Tough outlook for Vietnam’s feed imports as hog price falls

The impact of Covid-19 lockdowns continues for Vietnam’s agricultural sector

By Veronika Prykhodko, price reporter for Fastmarkets AgriCensus

Vietnam’s feed industry is expecting to see a major drop off in import demand for feed components as national lockdowns and a collapse in the price of pork and other meats squeeze margins in the sector, trade sources have told Fastmarkets AgriCensus.

Covid-19 continues to have a major impact on Vietnam’s agricultural sector, cutting margins for feed production while small scale pig farmers and feed millers lose money amid the fall in hog prices.

The challenges are the latest to beset smaller players in the industry, which is increasingly dominated by industrial scale livestock rearing and integrated feed milling operations that are re-writing the way the sector has historically worked – with much of the raising of animals handled by small, family-owned farms.

Despite an active vaccination program, isolation and moving restrictions have been a key element of the country’s response to the pandemic and means that restaurants remain closed and people mostly eat at home.

While that has slashed demand from the hospitality sector, pork prices in neighbouring China have also been under pressure as the sector recovers from the earlier African swine fever pandemic, where the pig population has expanded rapidly.

That has weighed on margins for producers and cut the outlook for China’s soybean imports, with a similar dynamic seemingly at play in Vietnam.

“Farmer can’t sell their pigs, while consumer has to buy (at a) high price. There are a lot of transportation costs, Covid-19 testing, driver and labour [expenses],” a Vietnam-based trader told Fastmarkets AgriCensus.

The decrease in hog prices and tighter margins bring negative consequences for small to medium size production in the private sector, which might not re-populate their pigs for the Tet holiday, Vietnam’s traditional New Year celebration in February.

Size matters
However, big producers backed with foreign investments, like Thailand’s Charoen Pokphand Group, Indonesia’s Japfa, the Dutch group De Heus, alongside companies like Emivest, and Chinese-owned New Hope, are ramping up production, according to trade sources.

That is likely to bring further losses to some smaller players and extend the pressure on hog prices through until at least the end of October, but it isn’t just the country’s hog sector that faces the biggest challenge.

Even amid the slowdown sparked by African swine fever, Vietnam’s wider livestock sector compensated for the loss of the pig herd – but trade sources are warning that poultry prices are also under pressure.

“Poultry was at a loss in the past couple of months,” a second trade source told Fastmarkets AgriCensus, quoting prices of VND10,000/kg, around 50 US cents, compared to prices quoted around VND45,000/kg back in April ($2/kg).

That in turn is leading to a decline in feed materials imports, such as corn, feed wheat, soybeans and soymeal.

“I think we will see arrivals in December, January, February reduce. The reduction began two month ago,” a second trader told Fastmarkets AgriCensus, commenting on a further decrease of corn imports into Vietnam.

According to provisional figures from Vietnamese customs, the country has imported a total of 7.6 million tonnes of corn in 2021 up to October 1, a 7.6% decrease year-on-year, with 721,148 tonnes arriving in September, almost a 50% decrease compared to last year.

That represents a marked slowdown in the pace of imports, with the country on track to break records in July after importing 6.4 million tonnes of corn – 10% above the volume imported by July of 2020.

Importers are expecting around 800,000 tonnes of corn to arrive in October, a massive drop compared to last October’s volume of around 1.5 million tonnes.
Alongside corn, the country has also imported 3.72 million tonnes of wheat and 1.53 million tonnes of soybeans.

Vietnam is one of the world’s biggest importers of corn, with the USDA forecasting a 10 million tonnes import need in the 2021-2022 marketing year – down a huge 26% year-on-year.

This article, by Veronika Prykhodko, was first published to on Friday October 15.

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