Three solutions for the livestock industry

Vietnam’s livestock industry is making positive steps to recover after the difficulties of the past few years. To maintain this growth momentum in 2024, the livestock industry needs to focus on three key solutions to cope with challenges and take advantage of development opportunities.

The livestock industry is expected to recover.

According to the Ministry of Agriculture and Rural Development, the livestock industry recorded quite stable growth figures in the first quarter of 2024. The total output of fresh meat of all kinds in this period is estimated at over 2 million tons, an increase of 4.5% over the same period in 2023. Of which, pig farming is still the main activity, accounting for 64% of the total output of livestock produced domestically.

Not only production, output prices also recovered strongly in the first 4 months of the year. Recorded this morning (May 29), the price of live pigs for slaughter reached 70,000 VND/kg, the highest level in the past 5 years. The sharp price increase, especially in April every year, is a rare phenomenon because consumption demand usually decreases in the summer.

According to the Vietnam Commodity Exchange (MXV), the domestic supply of live pigs remains low, following the outbreak of African swine fever (ASF) and a decrease in imports due to the narrowing price gap with pigs from Cambodia and Thailand. Meanwhile, businesses and farmers are still in the herd restoration phase, and will have to wait until at least the end of this year to be able to bring them to the market for consumption. Therefore, the price of live pigs is expected to remain high in the medium term, reinforcing the optimistic outlook for the livestock industry in 2024.

The advantage still belongs to foreign enterprises.

The stable growth momentum shows that the livestock industry still has quite a lot of potential for development, and reflects changes in the market structure after policies aimed at supporting the development of enterprise scale instead of small-scale livestock households.

According to the Ministry of Agriculture and Rural Development, over the past 5 years, the number of small-scale livestock farms has decreased by 15-20%. The production proportion in professional livestock households and farms accounts for 60-65%. This is an inevitable consequence when the livestock industry has to change and adapt after many events since the Covid-19 pandemic. Raising pigs in a closed chain is the core solution for sustainable development.

However, the difficult period has also revealed the difficulties that the Vietnamese livestock industry is facing, when foreign enterprises are still leading the race and increasingly have an advantage. According to statistics from the Ministry of Agriculture and Rural Development, currently, our country has about 265 animal feed factories, of which 85 factories belong to foreign enterprises, accounting for 32% but holding 65% of the market share.

One of the reasons is that foreign enterprises often have a systematic business strategy and apply a closed production chain, helping to optimize efficiency. In addition, another factor that makes domestic animal feed production enterprises less competitive is the heavy dependence on imported raw materials. This not only increases production costs but also makes it difficult for domestic enterprises to compete on price with foreign enterprises with stable supply chains and lower costs.

Solutions to the problem of raw materials

Every year, Vietnam spends a large amount of its budget on importing animal feed ingredients such as corn, soybeans, and wheat to serve domestic production. The livestock industry consumes more than 33 million tons of feed each year, mainly for poultry and pig farming. However, domestic production can only meet about 1/3 of this demand.

According to Customs data, in April 2024, Vietnam spent 498.82 million USD to import animal feed and raw materials, up 6.7% compared to March 2024 and up 34.8% compared to April 2023. In the first 4 months of 2024, imports of this group of goods reached nearly 1.69 billion USD, up 9.8% compared to the first 4 months of 2023.

Some major import items including corn, soybeans, and wheat all saw sharp increases in volume compared to the first four months of 2023. However, growth in import turnover of raw materials was still significantly slower because world agricultural prices had been on a sharp downward trend since 2022 until the end of February this year.

MXV said that although the increase in output prices combined with the decrease in raw material costs has created a more favorable market context for livestock enterprises, the upcoming situation may be more difficult. Import demand is forecast to increase slightly in 2024 while the prices of agricultural products in the world are showing signs of reversal, jumping in the past month.

Chicago corn and wheat prices have recorded sharp increases to their highest levels since late August 2023. The rally shows no signs of stopping as concerns about supply in major producing countries continue to grow, especially with recent frosts severely affecting Russia's wheat crop and risks as the US crop enters a critical development stage.

According to Mr. Pham Quang Anh, Director of the Vietnam Commodity News Center, to cope with the situation of high costs of animal feed ingredients, businesses need to take some important measures.

Firstly, businesses should proactively seek new sources of supply and change bran formulas to use alternative products when raw material prices increase. For example, wheat or cassava chips can be used instead of corn. This helps reduce dependence on a single raw material and is more flexible in production.

Second, businesses need to increase investment in oil pressing factories to proactively supply soybean meal, a valuable and difficult-to-replace raw material. Vietnam can import soybeans for oil pressing, creating products such as soybean meal for animal feed, soybean oil for food, and soybean hulls for dairy cow feed production. This not only helps stabilize supply but also increases the added value of domestic products.

Third, to minimize the risk of rising raw material costs, businesses should use hedging tools in the process of importing raw materials for animal feed. Applying these financial tools helps businesses stabilize input costs in the face of fluctuations in the international market.

Source: https://thoibaonganhang.vn/ba-giai-phap-cho-nganh-chan-nuoi-152173.html