More Vietnamese feed companies are expected to shut down this year upset by feed ingredient imports and tough exchange rates.
Ongoing struggles to source dollars are pushing firms to the wall
According to Vietnam Feed Association (VFA), more than 40 Vietnamese feed companies have completely collapsed since early this year and many more are shrinking their production scales. “Never before have local companies been flung into such a plight. In the coming time, many more companies will totally shut down. Some 20,000-40,000 workers from these companies, including hundreds of thousands of farmers supplying raw materials, will be badly impacted,” said Le Ba Lich, VFA chairman.
Lich told Vietnam Investment Review the failing companies mostly produced feed for cattle, pigs, poultry and fish. “They are being strangled by the rocketing prices of various feed ingredients, which have increased by 70-200 per cent since late last year,” he said.
Pham Trung Kinh, director of Hoa Kinh Feed Joint-stock Company in Ha Nam province, said he had lost big deals worth hundreds of thousands of dollars with customers because of high input costs. “High input costs have made it very hard for us to continue with production. We only dare to ensure production to fulfill small deals,” Kinh said.
According to the Ministry of Agriculture and Rural Development (MARD)’s Livestock Production Department (LPD), local companies often pay $1.2-1.5 billion every year for importing most of the ingredients such as soybeans, corn and flour.
LPD said feed ingredient prices were likely to increase by a further 20 to 30 per cent in the near future, threatening many more producers with bankruptcy. Lich said banks’ high lending rates and high foreign-exchange transaction fees had further burdened companies.
“Banks’ annual lending rates are peaking at 21 per cent, which is too high. Besides, enterprises cannot borrow much dollar from banks, while they have to pay VND2,000-2,500 for $1 they borrow from commercial banks as transaction fees,” Lich said.
“We did not have enough dollars to pay our suppliers. Consequently, they have stopped dealing with us,” said Kinh. This year, domestic demand for animal feed is forecast to hit 18 million tonnes, of which local manufacturers meet about 79 per cent. In the first six months of the year, nearly 3.5 million of tonnes of feed materials worth $1.5 billion had to be imported.
Kinh said many companies had used up nearly all of their reserved feed materials. “I am not sure of my company’s future during the last months of the year,” he said. According to the LPD, the growth of animal husbandry was only 0.03 per cent in the first half of the year. In order to reach an annual growth rate of 4-5 per cent, in the second half of the year, the industry must grow by 8-10 per cent at least.
The MARD also said it would focus on developing intensive farming areas for growing soy beans, corn and grass with high nutritional value.