FEED Business Worldwide - May, 2012
Myanmar: Asian feed & livestock's new frontier
by F.E. OLIMPO and Eric J. BROOKS
After 50 years of military control, Mynamar's recent decision to embark on political reforms and open up to the world has generated intense interest among overseas investors. The Aung San Suu Kyi led opposition's recent winning in 43 out of 44 freely contested seats within the 664 member parliament represents a symbolic coming of age. Alongside such visible groundbreaking events, much has been going on behind the scenes â€“and not the least inside Myanmar's feed and livestock sector.
When countries get wealthy and embark on rapid economic growth, the take-off into prosperity is almost always led by the feed and livestock sector. As we shall see, this is now happening in Myanmar, but the best is yet to come.
Decades of exponential growth ahead
With a population of approximately 64 million, per capita GDP of US$701, ample untapped arable land and per capita meat consumption slightly over 10kg, Burma contains the same ripe elements for exponential feed and livestock expansion that China had in the early 1980s or Vietnam in the late 1990s. In fact, just like Thailand's advanced agribusiness sector was the first large foreign investor in both China and Vietnam, we find that they again have set up integrated operations just in time for the country to become a fashionable foreign investment destination.
Wedged between China, India and Thailand, Myanmar straddles the border between fast growing Southeast Asia and South Asia. Already exporting feed grain to neighbouring China, these three Asian neighbours have a combined population of more than 2 billion people, representing a great market for exports of meat, feed or both. This is in addition to Myanmar itself, which has a population equivalent to Thailand, more unused arable land and only about a third of its per capita meat consumption.
As can be expected, most of the money is to be made from boosting production and consumption while raising productivity. CIMB Research, a regional think tank run by the CIMB Bank, correctly points out that the country's agriculture is antiquated, constrained by "low yields, fixed pricing and state requisitioning." But that is exactly where the opportunity lies: When economic growth takes off in countries with low meat consumption and backward feed and livestock sector, decades of rapid agribusiness expansion with rapid, 10%+ growth in production, consumption and (in some cases) imports usually follow.
And if nothing else, Burma's livestock sector has a lot of catching up to do, which means unlimited opportunities for investors. Meat production in the country remains in the hands of backyard farmers even more so than in neighbouring Vietnam. Their herds or flocks are typically small - averaging only two for cattle, four for buffaloes and pigs, and 17 and 30, respectively, for poultry layers and broilers. Commercial production, be it dairy, meat or eggs, is limited largely to the peripheries of Yangon and Mandalay, two of Burma's main population centers.
With no religious prohibitions against any meat line, Dr. Khin Hlaing, joint secretary of the Myanmar Livestock Federation states that in 2011, Burma had a livestock inventory of 9.25 million pigs, 153 million chickens (both broilers and layers), 13.5 million cattle, 2.9 million buffaloes, 3.3 million goats, and over 600,000 sheep.
Agribusiness - the first foreign investor
The few commercial pig breeders that it has, he adds, get their grandparent stock from Thailand. According to him, most of Burma's commercial hog farms, though not as big as their Thai counterparts, produce similar high-quality swine to their Thai counterparts, some of which they export to China and India through border trade.
Some small-scale "backyard" pig breeders and fatteners are also in operation. However, most of these are village rice millers with access to cheap sources of rice by-products, the main feed for their animals.
This brings us to another important point about what it will take to develop Myanmar: Compared to the rest of Southeast Asia, traditional, less effective feed ingredients are used. This implies that as was the case first in China, later in Vietnam and Indonesia, the first phase of Myanmar's agribusiness industrialization will at some point lead to a vast increase in feed grain and oil seed imports. For while Burma remains self-sufficient in feed crops, it is doubtful it could remain this way should meat consumption take off the way it has in its neighbouring Asian countries.
With regards to the poultry sector, Dr. Hlaing reports that Myanmar has close to 3,000 commercial broiler farms with a broiler inventory of approximately 4.9 million head. And it has over 2,000 commercial layer farms, holding a collective inventory of 2.6 million egg laying hens As with the hog sector, the big bulk of Burma's poultry output comes from backyard or smallholder farms, numbering more than 276,000.
Supporting these commercial livestock operations are three government-owned feed mills and six privately owned feed makers and integrators. The latter include Thailand's CP and Indonesia-based Japfa Maykha Industries Limited. Their commercial feeds are sold and distributed across the country through a network of 102 feed retail shops. The pigs, broilers, layers and chicks they produce and the compound feeds which support them, constitute the main production base for Myanmar's commercial poultry and pig industries.
Per capita consumption same as China in 1980s, Vietnam in 1990s
With poverty-level, sub US$1,000 per capita income that's poised to grow rapidly in years to come, meat demand is very low, highly elastic but brimming with once-in-a-lifetime growth potential. At approximately 11kg, Myanmar has the second lowest per capita meat consumption among ASEAN (Association of Southeast Asian Nation) nations. It is even lower than that of Cambodia (13.9 kg) and Laos (15 kg), its two most impoverished Southeast Asian neighbours. In comparison, Singapore has 71.10 kg, the Philippines 31.10 kg and Thailand 30kg. In Southeast Asia, only Indonesian's 5kg per capita meat consumption is lower.
However, much like in Indonesia, Myanmar's relatively low per capita meat consumption is partly offset by high sea food consumption per capita. 38kg in the case of Indonesia and 18kg in Myanmar, where the lower sea food consumption is offset by the fact that Burmese consume twice as much meat as Indonesians.
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