Top Pork Eater Gobbles More Imported Feed for Expanding Pig Herdby
Vietnam to top China per-capita consumption as incomes improve
Farmers unable to grow enough crops fuel record feed imports
The people of Vietnam are eating so much more pork these days that the country has become one of the world’s biggest importers of the soybean meal it needs to feed an ever-expanding herd of pigs.
New feed mills are being built by foreign companies including commodity giant Cargill Inc. and domestic conglomerates such as steelmaker Hoa Phat Group JSC, all hoping to profit as meat becomes a bigger part of daily diets. Per-capita consumption of pork has more than doubled since 2000 and will be the most of any country in the next seven years, the Organization for Economic Cooperation and Development estimates.
With local farmers unable to grow enough animal feed, imports of meal next year will be twice what they were in 2012, U.S. Department of Agriculture data show. A global crop surplus over the past few years has kept prices low, and rising incomes in Vietnam’s export-led economy mean people have more money to spend on meats and proteins in traditional dishes like bun cha, a meal of grilled pork and noodles.
“Although the animal-feed industry does not have high margins and competition is fierce, the scale is huge and there’s a lot of potential,” Tran Tuan Duong, the general director at Hoa Phat, said by e-mail. The company, which also has investments in construction, furniture, refrigeration and real estate, has started operations at its first feed mill and will open another one early next year.
While China consumes more pork by far than any other country, the amount eaten per person will soon be eclipsed by Vietnam, OECD data show. Per-capita use in Vietnam will reach 33.9 kilograms (75 pounds) by 2023, up from 29.9 kilograms now and more than the estimated 33.3 kilograms expected in China by then. More meat on the menu is a byproduct of economic growth in Vietnam. Per-capita gross domestic product jumped 42 percent over the past five years to $2,173.65 and is forecast to increase 43 percent to $3,105.41 in 2021, according to the International Monetary Fund.
“Along with Vietnam’s booming economy comes a growing middle class and their disposable incomes,” said Jorge Becerra, country representative and managing director of Cargill’s feed and nutrition business in Vietnam, where the company is building its 12th plant. “That is bringing about an increase in demand for animal proteins, which is fueling the demand for animal feed.”
The country had 28.3 million pigs as of June, up 3.9 percent from a year earlier, and it produces enough pork that some is exported, according to the agriculture ministry. The problem is that farmers can’t grow enough of the corn or soybeans needed for the expanding herds. That’s partly because of low yields and high production costs as well as limited land availability. Corn is the world’s most-common feed grain, followed by soybeans, which are crushed to make cooking oil, with the leftover meal sold to livestock producers.
The country has to buy about 70 percent of feed ingredients from overseas, according to Doan Xuan Truc, deputy chairman of the Animal Husbandry Association. Corn imports last year surged 59 percent to a record 7.55 million metric tons, while domestic production rose 1.5 percent to 5.28 million tons, according to Vietnam’s agriculture ministry. Purchases of soybean meal will reach an all-time high of 5.2 million tons in 2017, up from 2.28 million in 2012, USDA data show.
With more mills being built, Vietnam will import more whole soybeans for processing. Purchases will reach a record 1.75 million tons next year, according to the USDA. That’s helped make Vietnam the 11th-largest buyer of farm products from the U.S., the world’s top agricultural exporter.
Feed demand is expanding at more than 10 percent a year, and the country may need more than 20 million tons of industrial feed by 2018, Hoa Phat’s Duong said.
By 2022, the value of the domestic market for animal feed will reach $10.55 billion, according to a report last year by Grand View Research Inc. That would mark an increase of more than 50 percent from now, based on the estimate of $7 billion by Masan Group Corp., a Ho Chi Minh City-based food and consumer-product company that is also the country’s largest feed producer after Charoen Pokphand Group.
“The sector has become a lot more attractive in recent years,” said Nguyen Thi Thu Kim, an analyst at Saigon Securities Inc. in Ho Chi Minh City. “It’s now more essential to produce livestock on a big scale, so there’s more demand for industrial feed in replacement for home-made feed.”
Cargill, based in Minneapolis, opened an $8.5 million plant in May that was its 11th in Vietnam and will complete construction of a $30 million mill in the second half of 2017. Masan Group last year acquired feed makers Proconco and Anco. Dabaco Corp., based in Bac Ninh, Vietnam, is set to start operations this year at a plant that can churn out 200,000 tons annually and is planning two other 150,000-ton plants, targeting total capacity of 1 million tons by the end of 2019.
“It’s definitely a very exciting market with fierce competition,” said Le Ba Lich, chairman of Vietnam Animal Feed Association.