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COMMENTARY & ANALYSIS

October 29, 2018
 
Myanmar feed, livestock and aquaculture: Primitive, with great potential
 
Poultry leads booming feed and meat production, complimented by pork and aquaculture. Compared to its Southeast Asian neighbors, Myanmar is underdeveloped and and brimming with longterm growth potential.
 
By Eric J. Brooks
 
An eFeedLink Hot Topic
 
 
With a per capita GDP below US$2,000 and an economy that has been growing by 8.7% annually since the 1990s, Myanmar's 55 million people, plentiful feed inputs and agribusiness potential have long fascinated multinationals. Now, the political and economic liberalization that commenced earlier this decade is bearing fruit.
 
Compared to national feed output of 15 to 20 million tonnes found in nearby Vietnam, Philippines or Thailand (which have populations of comparable size), Myanmar's will produce only 3.0 million tonnes of feed in 2018.

Even so, the country's fast economic growth and rising meat consumption promise at least two decades of 10%+ annual overall feed demand growth. The USDA for example, expects feed production to increase by at least 15% over the next two years and total 4.0 million tonnes by 2020 and nearly 8 million tonnes by 2024. What is more interesting is that commercial feed demand expansion rates of up to 15% annually will be the norm well into the 2020s.

This is because the USDA estimates that only 46% or slightly under 1.4 million tonnes of Myanmar's feed is produced commercially. Another 20% is created on-farm from nearby available inputs while 34% is raw feed ingredients. Hence, while overall feed demand will grow by more than 10% annually, commercial feed demand will grow up to 1.5 times more quickly, as it starts to account for a majority of the country's feed production.

The primitive state of Myanmar's feed sector also extends to its aquaculture industry. It is growing by more than 16% annually but its majority cultivation of traditional species such as carp, catfish and snake head is matched by farm scrap based feed materials with average protein content just under 20%. Over 40% of aquaculture production depends on uses raw inputs. Less than 60% of aqua feed production uses scientifically formulated mesh, sinking or floating feed pellets
 
By comparison, commercial feed mills produce sinking feed and floating pellets with protein content ranging from 20% to 28% for carp and 35% to 39 % for snakehead and catfish. With Myanmar shrimp production dominated by large, Southeast Asian based multinationals, their operations forgo low-quality supplies, frequently using feed imported from Thailand, Vietnam or China. Alongside the 500,000 tonnes of aqua feed locally produced, approximately 100,000 tonnes are imported.

The multinationals are thumbing their noses at domestic Myanmar aqua feed, who use oilseed meals based on peanuts, sesame, sunflower, cottonseed, aspergillus, niger, rapeseed and soybean. Over the long run, however, we can expect soymeal to be substituted in place of less digestible, less protein rich ingredients.

With its meat consumption dominated by poultry, the USDA estimates Myanmar's total 2018 feed output at 3.0 million tonnes. Approximately 70% of livestock feed or 1.75 million tonnes is consumed by poultry. Per capita chicken consumption was estimated by France's Larive Group to have risen from 3.9kg in 2010 to approximately 9kg today, 10kg by 2020 and 15kg by 2025.

Swine accounts for another 25% of livestock feed demand, consuming 0.625 million tonnes each respectively by swine. Aqua feed will total 500,000 tonnes with dairy, ducks and quail accounting for another 125,000 tonnes.

Myanmar has long been in the eye of agribusiness multinationals, who currently account for 60% of feed production. Southeast Asian based multinationals including Thailand's CP, Betagro and Indonesia's Japfa Comfeed opened their first Myanmar mills over 20 years ago in the 1990s. Since 2010, these established players have greatly expanded milling capacity while South Korea's Sunjin, Netherland's based De Heus, China's New Hope Group and Japan's Marubeni all made several rounds of investment. The latter have all made significant feed milling and livestock production investments over the last two years.

These new investments mean that CP, which once accounted for up to 40% of the country's feed production is still the dominant producer but only has a 22% share of the commercial feed market and accounts for a tenth of the country's entire feed. With mills near Yangon, Mandalay, Taunggyi and Kyauk Me provinces, CP is the only firm with a nationwide network of feed mills. The Myanmar Livestock Federation estimates CP produces 300,000 tonnes of feed annually.

Indonesia-based Japfa Comfeed is the second largest producer, with Yangon and Mandalay operations outputting up to 216,000 tonnes annually. New, state-of-the-art facilities by China's New Hope Group (50,500 tonnes/year), Japan's Marubeni (50,000 tonnes), South Korea-based Sunjin (36,000 tonnes) and Netherlands based De Heuss (30,000 tonnes) round out the foreign dominance of Myanmar's commercial feed output.

Among domestic players, Htoo Thit outputs up to 145,000 tonnes of feed annually while Khuang Tet, KT, Top and poultry integrator Crystal Diamond all output between 420,000 and 540,000 tonnes of feed annually.

Due to the integrated nature of their operations, poultry and aquaculture are the sectors most dominated by foreign feed companies. In the case of CP, alongside four feed mills, it operates five breeder farms, two hatcheries and the country's only poultry slaughterhouse. CP's operations span the entire supply chain, from contract corn farming in the country's Shan state through to company-sponsored roadside stalls and CP Freshmart stores, which distribute its chicken and seafood products.

Distribution-wise, CP's operations are complemented by retail-end meat customers such as McDonalds, Pizza Hut and KFC, all of whom established their first Myanmar restaurants during the last two years. These fast food giants promise to become as important a driver of feed and meat demand, just as they have already done so in neighboring East Asian nations.

Alongside these foreign giants, Marel Stork, Moba, Van Arsen, Pas Reform, Hendrix Genetics and other suppliers of feed milling, animal genetics, livestock rearing and meat processing technology are also rapidly establishing a presence. They are not just supplying the above multinational clients but also emerging domestic Myanmar feed mills such as Crystal Diamond, Tet Chaung and MRC.
 
The question however, is not the inevitable development of Myanmar meat, fish and livestock but how inputs will be sourced. On paper, the country does what its Southeast Asian neighbors used to do: Import soymeal while enjoying self-sufficiency in corn. For the past several years, it has exported 1.2 million tonnes of its 2.3 million tonne corn crop to China, using the other million tonnes in feed.

At the same time, its soymeal imports are growing rapidly: From a USDA estimated 7,600 tonnes in 2013, they grew to 91,000 tonnes in 2017 and are on track to total up to 200,000 tonnes in 2018. Nor is the surplus of corn harvests as great as it seems: If Myanmar completely stopped using broken rice or cassava and substituted corn in their places, most of its trade surplus in this feed grain would quickly disappear.

All this implies that as its feed demand and meat consumption grow, so will Myanmar's foreign dependence. Its dependence on imported protein meals will grow as surely as did that of neighboring countries such as Thailand, Indonesia and Vietnam. How this protein is imported however is still a political decision? Does it choose to build or attract foreign crushing plants, import soybeans or import ready-made soybean meal from India or Argentina?

Similarly, raising the quality of its feed depends on increasing corn inclusion rates. That implies that Myanmar will go the way of Vietnam, which went from minor corn exporter to world importer in ten years. Already importing everything from feed milling technology and poultry genetics, Myanmar is destined to become both a big importer of feed materials while its per capita meat consumption zooms upwards.
 


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