to report a substantial increase
in output each year. Similarly, Douglas Dacy of the Institute for
Defense Analyses states "no serious student of Vietnam agriculture really
believes that rice output for the 1966/67 crop year was 4.3 million
metric tons. Rice output in Vietnam consistently has been overestimated
by the Ministry of Agriculture." At the same time, however, some
officials of the US Department of Agriculture (USDA) believe that
Vietnamese rice production data are understated. In late 1967, for
example, USDA's estimate of the 1966/67 crop was 20 percent higher than
the official estimate at that time and 12 percent above the final estimate
provided by the GVN and accepted by AID.
The difference in AID-USDA estimates of paddy production is
accentuated by the use of a 60 percent milling rate by AID ( and the GVN)
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in contrast to-a 70 percent milling rate used by USDA after completion
of a survey of Vietnamese mill operators in 1966. Use of a milling
rate of 70 percent to convert paddy to milled rice would increase the
data on milled rice output by about 17 percent in any given year. Thus,
if USDA's higher paddy production estimates and higher milling rate were
used, the data in Table 2 would be significantly different.
Under present security conditions in South Vietnam, a complete
survey of the agricultural area is impossible. Consequently, the
official GVN data on rice production, which are the only production data
that exist in any systematic form, are generally used throughout the US
government, and are accepted by I/SV. Even if the absolute values
involved are incorrect, the relative values probably are right as long
as the upward or downward bias in crop estimates is consistent.
It can readily be seen from Table 2 that with the exception of
1968 there has been a continuous decline in paddy production since 1964.
A substantial portion of this decline can be attributed to the war which
has reduced virtually all inputs used in rice production. In the last
ten years, the area under rice cultivation has decreased about 15 percent
from a high in 1957 of 2.7 million hectares to 2.3 million hectares in
1967 and 1968. Although some of this former rice land undoubtedly has
been shifted into other crops, a sizable portion of it presently is either
fallow or abandoned as a result of the fighting.
The agricultural labor
force also has been reduced because of the direct and indirect effects of
the war. Directly, both the creation of a large number of refugees and
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the draft have removed a large number of workers from the farm. Indirectly,
the wartime boom and prosperity in Saigon and other urban areas has
siphoned off a substantial number of people from the agricultural labor
force. Finally, the dislocations caused by the war have limited the
availability of purchased inputs such as fertilizer, seeds, insecticides,
tools, etc. Moreover, government priorities and complex administrative
procedures combined with the lack of strong agricultural organizations
through which rural demand could be expressed effectively have discouraged
importers' response to rural demand for these purchased items. Importers
have tended to concentrate on satisfying demand for consumer goods in
urban areas where quicker and higher profits could be realized.
Table 2
Rice Hectarage, Production, and Yield in South Vietnam
Area Cultivated
1960-68
Production
Milled Rice
Equivalent)
Yield
Year)
(1,000 hectares)
(1,000 M.T.)(1,000 M.T.)
(Tons/Hectare)
1960
2,400
5,092
3,055
2012
1961
2,318
4,955
2,973
2.14
19o2
2,353
4,607
2,764
1.96
1963
2,479
5,205
3,123
2.10
1964
2,538
5,327
3,196
2.10
1965
2,557
5,185
3,111
2.03
1966
2,429
4,822
2,893
1.99
1967
2,295
4,336
2,602
1.89
1968
2,296
4,688
2,813
2.04
a. Crop year ends 31 May of year shown.
b. Milling rate of 0.60.
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D. Control of Production
Estimates on the extent of VC control of rice land vary. In
late 1966 the embassy estimated that more than half of the delta's rice
land was under VC control. According to a MACV aerial rice survey
conducted during the main harvest period of 1966/67 about 37 percent of
the area under rice cultivation in the delta was under VC control, 27
percent was contested area, and 36 percent was controlled by the GVN.
Whatever the actual extent of VC control, it seems clear that VC efforts
to halt rice shipments to the market are limited, particularly in the
delta where the prime interest of the VC is revenue from the taxation of
rice production, sales, and transportation. Of course, VC taxation, by
widening the market margin, contributes to lower rice production in that
it lessens the peasants' incentive to produce. Outright seizures of
rice by the VC, however, probably are greatest in Central Vietnam where
the enemy is in greater need of rice for its own consumption. Enemy
consumption of rice is analyzed in Section IV, below.
III. Internal and Foreign Trade
A. Internal Movements
The demand for rice in urban areas and the 26 rice-deficit
provinces of eastern and central Vietnam (I-III Corps) must be met either
by shipments from the rice-surplus delta or by imports. Rapid urbani-
zation caused by the influx of refugees and the attraction of employment
in the war-inflated urban economies has resulted in a sharp increase in
urban rice demand. In 1967, the requirements of Saigon, the rice-deficit
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areas and the Army amounted to an estimated 150,000 tons per month, or
1,783,000 tons annually compared with an estimated 1,300,000 tons in
1964. Only 282,000 tons of this 1,783,000 ton need came out of the
delta in 1967; the remainder had to be met by production in the rice
deficit areas plus imports from outside sources. Table 3 sho:.rs delta
deliveries during the past decade.
Table 3
Rice Deliveries from the Delta to Saigon, 1958-68
(Thousands of Metric Tons of Milled Rice)
1958
426.5
1964
505.3
1959
575.6
1965
449.3
1960
562.3
1966
322.8
1961
553.8
1967
282.3
1962
580.3
1968
300.0 (est.)
1963
727.3
The decline in delta deliveries has been caused largely by the decline
in rice production. In addition, consumption of rice in the delta has
increased (see Section IV, below). Although it is sometimes asserted
that the decline in deliveries stems partly from illicit movements of
rice to Cambodia, efforts ;.o prove this theory and quantify the volume
of rice involved have been unsuccessful. Available evidence seems to
indicate-that traditional two-way border traffic between Cambodia and
South Vietnam continues as usual, but that large quantities of Vietnamese
rice.are not exported to Cambodia. Deliveries probably also are influenced
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by paddy prices, although here again, there never has been a meaningful
investigation of the supply response of Vietnamese rice production to
price incentives, or to any other stimuli. Developments thus far in
1968, however, indicate that lower paddy prices are stemming the flow of
rice out of the delta (see Section V, below).
B. Foreign Trade
Because of the decline in paddy production and deliveries, South
Vietnam's trade balance in rice has changed drastically. During the
period 1957-63 net exports of rice from South Vietnam ranged from a low
of 84,000 tons to a high of 340,000 tons annually and averaged 206,000
tons during the seven year period. Exports fell to 49,000 tons in 1964
and were banned in 1965 when South Vietnam imported 130,000 tons of rice.
Imports totaled 434,000 tons in 1966 and increased to 796,000 tons in
1967. According to current estimates, imports in 1968 will be about
775,000 tons. Most of this rice is supplied by the US under the Food for
Freedom program. In 1967, for example, about 90 percent of total
Vietnamese rice imports came from the US and it is estimated that the US
will provide more than 90 percent of Vietnamese rice imports again this
year. -
IV. Consumption
A. Population
The reasons for this dramatic shift in South Vietnam's trade
balance in rice are the decline in production discussed in Section II
and an increase in consumption. The two major factors governing rice
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consumption are the size of the population and its per capita consumption
of rice. No detailed population census has ever been taken in South
Vietnam. In 1936 and in 1960, however, estimates of the population were
made by the central government based on data supplied by village authori-
ties. Based largely on the growth rate yielded by these two estimates
and on the results of two limited population surveys conducted by the GVN
in 1962 and 1963, the US Mission has concluded that a population growth
rate of 2.5 percent annually is reasonable. Using this growth rate and
the GVN population figures for 1960 as a base, the population at the
beginning of 1968 would have been 17,145,000. According to HES data,
the population on 31 December 1967 was an estimated 17,157,370. This
memorandum employs the HES data for 1967 primarily because the estimate
is distributed by province. or earlier years, the US Mission estimates
have been used. In 1967 the population was distributed by Corps as
follows:
I Corps
3,065
II Corps
2,867
III Corps
3,137
IV Corps
5,883
Saigon
2,205
7
Total 172157
B. Per Capita Consumption
In 1962/63 the GVN National Institute of Statistics (NIS)
conducted an inquiry into rice consumption in South Vietnam. Household
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consumption in two cities (Saigon and Da Lat) and in five hamlets
scattered throughout the four Corps was examined during a one year
period. The amount of rice consumed ranged from 116 kilograms a year
per person in Saigon to 177 kilograms per capita annually in a fishing
village in Phuoc Tuy Province. Based on t're unweighted daily average
of rice consumption in the four hamlets plus Da Lat in the rice deficit
areas, consumption in the three northern rice deficit corps areas was
159 kilograms per capita per year.
For IV Corps the consumption was
found to be 472 grams daily per person, or 172 kilograms per year per
person, based on consumption in one hamlet in Phong Dinh Province.
Using this three-way average annual per capita breakdown -- 159 kilograms
for !-III Corps, 172 kilograms for IV Corps, and 116 kilograms for
Saigon -- annual consumption by Corps in 1967 would have been as follows
(in thousand metric tons):
I Corps
487.3
II Corps
455.9
III Corps
498.8
IV Corps
1,011.9
Saigon
255.8
Total
2,709.7
For South Vietnam as a whole, annual
rice consumption per capita in 1967
would have been 158 kilograms, which is close to the USDA estimate of
156 kilograms.
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Although this per capita rice consumption figure seems reasonable,
the NIS survey on which it is based was taken five years ago and the
number of hamlets studied during the survey was extremely small. A new
consumption estimate based on production, non-consumption uses of rice,
and internal and foreign trade in rice in presented in Table 4. This
table shows that in 1967 per capita consumption of rice ranged from a low
of 139 kilograms per capita in I and II Corps to a high of 186 kilograms
per capita in IV Corps with a country-wide average of 168 kilograms per
capita annually, or about one pound per day per person. This estimate
sees high compared with other basically rice-eating countries, but it
should be noted that in some of these other countries non-rice cereals
are consumed in quantity, whereas the consumption of non-rice cereal in
South Vietnam is very low. Table 4 excludes changes in stocks, but since
these changes would not vary by more than an estimated ? 100,000 tons,
the omission of stocks would not change the overall estimates to any
significant degree.
An analysis of rice availability based on this same methodology
for the years prior to 1967 shows that since 1962, consumption of rice
in South Vietnam has been rising steadily at an average annual rate of
about six percent. This growth in consumption is not surprising in view
of the increase in the population. Moreover, available data seem to
indicate that there is some income elasticity of demand for rice, parti-
cularly in the rapidly growing urban areas where incomes have increased.
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The wide variance in consumption figures illustrates the
impossibility of giving a definitive answer to the question of whether
or not there is a surplus or deficit of domestically produced rice in
South Vietnam. Those who maintain that there is a missing surplus of
rice cite the large difference between delta production and deliveries
to Saigon. If, however, the production figures are overstated, as
suggested earlier, there is no such surplus. If, on the other hand, the
production figures are correct, the case for a surplus of rice that
either is being consumed by the enemy or escaping the country can be
made using the 1962/63 consumption estimates.
The application of these
estimates to the rice availability data shown in Table 4 would yield an
unexplained surplus of 82;000 tons in the delta in 1967 and a country-
wide surplus of 167,000 tons. Part of this surplus, however, could be
accounted for by additions to stocks. Finally, the use of the higher
consumption estimates in Table 4 eliminates any surplus. The fact is
that the question is unanswerable given the nature of the data.
C. VC/NOVA Rice Cons rintion
Allowances for enemy rice consumption would not greatly alter
the estimate of rice availability presented in Table 4. The VC component
of enemy rice consumption is already accounted for by.:the use of total
population figures in Table 4. Estimates of rice consumption by NVA
forces are subject to a wide margin of error because of the lack of
precise data on the number of NVA troops present in South Vietnam, the
per capita rice consumption by these troops, and the amount of rice from
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external sources consumed bythese forces. Nevertheless, any plausible
estimate of these un? owns leads to the same conclusion: NVA consumption
of South Vietnamese rice is neglibible compared with the total availa-
bilities of rice presented in Table 4. Indeed, allowance for NVA rice
consumption would be lost in the rounding of the numbers in Table 4.
In order to illustrate the magnitudes involved, the following
assumptions are made for 1967; (a) the total number of NVA forces
present in South Vietnam on 31 December 1967 was 100,000 distributed
45,000 35,000 20,000 and 0 for !-IV Corps, respectively (estimate by
I/SV); (b) these forces consumed by Corps 8,300, 5,100, and 5,000 tons
of rice annually (estimate by I/SV), and (c) the NVA forces brought in
an estimated 60 tons of rice daily from external sources (estimate by
I/L). These assumptions lead to the conclusion that 100,000 NVA forces
consumed 18,400 tons of rice in 1967, or 184 kilograms daily per capita,
which was more than covered by the 22,000 tons brought into South Vietnam
in 1967. Since it is known, however, that NVA forces were actively
engaged in rice collection in I and II Corps, it appears that the
conclusion stated above greatly oversimplifies the problem. Undoubtedly,
NVA forces must have experienced local rice shortages which were not
covered by their external supplies. Indeed, there is no real basis to
assume that all external rice supplies went only to NVA forces. Regardless
of what rice exchanges between VC and NVA forces took place or what local
shortages were experienced, however, it seems clear that NVA procurement
of rice was insignificant in terms of the total rice availability picture
presented in Table 4.
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Population c
Milled Rice
Production"
I Corps
3.06
226,000
LI Corns
2.87
252,000
111 Corps
3.14
403,000
0
IV Corps
5.88
1,720,000
Total
17.15
2,602,000
Rice Availability, 1967
Rice Avail-
able For Internal
Cons>>mn-ption."b/ Snipments^
181,000
202,000
322,000
0 156,193
1,376,000
2,081,000
21,492_j-
104, 573
-282,258
0
Imports
Rice Avail-
able For
Consumption^
Annual Per
Capita
Consumption
Kilogx"BSmS
418,000
822,492
139
0
1,093,742
186
796,000
2,877,000
168
Metric tons.
a. Population on 31 Dec. 67, according to HES. b. Pr~~dc:.; ~ioti minis f-~ V official estimate of 20% for seed, feed, losses, etc.
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V. Tie S_tuation in 1968
Rice production was not directly affected by the Communist attacks
during Tet. Most of the rice harvest was completed before Tet and
agricultural officials reported an increase of eight percent above the
1967 crop. Almost all of this increase resulted from higher output in
IV Corps, particularly in those provinces that suffered heavy flood
da :.age in 1967. As a result of this increased output, a survey team
which toured the delta in mid-April 1968 reported that the surplus
available for delivery to Saigon could total more than 300,000 tons in
1968 compared.,with 282,000 tons in 1967 if price incentives and sufficient
transportation were available.
Deliveries during the first nine months of 1968, however, totaled
only 205,000 tons compared with 216,000 tons during the same period of
1967. This decline stems from the fact that the cost of transportation
and other costs that enter into the margin between Saigon rice prices
and delta paddy prices have increased sharply since Tp. Indeed, this
"transportation-plus" component of rice prices may well have doubled
since Tet. Simultaneous with the increase in these costs, the large stock
of imported rice held by the GVN in Saigon (185,500 tons at the end of
September) has exerted a depressing effect on rice prices. The continued
availability of this imported rice at a price subsidized by the government
prevents passing on increased transport costs to the consumer. It
appears that the merchant community is convinced that these imported
stocks are entirely adequate to permit the GVN to continue sales at the
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prices it has established. Thus, there will be no season"--l price increase
from which merchants can derive their profits. Moreover, there are real
costs involved in holding rice (storage and interest, for example).
Since merchants are unable to pass these costs onto the consumer in the
form of higher prices, they are attempting to cover the costs by passing
the burden back to the farmers in the form of prices discounted to allow
for these costs. This "discount" is undoubtedly in addition to the
reduction in paddy prices caused by increased transport costs. Indeed,
if the current paddy price is deflated by the cost-of-living index, the
result is a real paddy price that is the lowest since 1959. Under these
circumstances, the hope for high levels of delta deliveries this year
may not be fulfilled.
In order to stimulate the rice trade, the GVN purchased 40,000 tons
of rice in April from delta merchants at a price above the going market
LUvel. This purchase apparently was too small to have the desired
effect. In mid-July, therefore, the GVN decided to purchase another
60,000 tons of rice from delta merchants and to announce a guaranteed
support price to be maintained indefinitely. Not until mid-October,
however, did the GVN actually purchase the rice, and no more has been
said about announcing a guaranteed support price. However, unless the
government also acts soon to raise the price of imported US rice, this
one-time purchase may have no more effect on the rice market than did
the April purchase.
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