November 22, 2024

 

What to expect from US' increased soybean meal supply to Southeast Asia?

During the Southeast Asia Agricultural Co-operators Conference (USACC24) held in Ho Chi Minh City, Vietnam, on September 9-11, US delegates delivered positive news that the United States is expected to boost soybean meal supplies by 26% by 2030.

 

In particular, the delegates are looking to divert soybean meal towards Southeast Asia, where they expect a booming livestock industry.

 

Will this move benefit the feed industry in Vietnam?

 

Over the past two years, feed companies have consistently reduced their selling prices. However, the average price remains higher than pre-COVID-19 levels. To Vietnamese farmers, soybean meal, a significant component in feed formulas, particularly for pig feed, contributes substantially to the cost of animal feed.

 

The reliance on traditional suppliers from Argentina and Brazil raises concerns about supply chain disruptions, which have become more frequent in recent years. Meanwhile, domestically produced soybean meal is being considered as a viable alternative to imported soybean meal.

 

Although Vietnam has the capacity to produce soybean meal, the domestic output of 13 million tonnes per year only meets about 35% of local demand. Industry insiders suggest that the actual figure could be even lower, and the quality and price of domestic products are not as stable as those imported.

 

Another potential source is domestic fishmeal, but this also fails to meet demand in terms of quality and quantity.

 

In this context, additional US soybean meal are expected to contribute to the availability of supply in Vietnam.

 

US' booming crushing capacity 

 

In 2023, three crushing plants in the US expanded their operations, and a new plant was established in North Dakota. Furthermore, 12 new soybean crushing plants are expected to be in operation by 2026. This means that the US crushing industry will have an additional 12.7 million tonnes to supply to the market, allowing it to increase exports by 53% compared to the current level. 

 

Meanwhile, on May 21, the US Department of Agriculture announced that the Regional Agriculture Promotion Program would allocate US$300 million in funds to bolster US agricultural exports. The programme aims to streamline the transportation of grains and soybeans to South and Southeast Asia, Latin America, the Middle East, and Africa. In relation to this development, barge and rail transportation play a crucial role in efficiently handling high volumes, and products exported via the  Pacific Northwest (PNW) shipping route are anticipated to be the most cost-effective.

 

The primary obstacle to procuring soybeans and grains is Vietnam's import tax, currently set at 2%. Proposals to decrease the import tax on soybean meal to 0% have been put forward by the country's Ministry of Agriculture and Rural Development, the Ministry of Public Security, and several associations.

 

The Ministry of Finance is considering two options: maintaining the current tax rate or reducing it to 0%. The final decision has not been announced.

 

Outlook

 

Overall, there is a positive outlook for those purchasing US products in the near future. This optimism is supported by consistently high-quality grain, competitive prices due to ample supplies, and efficient shipping routes, particularly through the Pacific Northwest.

 

Alvaro A. Cordero, senior export trader at AGP Ag Processing in the US, emphasised that prices are expected to stay low for the next 2.5 to five years — unless major global events occur.

 

Cordero also noted that US producers will not face significant challenges in the upcoming year; despite low prices, they can still maintain their exports, which account for almost 15% of the total production — without having to depend too much on other countries' purchasing power.

EFL AG-DATA is a startup incubated by Singapore's Nanyang Technological University's Innovation and Enterprise Company (NTUitive) Incubator Program. It is developing an agricultural hub that will revolutionize the feed-to-meat supply chain in China and Southeast Asia countries through data-driven solutions. EFL's mission is to empower farms through innovative data-based services that solve complex problems and enhance productivity.

- Ha Thu, EFL AG-DATA