April 5, 2007

 

Asian feed mills risk low profit despite growth

 

 

Rising grain and oilseed prices look set to curb profits for South-east Asia's feed millers, despite soaring demand for animal feed.

 

A US soy expert was quoted as saying that although bird flu containment remains an issue in some countries, growth is nonetheless on the charts. The region can expected feed output growth of 10 to 15 percent in the poultry sectors in countries such as Thailand, while swine and aqua feed industries are booming in Vietnam.

 

But feed millers will be hard pressed to pass the higher costs to consumers. "They are resisting any price increases," the expert was quoted by Reuters in an interview.

 

Corn prices earlier this year climbed to its highest in a decade but news of the biggest planting of the grain in the United States in 63 years has undercut prices.

 

On Tuesday, the CBOT May contract fell US$0.085 cents to $3.46-25 per bushel. In the soymeal market, May soymeal fell $3.80 per tonne to $214.50, with the back months $1 to $4.20 weaker.

 

Thailand is enjoying buoyant demand for its processed poultry in Europe and Japan, which would help the country's commercial feed output rise 10 percent in 2007, to over 12 million tonnes from last year's 11 million.

 

Thailand's poultry sector is recovering as leading buyers resumed purchases of cooked and processed poultry from Thailand. The country has reported human deaths since the virus re-emerged in Asia in late 2003.

 

In Vietnam, the growth expected in swine and aqua feed is likely to offset any slowdown in demand from the poultry sector," he said, adding that commercial feed production in Vietnam would grow to over six million tonnes this year, from last year's under five million tonnes.

 

Feed demand in Indonesia could grow to eight million tonnes in 2007 from 7.5 million last year, demand for feed in Malaysia and the Philippines would remain steady at 4.5 million tonnes and 7.5 million tonnes respectively.

 

But strong exports of Argentine meal to the Philippines are giving a US soymeal exporters a headache.

 

US soymeal sales are seeing falling market share in the Philippines as competition from Argentine varieties are gaining a stronger hold in that South-east Asian market. US market share in the Philippines had dropped by about 30 percent from as high as 90 percent a few years ago, the expert said.

 

Traders are currently offering Argentine soymeal at around $280/tonne, including cost and freight, to South-east Asia. US soymeal is offered at $25-$27/tonne higher.

 

In the soybeans market, Indonesia bought around 1.3 million tonnes of the oilseed for food last year. "We still have the bulk of the market share for food soybeans in Indonesia, although we are not expecting the market to grow sharply," Lindblom said.