April 11, 2017
Nan Yang Rising: Southeast Asian takes over from China as a world agribusiness locomotive
By ERIC J. BROOKS
An eFeedLink Hot Topic
"Nan Yang": Literal translation is 'South Sea'. A Chinese term for the warm, fertile geographical region south of China, known as Southeast Asia
Southeast Asia's 600 million people are taking over from China as the main driver of growing world demand for feed and meat. This can be easily seen in Alltech's Global Feed Survey data. After growing at 10% to 30% annual rates for thirty years, the years 2011 through 2016 inclusive saw China's feed output grew by a paltry 1.3% annually.
By comparison, Southeast Asia's feed output expanded at a 9.3% pace over the past five years and by 10.8% in 2016. In quantitative terms, from 2011 through 2016 –even after adjusting for China having 2.25 times more people– ASEAN has been increasing its meat production tonnage volume approximately 3 times faster than China.
Based on Alltech Global Feed Survey statistics, from 50 million tonnes in 2011, the ten member ASEAN community's collective feed output grew to 77.3 million tonnes in 2016. That is 2.5 times more than the 31 million tonnes of feed produced by India's 1.2 billion in 2016. It will total an eFeedLink estimated 83 to 85 million tonnes this year.
Going forward, it would be a conservative to estimate that over the next 13 years, ASEAN's feed demand will grow by at least 7% annually and total 200 million tonnes by 2030. There are good reasons to believe that Southeast Asia's feed tonnage could be closer to 220 million tonnes by that time.
First, while low population countries such as Singapore, Malaysia and Brunei face decelerating meat demand growth, ASEAN contains many highly-populated nations whose rate of feed and livestock growth is only starting to accelerate into the 10%+ annual range.
Cambodia, Laos and Myanmar, which collectively hold 80 million people. That is twice the combined populations of slower growing Singapore, Malaysia and Brunei. This new wave of emerging economies will complement the average 6% to 8% growth rate that will be sustained in Vietnam, Indonesia, Thailand and Philippines.
Second, 480 million of Southeast Asia's 600 million people are at lower meat consumption levels than China was in the 1990s, when its feed output was expanding by 10%+ annually. From 2007 through 2016 inclusive, feed production in Thailand (+8.5), Indonesia(+10.4%), Vietnam (+16.1) and Myanmar (14.9%) grew at average annual rates near 10% or higher.
Southeast Asian agribusiness's immaturity relative to China –and greater growth potential– can be seen in its feed production per capita. Relative to America's 540kg of feed output per capita or Japan's 197kg, ASEAN's feed output per capita amounts to just 77kg. Myanmar (20kg), Indonesia (55kg), Philippines (120kg) and Vietnam (130kg) all have feed output per capita far below that of China (197kg).
Third, due to their technological immaturity, nations such as Indonesia, Vietnam, Myanmar, Cambodia and Laos will be substituting corn and soy in place of traditional farm yard scraps. This will push feed demand growth several percentage points ahead of their 5% to 8% meat consumption growth. Hence, it not surprising that relative to China's feeble 1.3% annual expansion, 2011 through 2016 saw feed output in Indonesia (10.4%), Myanmar (14.9%) and Vietnam (16.0%) rise at 10% to 16% annual rates.
Even Thailand, despite 235kg per capita feed output three times higher than the ASEAN average, saw mills expand output 8.5% annually in the years 2011 through 2016. That points to another Southeast Asian growth advantage: Once they accumulate sufficient agribusiness capital, many ASEAN nations will supplement rapid domestic growth with exports of poultry and seafood.
All this implies that Southeast Asian feed has at least 20 years of near 6% to 10% annual growth, with much of it occurring at the upper end of this range through the late 2020s.
Not not only are Southeast Asian nations following China's late 1990s growth path, they too are starting to have exert weight on the world market for feed inputs. From 4.95 million tonnes in 1990-91, Southeast Asia's total imports of corn, soya beans, soymeal and feed wheat increased at an 8.6% average annual rate, more than tripling to 18.6 million tonnes in 2006-07.
Then from 2007 through 2017, feed input imports accelerated to 10% annual growth. From 2006-07 through 2016-17, the volume of corn, soy and feed wheat imported nearly tripled to 48.1 million tonnes.
For example, from 2006-07 through 2016-17, Indonesian corn imports will have grown at a 19.9% annual rate, from 294,000 tonnes back then to 1.8 million this year. This is down from above 3 million tonnes several years ago, as the government imposed import barriers. That in turn induced massive inflows of feed wheat in place of formerly imported corn.
Similarly, despite using feed wheat whenever its price made it economically sensible to do so, Vietnam's corn imports increased at a 32% annual rate. They jumped from 500,000 tonnes in 2007 to a USDA estimated 8 million tonnes this year.
The Philippines, despite implementing several feed grain self-sufficiency programs, artificially high domestic prices and substitution of feed wheat, saw corn imports jump at a 28.8% annual rate over the past ten years, from 58,000 tonnes in 2007 to a USDA estimated 727,000 tonnes this year.
Thailand, traditionally the region's most self-sufficient large meat producer, saw its corn imports rise at a 9.1% annual pace, from 2007's 250,000 tonnes to a projected 600,000 tonnes this year.
The region has also seen sharp increases of oilseed-based feed inputs, be they soymeal or in the case of countries that opened new crushing facilities (eg. Vietnam, Indonesia), raw soybeans. After the opening and subsequent expansion of new crushing facilities from 2009 onwards, Vietnam soybean imports rose at a 32% annual rate, from 120,000 tonnes in 2007 to 1.75 million tonnes this year.
They did not increase their oilseed imports as rapidly as Vietnam but Philippines, Thailand and Indonesia all saw their imports of either soybeans or soymeal increase by 5% to 8% since 2007.
Clearly, Southeast Asia's appetite for meat greatly exceeds the feed crop growing capacity of its finite, water encircled land masses. It is this combination of low consumption, rapid economic growth, pent up demand and finite resources that defines Southeast Asia as the new global agribusiness growth locomotive.
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