September 9, 2016

Myanmar's feed and livestock boom: Murky numbers and limitless prospects


An eFeedLink Hot Topic
  • Despite unrealistic and contradictory official statistics, even by conservative estimates, feed demand has risen by 14% annually since 2012 and will keep rising by 10% through 2025
  • Asian integrators CP, Japfa Comfeed, New Hope Group lead this feed milling expansion, accounting for a majority of output
  • Suppliers like Van Arsen, Moba, Marel Stork, Pas Reform are bringing in production technology while fast food giants like McDonalds, KFC create new retail distribution channels
  • Poultry, aquaculture lead this expansion and will continue increasing at 10% to 15% annual rates through 2025
  • While the country enjoys a plentiful supply of feed grain inputs, high antibiotic levels in Myanmar's meat, fish, dairy products imply that huge productivity leaps, management changes lie ahead
With a population of approximately 53 million, per capita GDP of US$1,300, Burma's newly opened market is underdeveloped and ripe for several decades of exponential growth. Defined by cattle-friendly Buddhist and animist religious beliefs, seafood and poultry are its protein staples, with red meat consumption constrained by its low income level. The years after 2010 saw democracy begin to take root and the country opening itself up to foreign investment. With agriculture dominating the economy but at a very immature state, agribusiness investment has been dominated by feed milling investments,
The only problem is that Myanmar's official agribusiness statistics are even more immature than those of China or Vietnam's were several decades ago. Analysts who studied Myanmar agribusiness put its poultry consumption at around one-third the 35kg level of official government estimates. Moreover, UN FAO per capita consumption estimates imply that domestic production is less than 25% of official consumption levels.
Even private sector estimates vary widely and are inconsistent with ground level reports. For example, Alltech's feed survey for example, states that over the last five years, despite the FAO reporting 10%+ annual livestock growth and aquaculture increasing several times faster, feed production stayed constant during some of the last five years. Similarly, USDA statistics shows Myanmar using almost the same amount of corn in feed as five years ago –even though the country's feed production has doubled and new mills are being built.
Despite such apparent contradictions, ground level studies clearly imply the the following: Just like China in the early 1980s and 1990s or Vietnam in the 2000s, Myanmar agribusiness is embarking on two decades of 10%+ annual expansion, with its poultry sector leading the way and aquaculture providing an additional boost. According to UN FAO statistics, from 2011 through 2015, overall feed demand grew at a 14.1% annual rate.
Based on a report by Netherland's-based Larive International ("Poultry expert visit 15-19 March 2015"), per capita poultry consumption grew by a faster 15.2%, going from 4.6kg in 2012 to 7.0kg in 2015. With Myanmar's meat production isolated from the world economy and the population rising by 0.7%, chicken meat production must have increased by at approximately 16% annually over the past three years. On the basis of Larive's report, from slightly under a million tonnes in 2010, total feed production doubled, and will total over two million tonnes this year.
Moreover, production of poultry feed alone will need to rise by 1.0 to 1.5 million tonnes over the next decade to accommodate the projected rise in poultry demand, which accounts for over two-thirds of feed production. When other protein lines are taken into account, feed production should more than double from last year's 1.9 million tonnes into the 4.5 to 5.0 million tonne range by 2025.
This still leaves Myanmar far behind neighbours such as Thailand, Indonesia and Vietnam, which currently produce anywhere from 15 to 20 million tonnes of feed annually –but gives the country 20 years of rapid growth as it 'catches up' to its more developed ASEAN neighbours. –In fact feed mills must not only accommodate higher livestock numbers but also the substitution of high quality ingredients in place of traditional farm scraps. Hence, there is a high chance that feed production will exceed these conservative 10% annual expansion estimates
Myanmar has long been in the eye of agribusiness multinationals; and they already dominate its feed and meat production. The last few years have seen Thailand's CP and Indonesia's Japfa Comfeed (which opened their first Myanmar mills in the mid-1990s) being joined by the likes of South Korea's Sunjin, Netherland's based De Heus, China's New Hope Group and Japan's Marubeni. The latter have all made significant feed milling and livestock production investments over the last two years.
They are complimented 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 neighbouring 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.
Domestic players however, are still limited in scope. Owning one feed mill in Mandalay and another in Yangon, Crystal Diamond accounts for slightly over 10% of national poultry output. A distributor of livestock supplements and veterinary products, Crystal uses its parent stock and chick hatching facilities to supply surrounding broiler and layer farms.
Tet Chaung is the second largest domestic miller but is more of a regional player, mostly operating in Shan state. Collectively, Tet Chaung and third ranked MRC account for roughly a tenth of Myanmar's feed output and a slightly larger share of its poultry industry.
On the other hand, led by CP's 40% share of the market and Japfa's Comfeed's 20% of production, foreign firms account for approximately 70% of feed output. Poultry, which accounts for over two-thirds of meat consumption, is 75% supplied by foreign integrators. Although the country is an exporter of corn, in preparation for the day when it must step up its imports of protein meals, most of these mills are located close to Myanmar's coast, in either Shan state, Mandalay or near Yangon.
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.
Based on UN FAO figures, at 11kg, our estimate of Myanmar's 2015 per capita meat consumption (not including seafood) is still very low compared to the personal meat consumption levels found in neighbouring Vietnam (45kg), Philippines (34kg), Malaysia (52kg) or Singapore (71kg). Similarly, compared to the 21kg of eggs consumed in China and Japan, Myanmar's 2.5kg egg consumption has huge room to grow.
For example, according to Larive's study, as of 2015, only 3 million or slightly less than 6% of Myanmar's people had middle class income levels that can afford mass meat consumption. However, it estimates that 15 million or over 25% of the country's people will achieve this income level by 2025. This trend implies many years of pent-up, 10% growth in the country's feed and livestock production, similar to the growth phase Vietnam has been in for the last two decades.
Accounting for 70% of its meat consumption, poultry is coming to define Myanmar agribusiness. Larive's report estimates that from 2012 through 2014, per capita chicken consumption increased at a 15.2% annual rate, from 4.6kg in 2012 when its economic liberalization began, to 7.0kg in 2015. Going forward, Larive projects Myanmar's per capita chicken consumption to rise by 7.2% annually, to 14kg by 2025. This would put its chicken consumption per person ahead of China's and roughly on par with that of Thailand or Philippines.
Based on Larive's per capita consumption figures, Myanmar's population, negligible meat import volumes and its population rising 0.7% annually, this implies that chicken production jumped 16% annually from 241,800 tonnes in 2012 to 378,300 tonnes in 2015. Unless imports take away part of the market, should consumption keep rising at a 7.2% annual rate, Myanmar's domestic broiler meat production could exceed 800,000 tonnes in 2025.
But meat and poultry are only one side of Myanmar's agribusiness potential. Due to the fact government law does not allow the slaughter of cattle less than 16 years old, beef consumption is under 1kg while pork's expensive cost (relative to poultry and seafood) keeps it at approximately 2.5kg –which is still roughly triple its level of 25 years ago. Counterbalancing miniscule red meat consumption, conservative assessments of Myanmar's total per capita protein consumption are in the 35kg range, with over half this amount accounted for by seafood.
A December 2015 USAID study ("Aquaculture in Transition: Value Transformation, Fish and Food Security in Myanmar") puts its 2010 per capita seafood consumption at 18.9kg, with 3.9kg coming from aquaculture. The same study also estimated that aquaculture output rose at an 18% annual rate, jumping from slightly over 90,000 tonnes in 2000 to at least 940,000 tonnes by 2015.
With half of output exported, aquaculture provides no more than 6kg of the roughly 25kg of seafood currently consumed per capita in 2015. However, between the need to substitute aquaculture in place of declining wild caught seafood production and its low cost relative to meat, this sector will grow faster than the country's poultry demand.
At this time, over 70% of production is accounted for by carp-like species, which are traditionally raised in farm cast-offs such as swine manure. As production of value-added lines like shrimp and tilapia rise faster than that of carp and aqua feed is substituted in place of farm scraps, aqua feed production appears poised to expand even faster than that of poultry.
Best of all for Myanmar is that like neighbouring Thailand, it has a lot of arable land on which to grow the feed crops that this projected expansion requires. Helped along by hybrid seeds imported from Thailand, corn production jumped 483% from a USDA estimated 359,000 tonnes in 2000-01 to a projected 2.1 million tonnes this year.
This means that unlike neighbouring Vietnam, Philippines or Indonesia, Myanmar is self-sufficient in feed corn and will stay that way for a long time, too. Over 900,000 tonnes or 40% of each year's harvest is exported. Most of this ends up either in China or Thailand, as the latter's conglomerated take advantage of its low-cost supplies.
With 0.23 hectares of arable land per person, Myanmar has 72% of Thailand's arable land per person but 20% fewer people and only one-third its meat consumption. This implies that Myanmar can more than double its corn production to 5 million tonnes and triple its protein consumption before it loses its feed grain self-sufficiency.
In fact, the only dark shadow on Myanmar's prospects are its inability to properly manage its blessings: Larive's study noted, "a lack of knowledge on farm management", particularly with respect to "hygiene" and best practices and a failure to appreciate basic biosecurity management. Not surprisingly, given the low awareness of animal health and welfare, antibiotic usage is not merely high: They are used right up to the day of slaughter, resulting in high human antibiotic doses and potential resistance to human diseases.
Clearly, Myanmar, like China before it, needs to reinvent the way it raises animals –and do so while its feed and livestock demand is growing by more than 10% annually. When a country booms in this way, even its agribusiness difficulties create huge opportunities, both within Myanmar itself and for the multinational suppliers of agribusiness technology.

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