Actual situation of animal feed industry
The output of animal feed industry production in Q1/2020 reached more than 4 thousand tons, of which the output of cattle feed reached nearly 3 thousand tons, dropped by 20.3% over the same period last year while the production of aquatic feed almost unchanged year over year.
Consumption of animal feed in Q1/2020 reached 4,497.7 thousand tons (down 2% compared to the same period in 2019), equivalent to VND 37,982 billion (down 4.25%).
Feed production, 2013 – Q1/2020
According to estimates, the import turnover of animal feed and raw materials of Vietnam in March 2020 reached US $ 294.2 million, up 8.2% compared to the previous month. For the whole Q1/2020, the import turnover of raw materials and animal feed reached US $ 806 million, down 18.1% compared to the same period in 2019. In early 2020, African pig cholera epidemic was controlled but the COVID-19 complicated development in the world has affected more or less to commercial activities. Especially the US and China – the two major suppliers of animal feed in Vietnam are suffering severely from the disease. The main import markets of Vietnam are still Argentina, USA, China and Brazil.
In Q1/2020, exports of animal feed and raw materials increased by 7% over the same period in 2019, reaching US $ 150.4 million, accounting for about 0.24% of the country’s total export turnover.
Mainland China has become the important export market of Vietnam’s animal feed and raw materials. In Q1/2020, exports to Chinese mainland market accounted for 19.2% of the proportion, reaching US $ 28.9 million.
Export of animal feed and raw materials, 2013 – Q1 / 2020
It is forecast that by 2020, the market size of Vietnam will reach US $ 10.55 billion and acquire 25-26 million tons of animal feed.
Despite being the major producer of animal feed in the region, Vietnam currently has no self-control in input materials as we import grains and additives up to ten million tons per year, which worth billions of dollars.
The major import markets of Vietnam’s animal feed materials are the US, South America, the EU, Russia, etc. From March 2020, being affected by the COVID-19 pandemic resulted in a lagging in trade and logistics systems. The pandemic is making the sea and road transport industry be extremely stagnant due to the strict disease control in exporting countries, many countries have even temporarily stopped operations.
In addition, world’s cereal material prices have been on an upward trend recently. In addition, the concern that materials supply affected by diseases may impact on material growing areas around the world. That has led to an increase in the cost of importing raw materials in both domestic and overseas, and put production and consumption in trouble.
The pandemic in the early 2020 influenced not only food production but also animal feed consumption. Social distancing and disease control methods also make transportation and circulation of domestic animal feed challenging.
Weakness compared to foreign enterprises
Vietnam animal feed market share, 2018
Besides, what matters is that domestic SMEs are disadvantaged in competitiveness compared to foreign enterprises. The disproportion in feed market shares of foreign and domestic enterprises is becoming more and more apparent. For instance, although accounting for 67.9% of the number of factories, the production output of domestic enterprises only accounts for about 40%. While factories belonged to foreign enterprises only account for 32.1%, the output accounts for about 60% and tends to increase sharply in the near future.
The amount of imported animal feed materials is large while the domestic raw materials such as seafood by-products, alcohol production by-products, rice grains and rice by-products, by-products of vegetables and sugar industry, etc. are not yet taken advantage of. Currently, the industry of processing complementary foods and additives in Vietnam has not developed. Most of the raw materials are imported, materials such as corn, wheat bran, especially rich protein food are also imported up to 75% of the demand..
During the time of the African swine cholera epidemic, many people turned to raising buffaloes, cows and goats (for rural and mountainous areas) or raised chickens applying bio-security method… which reduced pig feed intakes but rising food supply and veterinary medicines for buffalo, cows, goats, chickens and aquatic animals.
It can be seen that the animal feed industry will face many obstacles in the future.
Orientation of the Government
The development potential of Vietnam’s livestock industry still stays vacant, even though being the momentum of the animal feed industry. According to the Prime Minister’s development strategy to 2020, the animal husbandry industry will basically shift to farm and industrial production, meeting the majority of food quality and consumption needs. Currently, the livestock industry is still mainly under household production. As a result, productivity is often lower than that counterpart of developed countries with centralized livestock production. Meat demand in Vietnam is increasing strongly, which encourages people to expand their husbandry scale. From that, enterprises continue to invest, expand sequential operations, and increase capacity to meet domestic demand and export chickens to foreign markets.
The successful signing of bilateral and multilateral free trade agreements between Vietnam and other countries around the world provides an opportunity for animal feed enterprises to export products and import raw materials from member states with the most preferential tariffs. Even though this brings great opportunities, but also challenges businesses to compete with foreign rivals.
This industry attracts the highest domestic and foreign investment in agriculture, with nearly 100% of the capital are privately-owned. Animal feed is also the industry with the deepest international integration, with over 65 countries and territories exchanging and trading the most modern and latest equipment and technology.
Vietnam products appear in most of the big and famous animal feed companies in the world such as Cargill, CP, De Heus, Japfa, etc. Information of domestic raw material prices is connected daily with big materials trading centers in the world such as the America, Europe, etc.