FEED Business Worldwide - June 2012

 

The foreign element in Vietnam's agribusiness miracle 

 

by Eric J. BROOKS

 

 

The past decade's rapid growth of Vietnamese agribusiness has seen an equally impressive expansion of feed crop inputs. But as is the case with other rapidly developing Asian economies, Vietnam's rapidly changing feed infrastructure and world grain market upheavals have restructured resulted in a restructuring of the quantity and type of feed inputs being sourced from abroad.

 

The industry's growth continued at a very rapid, though tapering off pace. Though annual feed output growth has 14.5% since 2006, 2011's 9% growth, while rapid by any measure, represents a deceleration of sorts. As expected, the quantum increases are outstripping domestically available feed resources: While the government's 5-year plan had projected a 5.64 million tonne corn harvest for 2011/12, it estimates that in actual fact, only 4.65 million tonnes was harvested.

 

That was partly due to 10% fewer acres than projected planted, as other crops offered higher returns than corn. It was also due to unusually wet growing weather during parts of last year.

 

 

 

Of course, when a developing country's feed grain harvest fails amid nearly 10% feed consumption growth, one usually expects skyrocketing corn imports but this did not happen: Instead, the USDA reports that, "In calendar year 2011, total corn import volume dropped dramatically -- by about one half -- down to 950,000 tons [from 1.8 million tonnes the previous year].  The drop was mainly due to the competitiveness of feed grade wheat prices compared to corn prices, which enticed feed manufacturers to switch from corn to wheat in order to cut production costs."

 

With over 90% of it imported from Australia, feed wheat's share of total wheat imports jumped from its usual 15% to 20% to roughly double this proportion. But the way feed wheat is being used is also changing. Formerly used in mostly by Vietnam's aquaculture sector as both a feed ingredient and pellet binding agent, wheat is now being fed to Vietnam's livestock lines.

 

What triggered this change was more than its usual substitution in place of corn: With cassava prices and exports skyrocketing, Vietnam's livestock sector began using feed wheat in place of cassava, broken rice and other alternative ingredients. Corn imports fell when several thousand tonnes of feed wheat were used in its place. With Australia still possessing very high inventories of feed grade wheat, Vietnam is strongly motivated to continue using feed wheat whenever possible.

 

Going forward, the high rate of feed wheat usage will continue but its impact on corn import growth will begin to wane. One reason for this is that wheat's share is limited by the maximum proportion that can be successfully used in place of corn. When that proportion is reached, Vietnam's fast growing feed demand implies that corn import growth will resume, in tandem with that of feed wheat. That is one reason why the USDA expects corn imports to bounce back to 1.5 million tonnes in the 2012/13 marketing year, while imports of wheat flatten out.