Vietnam’s feed margins under pressure, production down 20-30%

Local traders in Vietnam expect corn imports to fall in the second half of 2021 as another Covid-19 wave and national lockdown...

Local traders in Vietnam expect corn imports to fall in the second half of 2021 as another Covid-19 wave and national lockdown brings production and logistics challenges to feed makers while margins continue to be squeezed by robust corn prices and low meat prices.

Despite the global corn price increase and the Covid-19 outbreak, Vietnam has already imported 5.7 million mt of corn since the start of 2021 to July 15, according to customs data.

That up 10% from 5.1 million mt imported at the same point of last year, and makes it the biggest import slate that Vietnam has ever handled.

The figure represents 48% of Vietnam’s estimated annual corn imports of 12 million mt.

However, local market participants estimate that animal feed production has fallen by between 20-30% in recent weeks, a move that could lead to a decrease in the pace of imports for corn, feed wheat, and other feed products.

“Because of the lockdown, production cannot be maintained as normal. Transportation is bottlenecked, and plants have to ensure co-working and co-living for workers at sites,” a Vietnam-based trader told Agricensus, commenting on the situation.

“Many feed mills are closed in the Mekong Delta area due to Covid-19. They had to give up either margin or volume,” a second trader commented.

Nevertheless, market participants are hoping that an effective lockdown could bring the recent Covid wave back under control and allow imports to potentially pick up in the fourth quarter of the year.

“If we could control Covid-19 in the next 1-2 months, then Q4 demand would be back to normal,” a trader said.

The health of the country’s feed sector has already raised concerns at government level, as margins have suffered in the face of a recovery in the size of the pig herd - after African swine fever - and markedly firmer corn and wheat prices.

Earlier this month, traders flagged that Vietnamese government authorities were exploring lifting the 3% wheat import tax completely and cutting the corn import tax from 5% to 3% to support country’s feed producers.

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