In the end of 2009 around 40% animal feed producers in Vietnam announced plant closures, about 20-30% of them reduced their production output to avoid losses caused by decreasing prices of raw material in the world agriculture market.
The rest of animal feed producers faced the challenge and sustained losses to retain customers.
Only in March 2009 about 100 feed producers (40% of the industry) faced operational deficiencies, while about 50 of them reported bankruptcy.
experienced a strong slowdown in demand for fish and seafood emerged when such developed countries as the USA, EU and Japan went into the global economic crisis.
Apart from oil-cake produced from soybean seeing a tough decline in prices, corn price was curtailed from $305 to $164 per ton, and fish meal price fell from $1,100 to $764 per ton during 2009.
Increase to 15m tonnes
According to the report
“Animal Feed Market in Vietnam: Business Report 2010
”, by 2020 Vietnam’s animal feed consumption will rise up to 15 million tons, while the annual consumption in this country is around 11 million tons of agricultural products and related waste products that are used in local animal feed.
Despite Vietnam lacks a comprehensive strategy of investment into the animal feed production, its feed market is highly dynamic and fragmented.
There are lots of small to mid size companies and 15 large producers being either foreign companies or joint ventures including Cargill, Charoen Pokphand, Proconco, Uni-President, ANT, Tomboy, and Grobest.
Their production volumes accounts for about 50% of animal feed manufactured in Vietnam.
Moreover, there are about 250 feed factories, 60% of which are private, 20% have foreign ownership and 15% are state governed.
Dong devaluation hurts equipment importers
Many manufacturing enterprises in Viet Nam have faced losses recently because of the devaluation of the Vietnamese dong against the US dollar.
The chairman and CEO of the Sai Gon Trade&Production Development Corp (Sadaco), Tran Quoc Manh, said the devaluation of the Vietnamese dong had caused higher prices of imported materials, transport charges and workers wages. As a result, total production costs have climbed.
Imported materials account for 30 to 50% of the total production cost, so profits from the increasing forex rate cannot offset the increase in input factors.
Exporters need dollars to pay for imports, so they sell dollars to banks at the formally quoted price. But they have complained that they must pay additional fees to buy dollars at quoted prices from banks.
Animal feed prices rise
Local farmers, who are facing difficulties because of the rising price of animal feed, have not been able to find a solution to the problem, as the animal-feed processing industry has had to rely more and more on imported materials.
Feed manufacturers say they have had no option but to raise prices.
Nguyen Xuan Huyen, director of Viet Tin JSC, said the price of materials rose sharply on the world market in the past two months, adding that maize went up from VND4,900/kg to VND6,200/kg while cassava rose from VND4,600/kg to VND5,600/kg.
Hai increased the prices of his products twice during the past two months, from VND7,500 to VND7,800 per kilogramme.
Huyen said higher production caused greater losses.
His animal feed processing line had been operating at 70% of the designed capacity, just "to maintain the staff and the factory's operation," he added.
Exchange-rate fluctuations and material price hikes are the major reasons behind the increases in animal feed prices.
Rely on imports
According to the Ministry of Agriculture and Rural Development's Animal Husbandry Department, 30% of the materials for the local feed processing industry are imported.
He added that imported meat had slashed farmers' profits and, at the same time, discouraged the development of support industries for the country's animal husbandry sector.