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Vietnam's corn demand for pork feed falls on African swine fever

Highlights

The African swine fever outbreak in Vietnam has reduced the feed demand for corn from pork sector this year, but a rise in consumption from poultry has mitigated some pain for the feed industry, market sources said.

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Since Vietnam's Ministry of Agriculture and Rural Development confirmed its first ASF outbreak in February this year, a total of 63 provinces/cities reported outbreaks and more than 4.5 million pigs have been culled, according to Food and Agriculture Organization.

ASF is a contagious viral disease that affects domestic and wild pigs, and while not dangerous to humans, the disease causes up to 100% fatality in pigs, according to FAO.

Vietnam, the largest importer of corn in Southeast Asia, imported 10.12 million mt of corn in 2018, with the crop being a major ingredient in hog feed.

Depending on the severity of the ASF, Vietnam's corn consumption in the feed sector could drop by 10% year on year in 2019, said Rabobank's senior grains and oilseeds analyst Oscar Tjakra.

"African swine fever has had a significant impact on the industry, particularly in production and trade in pork and livestock feed ingredients such as corn in Vietnam. Mainly, swine feed volume has decreased between 20%-30% due to the reduction of pig population because of the ASF outbreak," said Mariano Berdegue, Managing Director, Cargill Feed & Nutrition in Thailand & Vietnam.

Demand for feed from the hog industry has fallen about 20%-25%, a Vietnam-based consultant working with a major grain exporters' body said.

In 2019, corn imports in Vietnam were at 5.73 million mt as of August 15 compared to 5.76 million mt during the same period last year, according to the country's custom data. In the last five years, except for 2017, corn import growth in Vietnam has ranged between 10.8%-117.9%.

In 2017, corn demand took a hit following a scale back in the hog industry and also partly due to the price competitiveness of feed wheat.

"Any reduction in Vietnam's corn import demand will reduce Southeast Asian corn import demand. I think Vietnam's corn import will decrease in H2 2019 as compared to H2 2018 due to ASF," Rabobank's Tjakra said.

POULTRY SOFTENS BLOW

Amid the feed demand destruction by ASF, the poultry industry has softened the blow for feed sector with consumption of the other meat going up, industry players said.

The demand for poultry has increased significantly, therefore, demand for feed for broiler, layer, duck and native chicken has increased partially offsetting lower demand for pork, Cargill's Berdegue said.

"There has been a shift in consumer behavior as many turn to non-pork meat products, such as beef and poultry ... poultry diets require more corn, and this ... should minimize impact to corn imports going forward," Berdegue said.

Rabobank's Tjakra also echoed a similar view saying, "decrease in corn demand from the hog sector, however, will be cushioned by increase in animal feed production from poultry [broiler and layer] sector to certain extent."

Berdegue said that it is difficult to predict when overall feed demand for swine will return to the levels seen in the fourth quarter of 2018.

--Mugunthan Kesavan, mugunthan.kesavan@spglobal.com

--Edited by Kshitiz Goliya, kshitizgoliya@spglobal.com