Animal feed market in 2023: Limited production capacity of raw materials
Overview of the animal feed market in early 2023
Prices have skyrocketed
Inflation has strongly impacted the prices of many goods, especially animal feed. According to feedback from animal feed factories, their customers are expecting a decrease in animal feed prices in 2023.
According to VIRAC‘s report in Q1/2023, the cost of animal feed has not yet cooled down and the price reduction is happening slower than expected. SSI assessed that “the cost of animal feed usually takes a certain amount of time to adjust downward because animal feed producers have had to bear high import costs for a long time, and the situation becomes even more difficult when the VND loses value against the USD.”
The sharp increase in prices of imported animal feed ingredients has been clearly reflected in the statistics. According to data from the General Department of Customs, as of December 15, 2022, Vietnam imported over 9 million tons of corn from abroad, a decrease of 700,000 tons compared to the same period in 2021, but the value reached USD 3.1 billion.
For soybean products, Vietnam imported about 1.7 million tons, a decrease of 200,000 tons compared to the same period in 2021. However, the value increased by over 110 million USD, reaching 1.2 billion USD. On average, imported soybeans cost 16.2 million dong/ton, which is about 2.8 million dong/ton more expensive than the price in 2021.
As for other animal feed and livestock ingredients, the country spent about 5.1 billion USD, an increase of over 440 million USD compared to the same period last year.
Imported raw material prices show no signs of decreasing
Deputy Minister of Agriculture and Rural Development, Phung Duc Tien, noted that Vietnam is an agricultural country, with many agricultural export products ranking first or second in the world. However, it is paradoxical that every year Vietnam still has to spend billions of USD importing animal feed ingredients.
During a recent working session between the leaders of the Ministry of Agriculture and Rural Development and livestock farmers in Dong Nai province, farm owners all expressed their concerns about the excessively high prices of animal feed, while the price of live pigs is decreasing, causing them to suffer losses.
According to Deputy Minister of Agriculture and Rural Development, Phung Duc Tien, the agriculture industry has been strongly directed towards developing animal feed ingredient production areas in the Central Highlands (corn, sweet potatoes) to reduce dependence on imports.
In addition, regulatory agencies have actively supported businesses in export procedures. Recently, Ba Huan Joint Stock Company successfully exported fresh eggs to Hong Kong – China with a volume of 1 container per week.
The production capacity of animal feed ingredients is still limited
Up to now, Vietnam has entered the top 10 in the world in terms of output of animal feed and aquatic products. The Livestock Department has also set a target for 2023, that the value of the livestock industry will continue to increase from 4.5% to 5.0%.
Although the overall prospects for the industry are forecasted to be optimistic and potential, to achieve the growth rate mentioned, producers will have to adapt better to the issues and difficulties that have arisen since the pandemic. Among them, taking control of animal feed ingredients is still a difficult problem for domestic businesses for many years.
Mr. Pham Thanh Duong, Deputy General Director of Vietnam Commodity Exchange (MXV), said: “Although Vietnam is an agricultural country, it actually has to import a large portion of agricultural products as raw materials for producing animal feed. These raw materials account for over 60% of the cost of finished animal feed, so any fluctuations in the global agricultural market will immediately affect the entire livestock chain in the country.”
Corn, soybeans, soybean meal, and wheat are the main agricultural products that Vietnamese businesses have to spend billions of USD to import every year. Currently, Vietnam is the third-largest importer of soybean meal and the sixth-largest importer of corn in the world.
In the livestock sector, breeding and animal feed are considered the two most basic and important conditions that determine competitiveness in the industry. To compete with foreign companies with abundant financial resources and advanced technology, factories, and producers still need long-term solutions for the raw material supply chain.
Businesses are still looking for solutions for the raw material supply chain
The Ministry of Agriculture and Rural Development affirms that it is pushing for strong cooperation with major livestock corporations to build production material areas, thereby reducing imports. This signal is expected to cool down the price of animal feed in the country in 2023, amid forecasts that global commodity prices will continue to rise due to political tensions and pandemics.
In this situation, the Ministry of Agriculture and Rural Development asserts that in 2023, it will promote cooperation with major livestock corporations such as De Heus or C.P to proactively control domestic raw materials. “The dependence on imported raw materials is expected to persist in the long run, if we do not have a comprehensive and systematic strategy, cooperation, and resolute participation in the construction of material areas by relevant parties,” said Deputy Minister Phung Duc Tien.
Currently, Mr. Willemink Arno, Director of Operations of De Heus Vietnam, said that the factors that determine whether a business buys raw materials domestically or not are price and quality. Among them, domestic corn often has a higher moisture content, more quality fluctuations, smaller grain size, more damaged and foreign objects, and frequent occurrence of mold.
“To compete with South American corn in terms of price and quality, Vietnamese corn needs to focus on reducing costs and increasing productivity, such as applying more advanced techniques in cultivation, using more effective fertilizers, improving processing technology (harvesting and drying), and post-harvest preservation. Especially narrowing the price gap between farmers and end buyers, that is reducing intermediaries,” emphasized Mr. Arno.
Mr. Arno also said that the company will focus on using by-products of cassava from starch manufacturing plants. De Heus is ready to invest in a feed mill in the Central Highlands if we can meet the quantity and quality of corn and cassava.
Forecast for the animal feed market in 2023
According to Mr. Duong Tat Thang, in the second quarter of 2023, the price of animal feed in Vietnam will decrease, partly easing the difficulties for livestock farmers. Currently, most of the import taxes on animal feed ingredients in Vietnam have been reduced to 0%, with only dry soybean oil still subject to a 2% tax, and it is recommended to reduce it to 0%. Meanwhile, the import prices of some types of production materials have decreased compared to 2022, such as soybeans, wheat, and corn.
Overall, to minimize the current inflation, people need to increase the efficiency of using animal feed and optimize the feed formula. Since feed accounts for the largest cost in livestock farming, improving the feed conversion ratio is extremely important for feed manufacturers and farmers.
These updates are from the “Animal Feed Report Q1/2023“. The report provides full information on the macro economy, supply and demand of the industry, related information, and forecasts from the latest updated data.
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