The recipe for meet­ing grow­ing feed de­mands


By 2020 it is pre­dicted that Southeast Asia’s de­mand for soymeal will have grown by 68 per­cent, and this growth will be largely led by de­mand from In­done­sia. In­done­sia’s soymeal con­sump­tion nearly dou­bled be­tween 2007/08 and 2013/14 from 2.37 to close to 4 mil­lion tons, ac­cord­ing to the United States Depart­ment of Agri­cul­ture (USDA).

A re­port re­leased re­cently by Rabobank ti­tled Los­ing Steam pre­dicts that as Southeast Asia’s de­mand for soymeal in­creases, soymeal ex­ports from In­dia are ex­pected to be­come neg­li­gi­ble within five years.

Tra­di­tion­ally, In­dia has been the largest sup­plier of soymeal to Southeast Asia, pro­vid­ing 36 per­cent of im­ports in 2008. How­ever, as its own do­mes­tic de­mand has in­creased (driven by an­i­mal pro­tein and dairy in­dus­tries) and pro­duc­tion has been con­strained, Rabobank pre­dicts that at the cur­rent rate of decline, ex­ports will dry up.

This will only fur­ther in­crease In­done­sia’s re­liance on the southsouth trade routes, as the coun­try turns to Latin Amer­ica for vi­tal feed sup­plies to sup­port its own grow­ing need for soymeal. As In­done­sia’s poul­try, live­stock and aqua­cul­ture in­dus­tries thrive on the back of ris­ing con­sumer de­mand for th­ese prod­ucts, de­mand for feed com­modi­ties has also seen rapid growth. From 2008 to 2014, In­done­sian feed con­sump­tion saw a com­pound an­nual growth rate of 10.44 per­cent, ac­cord­ing to the In­done­sian Feed­mill As­so­ci­a­tion.

In the past decade, Southeast Asia’s soymeal im­ports have dou­bled from 6 mil­lion tons in 2003/ 04 to 13.7 mil­lion tons in 2013/14, and at the cur­rent growth rate could reach 23 mil­lion tons by 2019/20.

In­done­sia is the largest con­tribut­ing coun­try in the re­gion to th­ese vol­umes, pur­chas­ing 4 mil­lion tons of soymeal in 2013/14, ahead of Viet­nam and Thai­land which im­ported 3.3 and 2.7 mil­lion tons re­spec­tively.

A lack of ad­di­tional free and avail­able farm­land re­stricts the op­por­tu­nity for do­mes­tic pro­duc­ers to ful­fill this grow­ing de­mand in the fu­ture.

As In­done­sia’s con­sumers con­tinue to move to­wards higher pro­tein di­ets, this trend and the re­sult­ing de­mand for feed com­modi­ties do not look likely to abate any time soon.

For busi­nesses in In­done­sia, this cre­ates both new trade flow op­por­tu­ni­ties, and chal­lenges for shor­ing up sup­plies. In par­tic­u­lar, im­ports from Ar­gentina and Brazil will fur­ther in­crease, giv­ing bar­gain­ing power to sup­pli­ers in th­ese coun­tries in the ab­sence of any other sus­tain­able al­ter­na­tives. This im­por­tant bal­ance shift will prompt busi­nesses to seek strate­gic op­tions to se­cure sup­plies.

A Rabobank re­port re­leased in Jan­uary ti­tled Food Se­cu­rity be­tween South Amer­ica and Asia cited a mod­er­ate view that pro­duc­tion of soy­beans in South Amer­ica could in­crease by 30 per­cent in the com­ing decade, cre­at­ing an ex­tra 20 mil­lion tons for ex­port. The re­port also high­lighted that cur­rently poor in­fra­struc­ture and lo­gis­tics are ma­jor bar­ri­ers to this growth — the cost of trans­port­ing grains from farm to port in Brazil is cur­rently the most ex­pen­sive in the world, five times higher than the U.S.

Strength­en­ing south- south trade is one of Rabobank’s 10 big ideas glob­ally for boost­ing food avail­abil­ity, and with chang­ing trade flows push­ing In­done­sia and the re­gion in this di­rec­tion as it ex­pe­ri­ences growth, we ex­pect more lo­cal busi­nesses look­ing south to en­sure sus­tain­able growth.

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