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.