Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Xavier Bocquillet
2014
TABLE OF FIGURES
Figure 1 World Feed Production per region (tons) and numbers of Feedmills, Source: Alltech Global
Feed Summary, 2013 .............................................................................................................................. 9
Figure 2 Annual animal feed production per country in tons (and rank); Source: Alltech, Global Feed
Summary, 2013 ..................................................................................................................................... 10
Figure 3 Vietnam's import of feed and feed ingredient Source: GSO .................................................. 12
Figure 4: Origin, volume and price of imported corn in 2013 - 2014. Source: Agromonitor................ 14
Figure 5 Average Import Volumes of Corn from supplying countries in 2013 Source: Vietnam
Customs ................................................................................................................................................ 14
Figure 6: Origin, volume and price of imported soya in 2013 - 2014. Source: Agromonitor ............... 15
Figure 7: Average Import Volume of Soya Bean from Supplying countries in 2013. Source: Vietnam
Customs ................................................................................................................................................ 15
Figure 8 Corn production in Vietnam Source: USDA ............................................................................ 16
Figure 9 Typology of corn farmer in Vietnam. Source: CIMMYT, 2008 ................................................ 17
Figure 10 Soya production in Vietnam (tons) Source: USDA ................................................................ 17
Figure 11 World Corn and Soya Bean price, 2009-2014 Source: index mundi ..................................... 19
Figure 12 Average Import Price of Corn from supplying countries in 2013 (USD) ............................... 20
Figure 13 Vietnam Import Price of Feed ingredients Source: Vietnam Customs Feb 2014 ................. 20
Figure 14 Procurement price of whole-grain corn by week, 2012-2014 (VND/kg). Source:
Agromonitor.......................................................................................................................................... 21
Figure 15 Average Import Price of Soya Bean from supplying countries in 2013 (USD) Source:
Vietnam Customs .................................................................................................................................. 22
Figure 16 Soya meal price in Dong Nai 2012-2014, Source: Agromonitor ........................................... 23
Figure 17 Procurement prices of cassava chips in Vietnam, 2012 to 2014. Source: Agromonitor ...... 24
Figure 18 Price of rice bran at warehouses in The Mekong Delta (VND/kg). Source: Agromonitor .... 24
Figure 19 Price of animal feed ingredient at warehouse of buyer, Feb 2014, Source adapted from
Agromonitor.......................................................................................................................................... 25
Figure 20 Supply VS demand of industrial feed during 2010's and ratio of industrial feed, self-made
feed and import feed during the 2010's. Source: MARD ...................................................................... 30
Figure 21 Annual Animal feed production Vietnam Source: MARD .................................................. 31
Figure 22 ratio of industrial and self-made feed and import feed during the 2010's. Source: MARD . 32
Figure 23 Market share repartition in animal feed industry in Vietnam, 2012 .................................... 33
Figure 24 CPV feedmills location in Vietnam, Source CP Hong Kong ................................................... 38
Figure 25 Location of Greenfeed factories and branch, Source: Greenfeed Co ................................... 40
Table of Content
1.
2.
3.
4.
5.
Brief presentation of animal feed industry in the world and neighboring countries. ............ 9
1.2.
1.3.
1.4.
2.2.
Production volume in the last 5 years and production capacity in 2013 ............................. 31
2.3.
Listing of the existing producers or animal feed (aqua and livestock feed) ......................... 32
3.2.
3.3.
3.4.
3.5.
3.6.
3.7.
4.2.
4.3.
INTRODUCTION
The Vietnamese agricultural sector was worth 31.4 Billion USD in 2013 representing 18.4% of GDP1.
Not like other developing countries, Vietnam having a population of 90 million with an economy
growing at 7-8% for more than two decades has a potential for livestock and feed sector expansions.
70% of the countrys population earns their life from agriculture with the majority of agricultural
production taking place on family farm of less than 0.5 ha. Labor is cheap and most production is not
industrialized. State-owned-enterprises still play a large role in the production, processing and
distribution of agricultural products, in particular for rice, coffee, rubber and tea2.
Experts have estimated that the earnings from livestock make up to 70% of the income of the
farmers in the countryside. However, despite being an important role in the livelihood of the
farmers, the livestock industry in Vietnam remains obsolete and not yet able to meet demand of the
domestic consumption.
From the Ministry of Agriculture and Rural Development (MARD), livestock in Vietnam exists mainly
in two forms: industrial farms and farmer (family) households. Two-thirds of the farms are in the
North and the rest is in the South. Although performance on a small scale with uncertainty in
quantity and quality, 8.5 million farmer households still account for about 65% of the pigs, 70% of
the chicken and 90% of the buffalos and cattle raised in the country3.
Vietnamese per capita meat consumption (seafood not included) is 40 kg annually, below Chinas
60.4kg, but the same like South Koreas, Japans and the world average. Vietnams meat
consumption habits are very unbalanced and surprising. According to Mr Hoang Kim Giao, Director
of the General Department for Livestock, under MADR, chicken account for 12-15%, cattle and
buffalo 5-8%, whereas pork for 80% of the total consumption. The low poultry consumption (5kg per
capita) contradicts most of the less developed countries, who eat mainly white meat such as chicken
or fish. Vietnam is an exception in Southeast Asia. It consumes surprising 32 kg pork per head,
comparable to China and the US, ahead of the wealth-off Singapore. It is estimated by MARD that
the meat consumption grows yearly by the year 2020 at 2.9%, from which, pork at 2%, poultry 5%
and cattle & buffalo 11%. Vietnam imports every year 3-5% of the total meat consumption, mainly
beef and chicken.
This important meat consumption in the country is the direct reason for the pressure on the animal
feed industry. With an annual growth rate of 17%, the Vietnamese animal feed industry is one of the
most dynamic in the world. By importing, in average, 50% to 55% of the raw material needed to
produce compound feed, the country is facing challenges and large foreign own companies are
imposing their rules in the atomized livestock production sector.
The Ministry of Industry and Trade forecasted that the growth rate of feed business will grow at 20%
per year in the next 2 years.
The present report will present the animal feed industry in Vietnam. After a brief presentation of the
international context of such industry, we will propose a detailed presentation of the Vietnamese
animal feed industry, considering its specificity: small farmers represent the majority of producers
but are not entirely in adequation with large integrated companies.
The report will detail the role of the main actors of the industry and will conclude by analyzing
impact of their integration strategy on the livestock landscape in Vietnam. Finally issues and
prospects for the sustainability of the industry will be discussed.
The world production of animal feed has been evaluated by industry player and the following figures
consider feed production in 134 countries. In 2013 approximately 950 million tons have been
produced, a 9 percent increase over the late 2011 estimates of 873 million. Among the 134 countries
reviewed, China was once again the leading producer of feed with 198.3 million tons manufactured
in the official estimate of more than 10,000 feed mills. Consistent with late 2011 assessments, the
United States and Brazil followed in second and third places, with 168.5 million tons from 5,251 feed
mills and 66 million tons from 1,237 feed mills respectively. China, USA and Brazil the top 3 worlds
producers represent 45% of the volume at 433 million tons.
Asia continues to be the worlds leading feed producing region at 356 million tons produced in 2013
by 12,149 feedmills.
Figure 1 World Feed Production per region (tons) and numbers of Feedmills, Source: Alltech Global Feed Summary, 2013
In 2012, considering the 25th largest animal feed producing countries, 9 countries belong to the
Asian area. China being the largest producing countries in the world (with over 198 million tons of
feed produced in 2013, is followed by India (ranked 6th, 27 million tons), Japan (7th, 25 million tons),
Thailand (12th, 15.7 million tons) and Indonesia (15th, 13.8 million tons). Vietnam is the 20th largest
country in the world with 230 feedmills in operation in 2013 producing over 12 million tons of feed4.
10
Figure 2 Annual animal feed production per country in tons (and rank); Source: Alltech, Global Feed Summary, 2013
5
6
11
www.allaboutfeed.net, 2013
12
needed to process animal feed. Corn, Soya bean and wheat, the main ingredient for animal feed,
have to be massively imported to satisfy the demand of the animal feed industry.
The Countrys imports of raw materials for the production of animal feed have been increasing in the
recent years by about 16% per annum (Period from 2006 to 2012).
For 2013, Vietnam had imported 5.84 million tones of animal feed and ingredients, representing
48% of the raw material needed to satisfy the demand, with a total value of US$ 4 billion. The
import of raw materials worth over US$3 billion including US$834 million of soya bean (1.4 million
tons, rising 7.5% in volume and 7.2% in value), US$690 million of corn (2.26 million tons, increasing
nearly 40% in volume and 39% in value year-on-year) India and Brazil are two major import markets
for these commodities, accounting for 55 per cent and 22.3 per cent of the total imports8.
For wheat, US$584 million has been spent to import wheat representing 1.7 million tons. The major
volumes of imported wheat are used for instant noodle (approx 400,000 tons) and bread (approx
400,000 tons) bakery and pasta are the two other industries using imported wheat. Wheat used in
feed account historically for 15% to 20% but with price increase of wheat and price reduction of
corn, the use of wheat decrease a lot in animal feed. The main import market for wheat is from
Australia with 69% market share.
In January 2014 only, 582,000 tons of corn have been imported worth US$150 million, a 6 time
increase in volume and 4.5 times increase in value compare to the same period last year.
13
Soya, corn, cassava and wheat are raw materials imported in Vietnam. Due to fragmented farming
structure, Vietnam is facing difficulties to ensure self sufficiency in raw material. Raw material
industry is characterized by small producers, with low yield and poor quality of grain.
One on the main issue is the status of post harvest facilities: driers and silo are not sufficient in the
country leading to poor quality of grain and post harvest losses.
The corn value chain is structured around small farmers, collectors and traders. If we look at the
drying activity we can notice that corn is dried one time at the farm level, often on the road close to
the field. The uniformity of the humidity cannot be ensured by farmers as grain is dried under the
sun without any humidity monitoring. Then collectors are collecting small volumes of corn from
numerous farmers. That means that different grain with different origin and humidity level are
mixed together. Then traders are buying even bigger volume mixing again origin and quality of grain.
Finally feed mills are buying the corn but are often facing large heterogeneity of products, quality,
colors, etc. Moreover, due to poor post harvest treatment we often have development of mycotoxin
in the grain leading to poor quality feed as mycotoxin can have massive impact on health of animals
(reproductive effects, hepatotoxic effects or performance effects). The mycotoxin impact on animal
husbandry together with higher price of local corn and inconsistency in supply are the main reasons
for feed mills to import corn from India, Thailand or South America.
In parallel, the corn value chain is not well organized in Vietnam. In 2010, 1 million tons of corn has
been lost due to lack of post harvest facilities. It is amazing to compare this figure to the volume of
corn imported: approximately 1 million tons have been imported in Vietnam in the same year9.
Finally, the supply chain is not efficient enough as logistic infrastructure and equipment are
still lacking. Access to farming area is difficult and only very few large stocking facilities exists. Very
limited private of public organization own professional dryers and silos in Vietnam in order to
properly dry and stock agricultural raw materials used in feed preparation. CP Vietnam invested in
these facilities and then reinforced their supremacies in animal feed business by controlling more
the upstream of the value chain.
Very few foreign own company have port facilities to unload grain from large boat and store it in
good conditions.
All these lead to a complex sourcing work for feedmill in Vietnam. Quality and quantity are key
issues that need to be tackled for development of feed industry in the country.
14
Corn is the main raw material imported for animal feed industry with more than 2.2 million tons
imported in 201310. The imports are mainly coming from India (over 1 million ton in 2013) and Brazil
(780,000 tons in 2013) but also in smaller volume from Thailand and Argentina.
Soya is the second largest raw material imported. Brazil has been the largest supplier with 570,000
tons closely followed by USA with 510,000 tons imported. Argentina and Canada are respectively
third and fourth suppliers.
Corn and soya account for almost 60% of feed and feed ingredient imported in 2013.
The following tables summarize the import situation for corn, the main raw material imported in
Vietnam for animal feed industry.
CORN
2013
Brazil
Thailand
India
USA
Cambodia
Laos
Argentina
Volume
779,836
123,046
1,019,681
570
72,275
23,273
147,528
Feb-14
Value
212,764,757
65,520,330
304,430,430
437,285
21,835,150
6,194,560
45,006,608
Volume
465,982
56,444
39,315
5,758
4,830
3,720
Value
120,780,166
16,023,242
9,424,679
1,499,150
1,371,400
861,000
Figure 4: Origin, volume and price of imported corn in 2013 - 2014. Source: Agromonitor & Vietnam Customs
India and Brazil are the two largest corn suppliers in 2013 supplying over 80% of the volume
consumed.
11
Figure 5 Average Import Volumes of Corn from supplying countries in 2013 Source: Vietnam Customs
10
11
15
Soya bean were mainly coming from Brazil and USA in 2013. These two countries supplied over 90%
of total volume last year. Argentina and Canada were also supplying soya bean but is much smaller
volume.
SOYA
2013
Brazil
USA
Argentina
Canada
Volume
570,911
511,508
67,602
36,298
Value
331,741,981
321,744,780
40,605,494
25,195,760
Jan-14
Volume
Value
157,293
91,194,296
2,463
1,518,084
Figure 6: Origin, volume and price of imported soya in 2013 - 2014. Source: Agromonitor
Figure 7: Average Import Volume of Soya Bean from Supplying countries in 2013. Source: Vietnam Customs,
http://www.customs.gov.vn/
Cassava is the third largest raw material used in animal feed production. Cassava is important
income sources of poor farmers thanks to its easy cultivation, low requirement on soils, low
investment costs, suitability to bio-ecology and farmers livelihoods. Cassava is widely grow from the
North to the South of Vietnam with more than half of million ha and production of almost 10 million
tons. In 2013 1.5 million tons of cassava has been sourced from local markets for animal feed
processing. In additions some volumes are coming from Cambodia but volumes are not really known
as statistics are missing.
16
Rice bran is also used in animal feed industry replacing wheat or corn depending on price. Rice bran
is mainly source locally (Mekong Delta mainly) but some imports have been recorded from India and
Pakistan.
Corn production
According to the Ministry of Agriculture and Rural Development (MARD), Vietnam 2012 corn
production was 4.8 million tons, a slight increase compared to 2011. 2012 planted area totaled 1.12
million hectares, only 37,000 hectares larger than 2011. In 2013 a total of 1.16 million ha was under
corn cultivation producing estimated at 4.9 million tons of grain (Source: USDA).
The minimal growth in corn area is likely due to lower corn profit margins, compared with other
crops. Corn is Vietnams second largest annual crop, after rice, in terms of cultivated area, however,
corn production area is located only where other better yielding, cash crops cannot be grown (such
as in the mountainous regions with poor soil fertility) or intercropped after a better cash crop (such
as rice). This severely restricts corn area expansion. The following table gives a clear view of the
typology of farmers involved in corn production in Vietnam. Almost 95% of corn farmers, cultivate
corn on plot smaller than 2ha.
Size of Holding
Number of Households
3,753,454
4,259,744
2,956,742
Percentage of Agricultural
Households
32.21
36.55
25.37
17
2 ha and over
683,538
11,653,478
5.88
100
According to MARD, Vietnam uses hybrid seed to plant 90 percent of the annual corn area. The local
production for hybrid corn seed, however, can only supply up to 20 percent of the total demand. The
outstanding 80 percent is imported from other countries. Thailand and Indonesia are two biggest
suppliers of hybrid corn seed into Vietnam. They account for about 62 percent and 19 percent,
respectively, of the total hybrid corn seed import volume.
The Ministry of Agriculture and Rural Development has said Vietnam will in 2014, use 130,000
hectares of rice land to grow corn and cassava for animal feed production. The corn production area
will increase to 1.23 million hectares, increasing 73,000 hectares compared to 2013. Vietnam will
also use high-yield seeds in order to produce 5.7 million tons of corn this year12.
Soya production
According to official government statistics, soybeans are currently grown in twenty five of Vietnams
sixty three provinces, with approximately 65 percent cultivated in the north and 35 percent in the
south13. Vietnams 2012 soybean production decreased 34.3 percent from the previous year to 175.2
thousand metric tons as severe cold weather at the end of 2011 and in early 2012, reduced yield and
harvested area. The scale of production remains relatively very small and continues to fall far short
of domestic demand. In 2013, the growing area expanded back to the level of 2011, with about 180
thousand ha and production to increase to 270 TMT. The soybean cultivation area is currently
concentrated with 65 percent in the North and 35 percent in South.
Source: http://www.asian-agribiz.com/
Source : USDA, Oilseeds and Product annual, Apr 2012
18
Despite, the uncompetitive nature of local soybean production, the Vietnamese Governments
Master Plan for Oilseeds prioritizes further development of the sector with the objective of 350,000
ha and a production of 700,000 tons by 2020. The Master Plan focuses further development on the
Red River Delta, midland, and mountainous areas in the North and Western Highlands. However,
Post doubts that production will increase as much as the Government of Vietnam desires due to the
high input costs and generally low yields of oilseeds crops, and slow expansion in growing areas.
Vietnamese scientists are continuing research on biotech and other modern soybean varieties with
higher output levels and lower production costs in specific regions in Vietnam. MARD has approved
three biotech crop types for field trials corn, cotton, and soybeans. However, no companies are
applying to implement Bt. soybean field trials at this time (only for Bt. corn). The field trial period is
expected to last for two or three years before final approval for commercialization is granted, if a
company does apply. As a result, there is no expectation that commercial production of any of
biotech oilseed crops will begin in the near future in Vietnam.
Cassava production
In the world, the three leading export countries are Thailand, Vietnam and Indonesia. Thailand
accounts for 60- 85% total global cassava export in recent years, followed by Indonesia and Vietnam.
Recently Cambodia cassava becomes a prospective export product.
Over 11 million tons have been produced in 2013. Cassava is the fourth agricultural products
exported from Vietnam in volume after rice, coffee and cashew nuts and belong to the 1 billion
export products club. In the end of 2012 exports of cassava and cassava based products was 4.23
million tons and valued at 1.35 billion USD. Vietnam is now the second largest exporting country of
cassava products while animal feed factories also contribute significantly to the increasing demand
for cassava roots.
Cassava production and yield of Vietnam significantly increase in recent years. The production in
2011 was 9.87 million tons from 559,800 ha, average yield: 17.81 ton/ ha. In 2000, cassava
production was 1.98 million tons, yield was 8.35 ton/ ha while the production in 2011 increased 4.98
folds and the yield doubled.14
Vietnam cassava yield growth. Cassava yield increased significantly recently. In 1976, the yield was
7.86 ton/ha, in 2000 was 8.35 ton/ha, close to Africas yield (8.65 ton/ha) but in 2011 the yield
reached to 17.73 ton/ha, much more than the average one in Africa at 10.77 ton/ha and higher than
12.92 tons/ha of America. The one of Vietnam now is lower than that of India (36.47 ton/ha), the
leading country in cassava yield of the world, Cambodia (21.30 ton/ ha), Indonesia (20.30 ton/ ha)
and Thailand (19.29 ton/ha) but cassava yield of many smallholders in Vietnam reach to 36.00- 50.00
ton/ ha, more than 400% than before.
Vietnam cassava was developed sustainably in the first years of the 21st century (2000-2013).
Cassava achievement of Vietnam is huge: it has been transformed from food crop, feed crop into 4F
14
http://www.asian-agribiz.com/
19
crop (Food, Feed, Flour, Fuel) as now biodiesel factories are processing cassava into ethanol (13
factories in operation in Vietnam).
Corn
The following graph represents the world corn price from US (FOB Gulf of Mexico) and soya bean
from US, in the last 5 years.
Figure 11 World Corn and Soya Bean price, 2009-2014 Source: index mundi
20
The following graph shows the different import prices of corn considering the origin of the product.
We clearly see that India provide the cheapest corn (and supply 47% of volume) while US corn
appear to be the most expensive (USA supplies less than 1% of corn in 2013)
Figure 12 Average Import Price of Corn from supplying countries in 2013 (USD), Source: Agromonitor
The following graph indicates the average import price (all origins) of corn and soya in Vietnam from
2012 to 2014.
Figure 13 Vietnam Import Price of Feed ingredients Source: Vietnam Customs Feb 2014
21
Finally, the following graph shows the procurement price (price paid by feedmill) of corn bought
locally (both in Northern and Southern area) since early 2012.
Figure 14 Procurement price of whole-grain corn by week, 2012-2014 (VND/kg). Source: Agromonitor
The world price for corn was about 5,700-5,800 VND/kg in November 2013. Domestic corn price (dry
corn) was around 7.000 VND/kg ($0.33US/kg-$0.15US/lb) in July 2013. At the end of the year 2013
the price has lowered to just 6,100 VND/kg. An interesting point is that now, prices of raw materials
for animal feed production are declining in the global market, but still remain high in Viet Nam. Large
feed companies are importing feed ingredients that are now cheaper than domestically produced
grains.15
The price of corn in Dong Nai Province in the week 4 of 2014 (20th January to 26th January) was 6,300
vnd per kg (equivalent to 296 usd per tons) while the import price per ton during the second half of
January 2014 is reported to be at 263 usd per tons (equivalent to 5,600 vnd per kg) by Vietnam
Customs.
In February 2014, the prices of corn imported from India and South America at feedmills were stable
at VND 6,000/kg and VND 6,300/kg, respectively. For husbandry farms buying feed ingredients for
mixing, corn prices sold at farm gates remained at VND 6,500/kg.
In Quy Nhon Province, prices of corn imported from India to the port were unchanged from last
week at VND 5,300-5,400/kg. Accordingly, plus freight rates, the prices of corn delivered at feedmills
would range around VND 5,500-5,600/kg. Similarly, in Dac Lac Province, selling corn prices of
warehouses remained at VND 5,450/kg. For northern region; offers for corn imported from South
15
22
America to ports hovered at VND 5,900-5,950/kg. Accordingly, plus freight rate, prices of corn
delivered at feedmills in Hung Yen and Hai Duong would be about VND 6,100/kg, nearly unchanged
from last week. However, compared to early February, the prices decreased by about VND 200/kg as
the corn import volume was ample while the demand for feed slowed down.
According to data from the General Department of Vietnam Customs, for the first half of February,
Vietnam imported as much as 338.1 thousand tons of corn, up by 47.2 thousand tons compared to
the same period of January. This figure was much higher compared to the figure of 33.3 thousand
tons in the same period of 2013. From the beginning of 2014 to February 15, accumulated corn
imports of Vietnam were 910.7 thousand tons, up nearly 10 times year on year.16
Soya
The following graph shows the different import prices of soya considering the origin of the product.
We clearly see that Brazil provides the cheapest corn (and supply 48% of volume) while Canadian
soya appear to be the most expensive (Canada supplied less than 3% of soya in 2013)
Figure 15 Average Import Price of Soya Bean from supplying countries in 2013 (USD) Source: Vietnam Customs
16
23
According to local industry, in 2013 the locally produced soybeans were not as price competitive as
imported soybeans. For example, local soybeans were quoted at 16,000 vnd ($0.77) 17,000 vnd
($0.82) per kilogram (kg), while the imported soybeans cost 14,600 vnd - 15,000 vnd ($0.70-$0.71)
per kg. Competitiveness is a major disincentive to the expansion of the soybean sector overall.
The price of soya meal in Dong Nai Province in the week 4 of 2014 (20th January to 26th January) was
14,200 vnd per kg (equivalent to 668 usd per tons) while the import price per ton of soya bean
during the second half of January 2014 is reported to be at 585 usd per tons (equivalent to 12,430
vnd per kg) by Vietnam Customs. The following graph from Agromonitor reflects the price
fluctuation of soya meal in South Vietnam during the last 20 months.
In contrast to the downward trend in the price of corn, the soybean price in the month of October
2013 increased slightly, from 503 usd per ton reached in September 2013 increased 1.2% to 509 usd
per ton but down 10% compared with the same month last year, due to drought in the U.S. Midwest
region affect crop yield and Brazil replace the U.S. as the country's leading soybean producers in the
world.17
Cassava
Price of local cassava was fluctuating around 5,500 vnd and 6,000 vnd (0.26 usd and 0.28 usd) per kg
in 2013. At the end of 2013, price of cassava chips decreased to fluctuate around 5,000 vnd. The
following graph from Agromonitor is summarizing the price of cassava chips in the last 2 years.
17
24
Vnd / kg
Figure 17 Procurement prices of cassava chips in Vietnam, 2012 to 2014. Source: Agromonitor
Rice bran
The following graph summarizes the price of rice bran at warehouses in the last 10 months in Kien
Giang and An Giang Province in Mekong Delta.
Figure 18 Price of rice bran at warehouses in The Mekong Delta (VND/kg). Source: Agromonitor
Finally the following table summarizes the different price of main raw material used in animal feed I
Vietnam
25
Commodities
Province
Price Feb 14
(vnd/kg)
Corn
Feed cassava
Rice Bran
Soymeal
Dong Nai
Dong Nai
Kien Giang
Dong Nai
6300
4800
5400
14200
6900
4600
4500
14300
Figure 19 Price of animal feed ingredient at warehouse of buyer, Feb 2014, Source adapted from Agromonitor
18
Source: http://www.agroviet.gov.vn/
Source: http://english.thesaigontimes.vn/
20
Source: interview with industry experts
19
27
This fragmented structure impact the feed industry as it is difficult to distribute very small
amount of industrial feed to many farmers all over the country. Thus feed distributors are important
relay for the feed factories.
Today approximately 55% of pigs are fed with industrial feed. This represents very potential
growth drivers as the trends are intensification of the production.
The Ministry of Agriculture and Rural Development expects strong continues growth in protein
consumption, with per capita consumption to increase through 2020 as follow:
1. Meat an increase from 36kg of meat in 2010 to 56kg by 2020
2. Eggs an increase from 82 eggs in 2010 to 142 eggs by 2020
3. Milk an increase from 4.3 kg milk in 2010 to 10 kg milk by 2020
To meet these expected requirements, the MARD has developed its Livestock Development
Strategy with a key focus of shifting livestock production towards industrial production by 2020.
Livestock production is projected to increase by an average of 6% though 2020, including
4.
5.
6.
7.
8.
Meat production to increase from 3.2 million tons in 2010 to 7 million tons by 2020
Milk production to increase from 380,000 tons in 2010 to 1 million tons by 2020
Egg production to increase from 7 billion in 2010 to 14 billion in 2020
Pig population to increase from 27 million in 2010 to 35 million by 2020
Beef cattle population to increase 4.8% to 12.5 million heads by 2020.
21
Source: MARD
28
29
Typologies of feedmills
The sector is dominated by larges foreign own companies, with important investment capacity
and strong knowledge of the industry. Vietnamese feedmills are characterized by small production
capacity (between 50,000 tons and 80,000 tons), poor R&D capabilities and limited investment
capacities.
Foreign feedmills often have production capacity higher than 300,000 tons per years. Majority of
foreign own feedmill are planning to open new production facilities in 2014 or have open ones in
2012/2013. Foreigners are signing deals with international companies like professional genetic
suppliers, giving them an important competitive edge. The consequence is that the gap is growing
between local and foreign owned companies.
It is important to note that most of large feedmill are located in South Vietnam while smaller
one are based in North Vietnam. This is reflecting the farming structure of the country: large farms
are in the South while smaller one in the North.
In a report done by IPSARD and CAP gave a typology of feedmill that we would like to present:
The mills have been categorised in the following way in the analyses:
small mills are those producing less than 10,000 tons per annum;
medium mills are those producing from 10,000 to less than 60,000 tons per annum,
Large mills are those producing 60,000 or more tons per annum.
It is important to note that such classification has been done according to production capacity and
not in term of incomes, number of staff or fixed assets.
Larger foreign rivals have access to cheaper commodity supplies. While domestic firms are struggling
to find sufficient local supply and have to depend on imported resources, foreign firms have cost
advantage from accessing cheaper sources globally. Cargill, for example, has facilities that span 66
countries. Its subsidiaries procure grain in Australia, soybean meal in Brazil and Argentina, cocoa in
Indonesia, palm oil in Malaysia and much more. The size of the firms and the nature of global trade
create high barriers of entry for newcomers, reinforcing the existing firms market power.
30
to proper biosecurity and were also able to buffer price fluctuation thanks to strong cash flow
and/or access to credit. In addition, with large volume produced regularly, large farms are more
interesting for the market as they can deliver regularly with stable quality
Thus, development of large integrated farms seems to be the future of Vietnam agriculture as it
was a compulsory step in the development of occidentals countries. CP Group understood it 15
years ago and started their vertical integration in their livestock business.
The consequences for Animal Feed industry is that, in the near future, the core customer will be
more and more large intensive farms while the ratio of small farms will decrease dramatically.
Then growth drivers for the feed industry will be triple:
Absolute growth of the market: more animals will be reared in Vietnam, increasing the
volume of industrial feed consumed.
More and more small and medium size farm will stop the to produce inefficient
homemade feed and will switch to a larger proportion of industrial feed
The numbers of small farms will decrease because of the development of efficient,
profitable and more flexible large intensive farms.
These trends would have to be considered in the strategy of the animal feed industry in Vietnam.
The following two graphs adapted from the report 2020 Livestock Industry Development Strategy
from MARD shows that demand of industrial feed is not sufficient today and will certainly not be
sufficient in the coming years.
Figure 20 Supply VS demand of industrial feed during 2010's and ratio of industrial feed, self-made feed and import feed
during the 2010's. Source: MARD
Many competitors, foreign firms enjoy economies of scale. The good prospect of the domestic
animal feed sector has attracted huge interest from foreign firms. With newer technology in
breeding, feeding, and housing of livestock, foreign firms typically build large-scale operations that
result in economies of scale and lower production cost. In contrast, local firms are relatively small in
31
terms of production capacity. Among the seven biggest animal feed producers, six are foreign firms
or foreign-invested enterprises.
Pricing power in the hands of Big Four: In developed countries such as the US and Canada, animal
feed accounts for 50-55% of the cost of pork. In Vietnam, it is near 75% - underscoring the impact of
animal feed price fluctuations on livestock breeding. With 30% market share combined, the foreign
Big Four firms (CP, Proconco, East Hope and Cargill), have enough pricing power to fully pass
through increase in input costs. Other smaller, domestic producers like Dabaco, can generally follow
the Big Fours pricing but are only able to pass through about three-quarters of the price increase.
This explains the stable gross margins in the domestic animal feed industry.
As example, during first part of 2012, animal feed producers were able to protect margin by
increasing prices by 10% while farmers have had to sell pork below cost at VND37,000-38,000/kg
(the total cost to raise one pig is up to VND41,000/kg).
2.2. Production volume in the last 5 years and production capacity in 2013
In 2013, demand for livestock feed in Vietnam is approximately 20 million tons per year, of which
approximately 17 million tons in 2012 was for industrial feed, and of which 12.7 million tons is
domestically produced. Industrial feed demand is expected to grow to 25 million tons (in which 18
million tons is domestically produced) by 2015.
32
In the pig industry such ratio is lower as a lot of pig farm in the North are still using local rice bran
and kitchen garbage to feed their animals. When animals reach sensitive phase (early age and
reproduction) often farmers buy industrial feed in order to supply all necessary nutrient and amino
acids to ensure good performance of animals.
In general self-made feed rarely provide all necessary nutrient for optimum growth of animals. Then
yield of herd fed with farm-made feed in almost always inferior to industrially raised animals.
However it would be interesting to go deeper in the reflexion and study the profit made by farmers
using self-made feed and industrial feed considering financial capacity to engage in the second
option and risk that goes along.
The following graph show that during the 2010s the proportion of industrial feed should increase
from 56% in 2010 to approx 70% in 2020 while imported feed should decrease from 30% in 2010 to
18% in 2020. Home-made feed should remain almost stable and should decrease from 14% in 2010
to 12% in 2020.
Figure 22 ratio of industrial and self-made feed and import feed during the 2010's. Source: MARD
However, if we consider volume produced in such period we would have the following volume of
self-made feed22:
22
33
As mentioned, the Vietnamese industrial animal feed industry is dominated by foreign owned
factory. The top 5 companies in the country are covering more than 45% of total production of
industrial feed. CP, Proconco, Cargill, East hope and ANT are leading the livestock feed industry in
Vietnam. Only Proconco is a national company, others are foreigners.
Figure 23 Market share repartition in animal feed industry in Vietnam, 2012 Source: discussion with industry experts
Foreign companies are the only able to integrated the value chain of livestock industry. Vietnamese
Companies are representing only few percent of the animal feed industry in Vietnam. The trend is
that local companies with low production capacity will slowly disappear in the coming years.
The reasons are multiple:
Most of farmers are asking for credit and small feed mills do not have financial capacities to
allow such credit policy. Then farmers are more likely to buy directly from large (and foreign
own) Companies. For example, a farm of 500 sows will often asked for 1 month credit
representing 1 billion vnd (approx 50,000 usd)
In the case of the poultry industry, the industry is very much vertically integrated, meaning
that large poultry producers are in reality the feeders. CP and Japfa are leading the market.
That means that the feed market for poultry is limited as CP and Japfa are consuming their
own feeds. Such captive market is strengthening even more the position of foreign owned
feed mills. In addition to feed, these integrators also produce their own juveniles.
Often small feed mills do not have strategic long term vision of their business. They do not
have investment capacity and then cannot really impact their long term development: they
are actually undergoing their development, linked to the development of large companies.
Very limited R&D programs are launched by smaller companies and formulation of feed is
not often very up to date.
34
Margins in animal feed industry are very high compare to margins in Europe. Discussion with
industry professional lead to the following figures: 2% net margin in Europe (in average)
while in Vietnam Companies are often doing 5% to 7% net margin. This has double effect
o Large international group are very attracted by such remunerative market and invest
massively in the country (Nutreco, Deheus, Cargill or Tequ Group are acquiring
existing feed mills in the last years). These large companies have lot of financial
resources and can invest into long term effort (R&D, Marketing, credit, etc.)
o Feed millers are killing their clients with very high price for feed. Feed in Vietnam is
known to be 20% higher than neighboring countries. This is also due to the fact that
companies are keeping high margin to satisfy shareholders expectation.
Management capacities are limited in Vietnam. There is not many education in the field of
animal nutrition in Vietnam, and technician are often learning by doing without proper
theoretical approach. As example, many small feedmills are not really and regularly
calculating their production cost or efficiency to produce their feed. In parallel, formulation
matrix not being up to date, does not allow formulation department to quick adapt their
formula (without hampering efficiency and quality of feed) and then do not optimize the
cost of production.
So in summary the small local feedmill does not really have chance to develop their business and if
no massive investment are done on production tools and long term actions (R&D, training, Credit)
these small companies will slowly disappear, certainly bought back by large international feed mills.
The following part provides a non exhaustive list of active feedmill in Vietnam. We decided to
present it according to their origin, either local companies or foreign owned23:
Foreign invested feed manufacturers
So far, foreign companies supplying breeds (Chicken, pigs or shrimps) are Japfa, CP Vietnam
(Thailand) and Emivest
23
35
Going more in details we have summarized the location of main factories in the following tables. The list of companies is non exhaustive and is give as
example only. Information are coming from Companies websites, discussion with experts and authors knowledge.
1
1
1
1
1
1
2
1
1
1
1
1
1
1
2
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
Bc Liu
Cn Th (city)
1
1
1
1
An Giang
ng Thp
Vnh Long
Tr Vinh
Long An
TP HCM (city)
ng Nai
Bnh Dng
Bnh Thun
Ninh Thun
Bnh nh
1
Bn Tre
Qung Nam
H Nam
Thi Bnh
Hng Yn
Hi Phng (city)
Hi Dng
Bc Ninh
Vnh Phc
1
1
Tin Giang
CP
Proconco
Cargill
Anco
Greenfeed
Japfa
ANT
Tongwei
Austfeed
Hong Ha
West Hope
Dabaco
Vina
VIC
VasaFeed
VietLand
New Hope
East Hope
CJ
Bc Giang
H Ni (city)
The last 16 Companies (in blueu color) are producing only Aquafeed.
Total
9
4
6
2
5
4
1
3
2
1
1
3
4
1
1
1
3
1
2
37
3
1
1
1
1
1
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
12
1
2
12
6
4
1
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
4
1
1
95
The domestic industrial feed industry is currently dominated by foreign owned feed manufacturers.
The top 5 companies in terms of market share include 4 foreign owned companies: CP Vietnam,
Proconco, Cargill Vietnam, East Hope Vietnam, ANT (Dachan) with a combined market share of over
35%. Some companies such as CP Vietnam and Japfa have already established an integrated value
chain from breeding to farming and processing.
Economies of scale provide a high barrier of entry into the industry. Large Companies, including
Proconco, have established market shares, brand names and large existing production capacity.
These companies can achieve favorable conditions in material purchasing thanks to their larger
order and stronger financial capacity to stock materials during off-seasons, when prices are usually
lower thanks to abundant supply.
Information mentioned in the following part are coming from companies website and industry
experts.
1.
CP Vietnam currently operates five animal feed plants, three aqua feed mills, with a total capacity of
3.8 million tons per year (2.3 million tons for livestock and 1.5 million tons for aquafeed) making it
the biggest feed miller in Vietnam with a 19% market share. CPV has approximately 1,300 dealers for
the distribution of feed products. The company also accounts for 22% of white-feather chicken, 7%
of pigs and 16% of the egg market in Vietnam (with figure as follow 250.000 sows, 3,8 million hens,
4,5 million chickens)
CPV operates about 3,000 farms, including shrimp farms,
shrimp hatcheries, fish farms and livestock farms, most of which
are contracted operations.
CP Vietnam Livestock Corporation targets to increase its
herd size to 350,000 sows in 2015 to meet a growing demand for
pork in Vietnam,
CPV distributes its products through both traditional
channels, such as wet markets, as well as modern channels, such
as supermarkets. The Company owns the CP Fresh Mart chain and
already opened over 70 of these convenient stores within
Vietnam. The companys aquatic food products are exported
primarily to overseas markets such as European Union, Japan and
other Asian countries.
39
2. Cargill:
In February 1995, Cargill established its presence in Vietnam with the
opening of their first representative offices in Hanoi and Ho Chi Minh
City. In October 1997, Cargill Vietnam Limited was formed. In
December 2009, they were the first U.S. Company to obtain a
distribution license in Vietnam, allowing them to distribute products directly in the country. Cargill
Vietnam employs over 900 employees across 15 locations. Their operations include premix, animal
nutrition, cocoa production, food and beverage ingredients, grain and oilseed trading and marketing,
and metals trading.
Animal Nutrition: They are one of the leading animal nutrition Companies in Vietnam,
producing premix and compound feed. They own and operate one premix plant and eight
feed mills in Can Tho, Tien Giang, Long An, Dong Thap, Bien Hoa, Binh Dinh, Hung Yen and
Ha Nam. They have over 770,000 tons capacity.
Grain and Oilseeds They supply soybean meal, wheat, sugar, corn, copra meal, canola and
soybeans. Their customers include animal feed producers, poultry and hog raisers,
integrated fish processors, flour millers, and food and beverage manufacturers.
Animal Protein They import a range of cooked chicken products into Vietnam from their
poultry processing business in Thailand, where they maintain a fully integrated supply chain
to ensure food safety and quality products.
Recent Investments
2012
Cargill began expansion of its Binh Dinh feed plant. The plant is expected to be completed by
2014
2012
Cargill opened a feed mill in the Ha Nam Province, its eighth in Vietnam
2012
Cargill expanded its Hung Yen facility with the addition of an aquaculture feed processing
plant
2011
Cargill acquired its first shrimp feed mill in Vietnam (the former Higashimaru Feedmill)
2011
PROCONCO
Proconco was established in 1991 as a JV between Socit Commerciale des
Potasses et de lAzote SCPA and a group of Vietnamese SOE. Proconco has
grown its production capacity from one factory in Dong Nai Province built in
1992, to its current five plants nationwide, in Bien Hoa, Hai Phong, Can Tho, Long
Chau and Hanoi. Proconco has a total annual production capacity of 1.2 million
tons (950,000 tons for livestock feed and 250,000 tons for aquafeed).
40
Today the company is ranked 47th largest feed mill in the world, ranked 96th largest enterprises
in Vietnam and has been awarded best feed miller in Asia in 2010 by Asian Feed magazine.
Proconcos main business is in livestock and aqua feed production. Feed is sold to individual and
industrial farms all over Vietnam. 90% of total sales are generated through distributors while only
10% are directly sold - to large industrial farmers. The Company sells on a cash basis to more than
600 distributors nationwide.
Proconco managed in the 20 years of its existence to impose its brand conco as one of the
most recognized by farmers in Vietnam. The famous Cm n Conco jingle (or Thanks Conco) is
very well known in Vietnam countryside.
In October 2012, Masan Consumer, one of Vietnams largest diversified consumer companies,
announced that it acquired 40% of the shares of Proconco reinforcing the Vietnamese ownership of
the Company. Proconco is the only large Vietnamese feed producers.
GREENFEED
Greenfeed has been established in 2003 and is
now the number six feedmill in Vietnam with 5
factories and 540,000 tons production capacity (pig,
chicken and fish feed mainly) and about 5% market
share. Factories are located in HCMC, Long An, Hung
Yen, Binh Dinh and Dong Nai Province. In addition,
Greenfeed built a feedmill in Cambodia in Kampong
Cham in 2008.
Apart from these feed factories Greenfeed has
built branch network throughout the region from
north to south. The goal is to facilitate the delivery
system in order to be is fast and convenient.
The Company has one of the strongest
management team of the industry as well as a
leading position on raw material procurement,
technology and products quality. Greenfeed
currently has more than 2,000 dealers throughout 64
Figure 25 Location of Greenfeed factories and
branch, Source: Greenfeed Co
Greenfeed has decided few years ago to integrate its business and to launch pig genetic
activities in collaboration with a world leader genetic supplier; PIC a US based pig genetic
company. Today with 3 reproduction farms the Company is steadily gaining market shares.
Similarly, Greenfeed has developed fish genetic activities and own 2 reproduction farms in
Mekong Delta. They are working on the pangasius reproduction.
41
After several discussions with industry experts, in 2012 the production capacity of 24th main animal
feed producers has been reported to be almost 12 million tons.
1
2
3
4
5
6
7
8
9
10
11
Production
Capacity (in tons)
West Hope
Dabaco
Vina
CP
2,300,000
New Hope
Proconco
985,000
East Hope
Cargill
980,000
CJ
Japfa
800,000
Evialis
Anco
550,000
DeHeus
Greenfeed
540,000
Sojitz
Japfa
525,000
Laitchien
ANT
507,000
AFC
Tongwei
500,000
Suijin
Ausfeed
450,000
RTD
Hong Ha
400,000
TOTAL
These figures do not take into account aquafeed capacity.
Company Name
12
13
14
15
16
17
18
19
20
21
22
23
24
400,000
392,000
390,000
320,000
314,000
270,000
236,000
230,000
200,000
180,000
159,000
140,000
120,000
11,888,000
Several marketing systems exist in Vietnam. It is important to note that the marketing and
distribution system vary according to the industry considered. Then we will provide information on
the most important industry known as: pig, chicken, duck and shrimp.
But with synthetic approach we could say that the most common marketing and distribution is the
following
1. Feedmills produce feed and sell it to distributors. They keep the possibility to deliver directly
very large farm (delivery in bulk for CP for example, in bags for others)
2. Distributors sell directly the feed to large farms (industrial farms) and sell the rest to local
distributors (level 1).
3. Farmers come to their local distributors and buy the feed they need (often 2 weeks stocks, but
depend on their financial situation and status of their herd).
42
4. We could also find another level of distribution (Level 2) before reaching farmers who are the
main clients.
The animal feed marketing and distribution system is mainly driven by the existence of plenty of
primary (level 1) and secondary (level 2) feed distributor.
In such sector feed mill are sometime selling directly to large farm but most of the volumes go
through distributors. It is estimated that 10 to 20% of the volumes go directly to large farm24
(depend on feed mill). However, small feed mill (less than 50,000 MT per years) do not work so
much with distributors and are selling very locally to historical clients.
Usually large farms that source directly their feed to the feed mill often required adapted and finetuned formula while distributors have all the same basic formula.
Historically, these distributors were more involved in South Vietnam than in North. In North Vietnam
feed mill were smaller in term of production volumes while in South, led by foreign own companies,
volumes were more important. These foreign own companies were working through distributors for
2 main reasons25:
24
25
Having local distributor would help as they could play role of buffer between the risky
business of raising animals (subject to disease, poor performance and meat market price).
Then in 90s and early 2000s selling feed to distributor mainly was a way to minimize risk of
non-payment from farmers and to avoid to do credit to farmers
Having local distributors also helps in term of business development. A foreign own company,
even with local staff, when they started business they did not have so much clients on the
field. Working with distributors was a way to limit investment in marketing and sales by letting
private entrepreneur (distributors) the work to develop a network of farms.
43
Level 1 distributors used to play a very important role as they were the ones to provide loans to their
clients/farms. Indeed they were paying cash feed to feedmills and they were giving loans (30 days
very often) to their client. Such financial support was often the real added value of these
distributors.
However, since few years it appears that large feed mills are now proposing credit to their client.
They have now a better understanding of their business, production seasonality and better
knowledge of the field. As all private companies, they were trying in this way to take back the lead
on the market and keep more margins thanks to direct sales to farmers. Such move allows feed mills
to slowly take back the control of their distribution channel, maximizing profit and allowing
feedbacks from direct users.
Thus level 1 distributors are slowly losing their control of the distribution and are becoming real feed
dealer rather than financial organizations proposing credit to farmers.
Level 1 distributors in feed sector are often exclusive distributors, meaning that they are selling only
one brand of feed. Such actors are often doing important business and are selling both to large local
farms and level 2 distributors.
In term of remuneration, distributors are making money thanks to different systems26:
Basic margin: that corresponds to the margin represented by the difference between buying
price to feed mill and selling price to farmers or Level 2.
Exclusivity margin: being an exclusive distributor allows to have extra margin (often 1 to 2 %).
In addition the distributor can have access to goodies like brochure, hat, raincoat, etc. that
would help selling products
Monthly, quarterly, annually performance bonus: feed mills set periodic target to reach to
distributor. Setting monthly, quarterly and annually target allows feed mill to ensure that
efforts will be done continuously by distributors and not only during peak season.
For livestock feed, basic margin are often around 5% to 7%, when total margin can reach 8 to 10%
including the periodical target and exclusivity extra margin.
The level 2 distributors are rarely exclusive as there are trading smaller volumes and working very
locally. These kinds of distributors have smaller margins and propose very rarely credit to their
clients. The level 2 distributors are making rather small margin. It is difficult to estimate level of
margins that are made but feed professionals are often talking about 2% to 3% maximum.
Often these type of feed distributors do not only sell feed but all kind of agrofurnitures needed by
local farmers (equipments, vet products, etc.)
The pig, chicken, duck and shrimp sectors have specificity regarding their feed distribution systems27:
Pig industry: This sector is considered as a dealer industry. Indeed primary and secondary
distributors are doing a large part of the volume of feed sold by feed mills. However it appears
that more and more feed mills are now trying to take back the control of their distribution
26
27
44
channel. On the other side, integrated companies are taking more and more important role
subtracting volume to the market as they represent their own captive market out of
competition.
Chicken industry: this sector is not really concerned by distributors involvement as almost all
white meat chicken producers (industrial chicken, the one consuming industrial feed, by
opposition to local species) are integrated producers producing their own feed. The market is
dominated by 3 main actors known as CP, Japfa and Emivest.
Duck industry: this is considered as feed dealer sectors as almost all feed is sold through
primary and secondary distributors. The market is known to represents 1 million tons while
Proconco hold 30% market shares. Proconco work a lot through local distributors.
Shrimp industry: this industry almost does not have Level 2 distributors as Level 1 and
feedmills are selling directly their feed to farmers. Few secondary distributors shall exist in
some remote area but they are doing small volumes. Margins are higher than for livestock
feed as it is reported by industry experts to be between 12% to 15% (compare to 8 to 10% for
others industries)
The following part is a selection of wire story published by the Asian Agribusiness Group on their
website28 in the last months.
Nutreco plans for new plants in Vietnam and Indonesia
[24 February 2014] Nutreco is expanding its presence in Asia with two new state-of-the-art plants in
Vietnam and Indonesia and a remodel of its Chinese plant in Xiangtan (Hunan). The facility in
Vietnam will be operational in the second quarter of 2014 and the plants in Indonesia and China in
the first quarter of 2015. These initiatives confirm the companys strategy of expanding its presence
in Asia due to sound, long term growth prospects in the region. Both plants will produce premixes
and farm minerals and in Vietnam also young animal feed concentrates will be produced.
45
46
Vietnam Tongwei, the new plant in Hai Duong will cover an area of three hectare. The new plant will
have annual output capacity of 200,000 tons. Construction will commence this month and is
schedule to be finished next March
West Hope Gorup: Chinese feedmiller opens facility in Vietnam
[21 September 2011] China Sichuan Tequ Group/West Hope has started running its first feedmill in
Vietnam, the first step towards its goal to build a complete meat and food supply chain in the
country. Costing USD 10 million, the plant is located in the northern province of Bac Giang and has a
capacity of 400,000 tons/year in manufacturing livestock feeds. It is operated by the groups
subsidiary Khu Hope Feed Co. Group President Wang Degen said the new operation marks a good
start for the groups business in Vietnam where it plans to set up a complete chain of livestock and
aquaculture feed production, and food processing. Mr. Wang said the group plans to build seven
feedmills, two pig breeding farms and two poultry breeding farms during 2012-2017.
CP expands in Vietnam with more feed plants
[16 September 2011] Thailand's largest agricultural conglomerate, the CP group, which currently has
five animal feed factories in Vietnam envisions doubling its total there by 2014. "We want 10 plants
in Vietnam by 2014," says Jittisart Jittiloet Sakulchai, the general manager of CP Vietnam Livestock
Corporation, adding that the cost of all six planned new factories will be less than for the first four
due to smaller capacity. "We've earmarked US$37 million for 2012, $60 million for 2013 and $70
million for 2014," he says.
De Heus acquires aqua feedmill in Vietnam
[14 September 2011] Dutch feedmiller group De Heus has entered into the fast growing aquafeed
market in Vietnam through the acquisition of an aqua feedmill its fourth in Vietnam since 2008.
Located in Hoa Phu Industrial Zone in Vietnam's southern province of Long An, the plant has a
capacity of 100,000 tonne/year. It is scheduled to be operational in September 2011 and will be
operated by De Heus LLC Vietnam. The acquisition of the aqua feedmill is a strategic at diversifying
its product range and a stepping stone towards becoming a top 10 feedmiller in Vietnam in 2013.
The company is also building a state-of-the art feedmill in Dong Nai province that will be completed
in March 2012.
47
feedmill in Vietnam. They have established Kyodo Sojitz Feed Co (KSF) to build a feedmill in Ben Luc
district of Vietnam's southern province of Long An. Costing USD 26 million, the plant will have a
capacity of 200,000 tons/year and is scheduled to be operational in April 2013. As the biggest pig
feed producer in Vietnam, Kyodo Shiryo will employ its technology and expertise to support the
production of feed in Vietnam, where pork is the major meat consumed in the country.
As the pioneering market leader in commercial feed production, CPV currently operates five
livestock feed mills and three aquatic feed mills. CPV has a production capacity of 2 million tons of
feed and is the leader of the Vietnamese feed business with a market share of 19%, thanks to 5 feed
mills in operation and 5 others to be added by 2014. CP targets to produce 3.5 million of feed in
2015.
CPV has a complete range of livestock and aquaculture feed products, including concentrate,
powder and pellet feed for swine, broiler, layer, duck, cattle, shrimp and fish. They have an extensive
distribution network, with more than 1,300 dealers, enabling them to distribute their feed products
across Vietnam.
CPV's farming business includes both livestock and aquaculture farms. They are the market leader in
commercial broiler production, as well as commercial swine production. In the aquaculture market,
CPV is a growing player with plans to strengthen its market position in Vietnam.
CPV employs an integrated, closed farm system and applies modern production technology that is in
line with international standards in its farms. CPV operates about 2,000 farms, including shrimp
farms, shrimp hatcheries, fish farms and livestock farms, most of which are contracted operations.
All contract farms have to pass screening tests before CPV supplies farmers with animal breed,
animal feed, farming techniques and know-how.
With regard to the food business, CPV has three food processing plants manufacturing value-added
food products, including shrimps, chicken meat, and sausages. CPV also has its own production and
cold storage facility for seafood products.
CPV produces different processed food products using outputs from its own farms as well as other
trustworthy farms. The processed products - fresh, chilled or frozen - are packed and distributed to
retailers, wholesalers, fast food operators, convenience stores, supermarkets and supercenters. For
48
seafood products, they are sold to overseas markets, such as the European Union, Japan and other
Asian countries.
The following figure represents the integration of CPV in food business.
Since CP first came to Vietnam in 1993 (they establish rep office in 1988), the animal feed industry
has transformed considerably from poor-quality manually mixed products towards strictly
standardized formula fodders. Currently, the market is still lucrative as supply only meets 60% of
demand, leaving a big slice of the pie unconsumed.
Thanks to the grain business integration with nationwide grain collection, the company
covers 40% of its raw material needs.
CP also controls its pig production thanks to a contract farming platform including 180 000
sows, allowing for a production of 4 million pigs/year. CP is now considered as the biggest pig
producer in Vietnam. In similar fashion, CP also produces 4.5 million chickens per year through
contract farming.
CP complemented its control of the entire value chain by investing in cold storage and
processing facilities and by being present in the distribution business with 120 CP Mart currently in
operation carrying 5 CP brands. 2,000 CP Fresh Mart convenient stores are expected to be in
operations by 2020.
Contract Farming
Contract farming has been used for agricultural production for decades but its popularity appears to
have been increasing in recent years. The use of contracts has become attractive to many farmers
because the arrangement can offer both an assured market and access to production support.
Contract farming is also of interest to buyers, who seek supplies of products for sale further along
the chain or for processing. Processors constitute the main users of contracts, as the guaranteed
supply enables them to maximize utilization of their processing capacity. Contracts with farmers can
49
also reduce risk from disease or weather and facilitate certification, which is being increasingly
demanded by advanced markets.29
According to FAO, contract farmings definition is
Contract farming can be defined as agricultural production carried out according to an agreement
between a buyer and farmers, which establishes conditions for the production and marketing of a
farm product or products. Typically, the farmer agrees to provide agreed quantities of a specific
agricultural product. These should meet the quality standards of the purchaser and be supplied at the
time determined by the purchaser. In turn, the buyer commits to purchase the product and, in some
cases, to support production through, for example, the supply of farm inputs, land preparation and
the provision of technical advice.
Several type of contract farming exists in livestock industry. A research report from ILRI and IFPRI for
the Pro-Poor Livestock Policy Initiative listed 4 cases of contract farming in North Vietnam for pig
production:30
1. Closed loop: integrator provide feed and stock and get back the ready-to-slaughter animal
2. Sub closed loop: integrator work with farmers and provide feed and stock but farmer is also
subcontracting the fattening to other small farmers. When animal can be slaughtered, small
farmers give it back to the main farmer who gives back animals to integrator.
3. Open loop: the integrator is providing feed and stock but does not commit to buy back the finish
product. It is an option but not compulsory In this case, we could have sub cases as the direct
interlocutor of the integrator could be either a farmer, or feed distributor or even producer
cooperative.
4. Incomplete loop: in this last case the integrator do not buy back the finish product and provide
feed and stock against payment at the end of the cycle.
Many others contract farming systems exists. It is actually very flexible in term of implementation on
the field. In order to work, contract farming must be a win-win situation so discussions and mutual
understandings are important before signature of such contract.
Regarding contract farming, CP was one of the first Agribusiness Company to implement contract
farming at large scale.
In Vietnam, CPV has more than 2,000 farms under contract farming, supplying pig, chicken, shrimp,
and eggs.
The basis of the CPV contract farming is:
5. CPV sign an agreement with local farmer to produce animals. Such contract stipulates that CPV
will buy the ready to slaughter animals at a certain price per kg of animals. Such amount is fixed
at signature of the contract.
6. CPV would provide either juveniles, either feed or sometime both.
29
30
Wikipedia definintion
Smallholder Contract Farming of Swine in Northern Viet Nam: Contract Types, ILRI, Mar 2006
50
7. The price paid to farmers for alive animals is then already taking in consideration that juveniles
and feed have been provided.
8. CPV will dedicate technicians on site that will be in charge to provide technical advises to
farmers.
9. When growing cycle reach the end, CP will organize the collect of animals for slaughtering.
10. The payment of the farmers will be organized according to performance of the lots but also
according to input use (and paid by CP) during such cycle.
In such system, CP is paying a amount of money to farmers that is not visibly linked to a market price
as it take into account cost of input (feed and juveniles) but also technical support and advises. It is
important to note that during the cycle of the animal, such animal does not belong to farmers, but
belongs to CP.
The principle is that CP rent the farm, rent the production tool and lent juveniles to farmers with
input to fatten them. The ownership of animal still belongs to CP during cycle.
Since recently CP Vietnam decided to decrease the ratio of animals coming from contract farming as
they were facing difficulties. Some contract farmers were selling CP feed to other farmers or were
simply steeling animals to resell it on the market. As we explained, very often animals did not
belongs to farmers, then facing thief and resell of input, CP decided to reduce its dependence to
contract farmers.
The actual move in this business for CP is simply to acquire the farm from the farmer. It represents
an important investment but allow CP to have full control of the production. The basic pig farm
acquired by CP for example is a farm with 1,000 sows.
The Government of Vietnam published in 2008 the Livestock Development Strategy to 2020, a
guiding document on how the government wants to frame the livestock development on the next 10
years.
It clearly shows the path of industrialization and intensification of animal husbandry. The main
purpose is to increase the volume produced thanks to intensification of the production and increase
in the scale of farming. Such system, very well developed in western countries (Europe, US,
Australia) allowing more production of animals per surface unit but are not neutral in term of
pathogenic and financial risks.
On the field, in order to support farmers to intensify their production, limited efforts are done.
Discussions with industry experts lead to the following statements:
Poor technical support is given by relevant authorities (DARD, Department of Agriculture and
Rural Development, it is the local representative of MARD). Technicians from DARD do not
visit very regularly farms and do not propose action to overcome difficulties in everyday
managements. Private companies, again, are filling the gap by proposing free technical
support, but at the condition to sign a contract farming with them and then be bind to a
large company
There is no state organization really active to follow performances of animal husbandry and
to sharing this information between farmers. This could be a good way to disseminate
technical information and show to farmers that good practices can be efficient thanks to
practical examples and farm visits.
Poor logistic and organization at slaughterhouse level. There is 28,285 small slaughterhouses
in Vietnam according to Department of health. In 12 provinces in the North alone,
there are 11,485 slaughterhouses but out of these the relevant agencies can only monitor
929 because of lack of human resources.
There is no proper control at slaughterhouse level in term of quality and traceability. We
propose an extract of article published in Vietnam Net website31 in October 2012
"Livestock and poultry slaughtering is the main income for many people. They must be a part of the
city's system plan or the city must help them switch jobs," Deputy Prime Minister Nguyen Thien Nhan
said.
Currently, about 26 cities and provinces are yet to develop a slaughter system plan.
31
http://english.vietnamnet.vn/fms/society/49871/ha-noi-given-ultimatum-on-slaughterhouse-targets.html
52
According to the municipal Department of Agriculture and Rural Development, Hanoi aims for 50 per
cent of livestock and poultry products to be slaughtered and processed at modern industrial
slaughter houses by 2015.
There are approximately 18 standard industrial abattoirs in Hanoi Capital. However, most have
halted operations or are working at reduced capacity as their trade has been poached by substandard slaughters.
In the meantime, roughly 3,000 slaughter houses are operating in residential areas and up to 2,540
of them fall well below expected quality levels.
Director of the department Hoang Thanh Van said that many slaughter houses failed to meet food
hygiene requirements with no waste water treatment system, no regular quarantine, substandard
processing equipment and unhygienic water use.
The situation is the same in northern Vinh Phuc Province, which is home to 1,100 sub-standard
slaughter houses.
Director of the provincial department Nguyen Tien Phong admitted there were some abattoirs
slaughtering animal right next to the river, discharging waste water into the river and use its water
to clean the meat.
Phong said there was only one industrial abattoir in the province with a capacity of 500 poultry per
hour, but in fact, it has been only operating once or twice per week.
According to officials, loose management from local authorities leads to traders slaughtering
smuggled, sick or dead animals. The price of these products is usually much cheaper than that of
standard abattoirs.
These testimonies are reflecting the poor level of quality and the need to immediate support to
ensure safety of meat consumed in the country.
Then, the distribution channels are also not really in adequation with international food
safety. Indeed, there is thousand of wet market where meat is sold with poor hygienic
conditions. The meat is sold hot meaning without proper cooling system but in most of
case is sold in the day (or even during the morning only) however, if seller did not manage to
sell the meat the day of slaughter, they will certainly try to sell it again the day after
increasing the chance of pathogen development leading to health issue for consumers.
53
The level of technical support is also often not satisfying. There is in each Province, Provincial
organization, depending from MARD, in charge to supervise and help farmers in their everyday job,
discussion with professional shows that no support is given to farmers by the governmental
agencies.
Regarding credits and loans, there is some program in place for farmers, but it appears that
condition to access such program are very hard and not often approved. IN this situation, farmers
often have to solicit their family and friends in order either to invest and upgrade its production
tools or to finance its short term debts and pay for feed, juveniles or medicines.
As we explained previously, since several years, the private sector came into the landscape and
proposed contract farming to farmers allowing them to have access to farm input of to secure their
output at known price.
Agribank
The Vietnam Bank for Agriculture and Rural Development (VBARD) was established in 1988 with the
reform of the financial system and the reintroduction of commercial banks in Vietnam. VBARD is a
state 'policy' bank, responsible for 'directed' lending to agricultural and rural sector. It enjoys
government subsidies and access to central bank credits. By the end of 2001, VBARD had become
the leading commercial bank in Vietnam, with the most extensive network of branches in rural
areas.
Agribank is the bank in charge to support development of the agricultural sector in Vietnam through
financial tools such as loans. Agribank utilizes different credit methodologies. The most common one
is to provide individual loans to rural farmers and entrepreneurs, with collateral requirement. A land
use certificate is commonly used as collateral.
Agribank introduces the credit product of Loans for farmers in accordance with Decision
67/1998/QD-TTg in 2010 to individuals or households who are in need of loans for agricultural and
rural development and for expenses of business operation.
Main features of such program
Currency: VND
Loan amount: customers must have equity participation of at least 10% of the total demand
for short-term loans and 20% of the total demand for medium and long term loans
Repayment of principle and interest: single or multiple principle payment, monthly repayment
on interest or regular repayment as negotiated.
Repayment before term: interest calculated from the date of borrowing to the date of
repayment. Total fees paid before the term is stated in the contractual agreement.
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Quality Management
The Quality in the animal feed industry is almost always managed at private levels. The government
has role to provide necessary lab facilities in order to test main characteristics of feed ingredient but
most of the effort is supported by private companies.
The quality of feed in Vietnam is considered as good. The food safety attribute of feed is in line with
international standards even if the formulation of some animal feed should be improved thanks to
better formulation matrix.
Local ingredient like corn represents some threats in term of quality as it is vector of mycotoxin
contamination. Such mycotoxin could lead to severe health problem for animals.
Traceability
Regarding traceability, it is almost impossible to trace back local ingredient. Indeed, the nature of
Vietnamese agriculture, being atomized and production done by smallholders, does not allow
knowing the exact origin of the product. There is no national traceability program in place, while in
Thailand local authorities implemented a traceability program for the shrimp industry allowing value
chain actors to know the exact origin of the product: the TraceShrimp concept
In Thailand, TraceShrimp concept includes the whole supply chain from farm to processing level
including feed utilization, hatchery and farm operations, shrimp collectors/distributors, and
processors. Moreover, at the Departmental level, to some extent, traceability system using
documentation known as Movement document or MD has been used among the four steps, from
hatchery to farm via shrimp distributors to processing levels.
Such program could be interesting to duplicate in Vietnam for agriculture and livestock.
In Vietnam, if we consider the corn industry, local farmers can only produce few hundred kilos per
year, while the local industries need million tons. Multiplying number of farmers involved is a
necessity in order to interest large factory buying large amount of corn but the multiplication of
stakeholders opacify the value chain loosing traceability.
55
In 2013, Vietnam authorities have been working in the development of Vietnams regulatory
structure for agricultural biotechnology. In May 2013, the Ministry of Natural Resources and
Environment (MONRE) issued Circular 8/2013/TT-BTNMT on the procedure for granting and
revoking Bio-Safety Certificates, paving the way for cultivation of agricultural biotechnology crops in
Vietnam. Meanwhile, the Ministry of Agriculture and Rural Development (MARD) is actively working
on the Circular for Approval of Genetically Modified (GM) Plants for Use as Food & Feed which is
expected to be approved early 2014. Additionally, MARD is also working on a draft Circular on
labeling of biotech products.
Given the work made this year by authorities, USDA expects that the first commercial cultivation of
agricultural biotech crops should be done in late 2014 / early 2015, following individual trait
approvals. Based on the timeline established in MONREs Circular 8, MONRE should issue the first
Bio-Safety Certificate in the middle of 2014. Similarly, biotech developers expect to obtain the food
and feed approval certificate by the middle of 2014.32
On June 21, 2010, Vietnams Prime Minister approved the Bio-Safety Decree 69/2010/ND-CP,
replacing Vietnams Bio-Safety Regulation approved in 2005, which was first ever biotech regulation
in Vietnam (VM5062). The Bio-Safety Decree provides the legal framework for biosafety
management of genetically modified organisms (GMO), genetic specimens, and products derived
from GMOs. The Decree entered into force August 10, 2010. In order to bring Decree 69 in
compliance with provisions on the management of food derived from agricultural biotechnology,
regulated under the Vietnam Food Safety Law, in November 2011, Prime Minister Dung signed
Decree 108 revising Decree 69 and changing the responsible Ministry for certification for food use
from MOH to MARD.
The following tables summarize the responsibilities of Vietnams Government Agencies in
Management of Bio-Safety as described in Decree 69 and amended in Decree 10833
32
33
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Secondly, it appears important to underline the trend of the development of animal feed industry
since few years: large international companies are taking the lead on the market due to their
financial power but also their capacity to mobilize competent staff and implement long term
development strategy.
This trend is putting at risk the existence of local feed mill as often these feedmill do not have
sufficient financial capacity to benchmark credit practice of large companies or even to provide same
quality feed with same production cost as they do not have same formulation skills.
One reason for emerging of international companies as leader in animal feed market is due to the
fact that large companies are able to source good quality product and to import it directly without
going through importer, that will obviously takes a margin, increasing price of ingredient. Small local
companies do not have choice and are obliged to pay higher their raw materials compare to
international companies.
We can imagine that in such situation, the animal feed industry will be dominated entirely by foreign
own companies, making profit thanks to local Vietnamese farmers but exporting their dividends
abroad to satisfy shareholders thirst. What would be the impact of such foreign domination while
their strategy is to control entire value chain like CP? What would be the dependency of Vietnamese
farmers is these corporations decide to increase feed price? Reduce technical support? Or even
reduce price of ready to slaughter animals? What motivation young generation would have to work
to produce pigs chicken or fish if they know that foreign companies are in position to manage price
increase of decrease?
All these questions are not trivial and future of large part of food industry will depend on the
development of the feed industry. It is the entire food security strategy that should be consider as if
nothing change the meat business will be in hands of foreigners.