Animal feed costs spike but low demand helps ease pricing

Containment measures in many countries saw feemillers in Asia fight fiercely to keep transport channels open for supplies. In the two months since the lockdowns, their efforts have born fruit. ZAHRAH IMTIAZ and the Asian Agribiz team report that supply chain disruptions were minimal as the animal feed sector is deemed an ‘essential service’.

Despite these successes however, countries that are dependent on feed imports have been struggling with short term price increases. This has more to do with weaker domestic currency than a disruptions in the supply chain.

Vietnam faces shipment delays

In Vietnam, 70-80% of feed inputs are imported. In the last few months, Vietnam has been reeling from reduced container traffic between Europe and the US, impacting its stock of feed ingredients and products, Olmix Asialand’s Director Trinh Quang Thanh told Asian Agribiz.

This has led to a sharp increase in prices – as much as 30-60% for some ingredients, and about 5-10% of feed products. Vu Anh Tuan, Deputy General Director of CP Vietnam Livestock JSC, said the company’s stockpile of feed material was only sufficient to last until the end of May 2020.

“If the pandemic is not controlled, the import of corn, soybean meal, and food additives will face constraints. This could see a possibility of raw material shortage for feed in the next three months,” he added.

To address this challenge, Mavin Group, Deputy General Director, Nguyen Anh Tuan, explained that they had submitted a proposal to the Ministry of Agriculture and Rural Development, to grade livestock products including feed and veterinary drugs as essential commodities.

Higher premix cost in Sri Lanka

Sri Lanka also depends heavily on imported feed ingredients and has been challenged with imports. Shipments from China and Europe however, have been arriving without hindrance.

Uditha Wanigasinghe

Sri Lankan Feed ingredient manufacture and importer, Farmchemie Pvt Ltd, Managing Director, Uditha Wanigasinghe told Asian Agribiz they still had issues importing certain chemicals as ports in countries like India were not clearing shipments fast enough.

Mr Wanigasinghe expects feed ingredient prices to increase by 10-15% at least in the next three months as the dollar strengthens. “We have not increased prices yet because we have older stock. But as new stocks come in from June onward, prices will increase,” he said.

The most affected has been the cost of vitamins which has increased by almost 50%, adding to premix costs. This has been driven more by higher demand rather than the exchange rate.

“People have been stocking up on these vitamins so short term demand has increased,” said Mr Wanigasinghe.

In the long term, he expects feed costs to drop due to the drop in broiler production. The industry has cut down production by 50% and it is expected to take at least a year to recover to previous levels.

Thailand turns to alternative ingredients

According to Taveedaj Prajakesakul, Technical Director of Top Feed Mill in Thailand, disruptions in input supplies in Thailand are not so severe as the country has diverse feed raw material substitutes.

However, the broiler sector, especially exporters, are seeing a shortage of DDGS, which is mainly imported from the US. Thailand depends heavily on DDGS and include up to 20-25% in broiler diets given its price competitiveness.

“Port congestion and falling supplies in the US have impacted broiler exporters. Switching to local energy sources would increase cost a great deal,” said Mr Taveedaj.

Declining demand for animal protein in Thailand and globally may bring down feed raw material prices. However, this does not mean that feed cost would be lower.

In the wake of Covid-19, Mr Taveedaj said demand for feed is low. When growth is flat, the only way to survive is through competitive pricing and by expanding the customer base.

“Substituting conventional raw materials with cheaper locally available alternatives is a viable option,” Mr Taveedaj told Asian Agribiz.

Indonesia sees depressed feed demand

Regular communication with government authorities has ensured that the feed supply chain in Indonesia flows smoothly.

Timbul Sihombing

Timbul Sihombing, Chairman of the Indonesian Feed Producers Association told Asian Agribiz, the government had also asked what kind of relaxations they could provide to help us cope with the pandemic.

Imports of macro and micro ingredients have been ongoing, despite stricter inspection procedure at seaports, Mr Sihombing said. “We understand it is part of the government’s effort to mitigate the disease.”

Similarly, distribution of feed raw materials to feedmills or complete feed from feedmills to customers, is running smoothly. “Each region or province has inspection points. Raw material/feed truck drivers just need to show documents of the products they bring,” he said.

Unfortunately, due to the cumulative impact from increased raw material prices and currency depreciation, feedmillers in mid-April raised poultry feed prices. On average, broiler and layer feeds increased by USD 0.013/kg while layer concentrate by USD 0.02/kg.

“This pandemic so far has depressed feed demand. We predict total feed demand this year may drop by 20-30%. The projected animal feed consumption of almost 22mt this year will not be achieved,” said Mr Sihombing.

“On the other hand, we are grateful that so far no members have reported Covid-19 cases at their facilities. If this happens, feed production at affected facilities must be stopped for at least 15 days.”

Indian harvests come in at the right time

India in the meantime has experienced positive raw material harvests this year despite the disruptions due to Covid-19, allowing significant decreases in feed costs. Reduced demand has also added to lower prices.

Compound Livestock Feed Manufacturers Association of India, Secretary, Naveen Pasuparthy told Asian Agribiz that it was the first 10 days of the lockdown that was hardest. Thereafter, the government declared animal husbandry an essential service. During this time, many producers also slowed down feeding of birds and even induced molting.

The Indian poultry industry suffered greatly due to rumors urging customers to stay away from chicken due to a supposed link to Covid-19. “This forced producers to cut production by 50-60%. We lost USD 2.7 billion between January and March,” said Mr Pasuparthy.

This decreased demand for feed raw materials and with a good harvest, Mr Pasuparthy said, corn prices have dropped to USD 0.2/kg from USD 0.32/kg in the last season.

He explained that feed prices would be dependent on the decision made by industry players to increase production or not in the near future. “That is what we need to watch,” said Mr Pasuparthy.

Liang Kee mills formulate their own value-added feed for a variety of eggs.

Lower production in Malaysia

Malaysia has not had a problem with raw material sourcing but Covid-19 has affected feedmilling.

Lower broiler demand due to the slump in foodservice has seen a parallel decline in feed demand.

A Singaporean farm owner in the south of Malaysia, lamented not having enough people to raise his special French Poulet. Plus, integrators such as Leong Hup International and Cab Cakaran who supply DOC, noted a decrease in production. Financial analysts predict lower production until the end of 2020, which is expected to reflect on feedmilling activities too.

However, some egg farmers are looking to furthering their value-added products. Tan Leng Yee, Managing Director of Liang Kee Farms is inquiring about non-GMO corn. His brand LK Fresh Eggs is known for a variety of value-added products. He told Asian Agribiz he is looking into adding non-GMO corn to his layer feed.

Grain traders such as Agri Agrobusiness (AA) have abundant raw material stock, including non-GMO corn. AA which also runs a small, full fat milling operation, noted no change in operations.