Vietnam - Foreign feed firms in stampede

While Vietnamese animal feed production companies struggle to stay afloat amid financial and output woes, their foreign rivals have grabbed this opportunity to control the nation’s lucrative husbandry industry.

One such example is the Australian-Vietnamese joint venture animal feed maker Ausfeed, which in September said it was implementing its “From feed to food” plan in Vietnam by assorted investments. Ausfeed is now installing a second production line, with an annual capacity of 150,000 tonnes, following its feed plant constructed in late 2010 in central Binh Dinh province.

Ausfeed has also planned to establish in 2013 its own research and development centre to develop products for its own commercial production. After opening of this centre, Ausfeed would set up a commercial-scale meat processing plant.

The two facilities will be located in northern Hung Yen province, where in late last month, Ausfeed also began construction of a nucleus pig farm to develop genetics exclusively for the domestic pig industry. The farm is scheduled to come online by the end of this year.

“Ausfeed’s swelling business is just one typical example of foreign husbandry enterprises currently eating up Vietnam’s attractive livestock production market,” said a representative from the Ministry of Agriculture and Rural Development’s Livestock Production Department.

“Amid ever-increasing difficulties seriously hitting local enterprises, foreign companies have grabbed this opportunity to further penetrate into the local market, both in terms of animal feed and breeders,” the representative said.

Foreign conquests

Vietnam Husbandry Association’s chairman Nguyen Dang Vang said the market share of foreign feed suppliers in Vietnam has risen to 60 per cent now from 40 per cent last year. Vietnam currently has 57 foreign feed suppliers, 41 of which are wholly owned and the remaining 16 are joint-ventures with local partners.

“Meanwhile, the rest of the feed market was held by 170 Vietnamese suppliers and is now even being attacked by foreign companies, which are increasingly expanding their operations in Vietnam not only in feed but also in animal medicines and breeders,” Vang said.

For instance, Thai-backed CP Vietnam vice general director Suwes Wangrungarun said this company would put into operation two new feed mills, one in northern Hai Duong province ($50 million) and one in southern Ben Tre province (about $30 million) in early 2013.

In June 2012, CP Vietnam began construction of an additional animal feed mill in central Binh Dinh province, with total investment capital of $20 million, raising this company’s total feed mills in Vietnam to 10.

In May, CP Vietnam also put into operation its $17 million poultry processing factory in Hanoi’s Phu Nghia Industrial Park. This factory is the most modern one of the type in Vietnam.

CP Vietnam president Sooksunt Jiumjaiswanglerg said over the past five years, this company’s revenues annually had grown 29 per cent on average. It reported to achieve a 50 per cent growth year-on-year in 2011 to $1.43 billion in revenues, which were expected to rise by 15 per cent in 2012.

Besides CP Vietnam, in mid-August 2012, Japfa Hypor Genetics Company, a joint venture between Indonesia’s animal feed producer Japfa Comfeed Long An and global swine genetics company Hypor, opened a $5 million high quality pig breeding facility in southern Long An province. At present, Japfa Comfeed has five feed mills, over 20 breeding farms and hundreds of poultry and pig processing facilities nationwide.

Also in June 2012 China’s New Hope began construction of a new feed mill in Long An. In March, US-backed Cargill Vietnam, which said one of its business strategies in Vietnam was to “build a vehement distribution system covering Vietnam,” opened its ninth feed mill in Vietnam in northern Ha Nam province. This mill has total annual capacity of 240,000 tonnes, raising Cargill Vietnam’s total feed capacity to one million tonnes, which will be raised to 1.5 million tonnes by 2015.

Green Feed and Uni-President said they would continue expanding their business in Vietnam. For example, while seeing its output grow 33 per cent and profit grow 80 per cent last year against 2010, Green Feed said this year “will be a new big turning point” for it in the local market.

Uni-President said it would inaugurate a shrimp breeding factory in central Quang Tri province in December 2012, and at that time the company would have five factories producing snacks, wheat flour and animal feed in Vietnam. It also said it would soon open a branch in Hanoi.

According to Vietnam Association of Seafood Exporters and Producers, such foreign players as Taiwan’s Uni-President, CP Vietnam and France’s Tomboy were holding 95 per cent of shrimp feed market share in Vietnam. Meanwhile, Cargill, Thailand’s Green Feed and France’s Proconco were controlling 60 per cent of local tra fish feed market share. Also, foreign companies were occupying 70 per cent of the country’s breeder market share and 90 per cent of the local animal medicine market share.

Contrary performance

Pham Manh Quan, director of an animal feed company in Hung Yen, said like so many local companies, his company had since early this year been operating half of its capacity due to difficulties.

“Prices of meat at the marketplace have reduced 20 per cent, discouraging farmers from continuing their farming. So our company’s output has been slashed. In this year’s remaining three months, material prices are expected to rise by 20-25 per cent against early this year. I am not sure where our company will go,” Quan said.

Meanwhile, Vietnam Animal Feed Association chairman Le Ba Lich said at least 20 per cent of local animal feed companies “have totally shut down operations” due to financial and output difficulties.

“I think the rate may be 25-30 per cent for the whole 2012,” he said. Only several local leading companies like Viet Thang, Vinh Hoan and Hung Vuong could now strongly compete with foreign rivals due to their financial health and integrated production chains from producing feed, breeders and consumption.

“Nevertheless, many of 170 local enterprises are in big difficulties and cannot compete with foreign enterprises, because they currently have to borrow bank loans at 15-18 per cent interest per year, while their production costs have risen 20 per cent on average since early this year,” Lich said.

Early this year, the State Bank of Vietnam asked commercial banks to cut the annual lending rate from 15 to 13 per cent for enterprises operating in the agricultural sector. Meanwhile, the National Assembly has offered a 30 per cent reduction of corporate income tax in 2012 to agricultural enterprise.

Still, Lich said, “Difficulties have not really abated, because many enterprises had no revenue, meaning the tax reduction is not too important to them, while the lending rate remains too high.”

In August the Vietnamese government issued Document 1149/TTg-KTN on policies to promote livestock production and aquaculture nationwide. According to this document, the State Bank of Vietnam asked commercial banks to offer an annual lending rate at 11 per cent on loans to agricultural firms.

“Local companies critically need more practical supports and actions from the government to revive production, before they can be completely wiped out by economic difficulties and fiercer competition with foreign companies in the marketplace,” he said.

Nguyen Thanh | vir.com.vn

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