Thai animal feed market flexible with in a strait-jacket

Being self-sufficient in food production is a long term goal for many Asian countries. In Thailand this longstanding policy has not been particularly successful when considered in terms of the long term trends in imports. Imports have increased in the face of an ongoing battle between an expansionist private sector with a profit motive and protectionist bureaucrats who do not have a sound understanding of the needs and requirements of the commercial world. This clash in opinion hampers the government’s policy of developing Thailand into Asia Pacific’s centre for the animal feed industry.
  Soybean meal/cake and fishmeal are the major protein sources used in Thailand. Most of these products are imported. The government views this as a threat to its farmers and fishing community and has set a future goal of developing competitive protein sources from local products. One policy focus is on locally produced cassava roots and cassava based products, all of which have been found to contain protein. The development policy revolves around the “Clean Tapioca Program” which has the goals of promoting and developing tapioca (cassava) products.
  Thailand currently has 500,000 farmers producing cassava. These farmers are currently producing around 28 million tonnes of cassava roots, up from 17.2 million tonnes in 2003. These products have a variety of uses in Thailand. An important usage lies in chip and pellet production for animal feed, which are sold into both the domestic and export markets. Domestic use of cassava in animal feed was estimated at 700,000 tonnes in 2007 by the Thai Feed Millers Association (TFMA).Exports are significant. According to the TFMA, cassava chip and pellet exports earn around €650 million per year. The key factor that underpins Thailand’s demand for imported animal feed is its exports of aquaculture and poultry products. The government generally recognises that some level of imports is needed to keep Thailand’s export businesses going in a cost effective manner. It should be noted that there is a ban on exports of pigs and pork products to neighbouring countries of Cambodia, Laos and Vietnam, where prices are considerably higher than in Thailand. This ban has been put in place as part of efforts to combat trade that is officially now regarded as smuggling.
  Under Thailand’s Animal Feed Quality Control Act, the government has imposed an official ban on any ruminant-based meat and bone meal (MBM) from any BSE-infected country.

Thailand’s livestock in overview
Thailand has large industries producing chicken and pig meat. It also has a sizeable cattle industry that produces both milk and beef (Tables 1 and 2). The country has a sizeable duck farming industry which produces about 85,000 tonnes of duck meat per year. Aquaculture is fast growing with production output reported at close to 1.4 million tonnes, which is about 33% of Thailand’s total fish and seafood production.

  Thailand’s livestock industry is fragmented with about 300,000 family owned farms that operate small sized herds and/or flocks. Then there are a small number of large scale integrated businesses that are key players in the pork and poultry industry, and are the only businesses involved in exports. Major producers and exporters of chicken products are Saha Farms, Charoen Pokphand Foods and Betagro. In pigs and pork Charoen Pokphand Foods, Betagro, Kanchana Fresh, Laemthong Group, Mittraphap Group, Freshmeat Food and Belucky are the main players. All these companies operate integrated livestock and meat product production facilities.
  Thailand has some very serious animal health problems, which have had a devastating impact on its export oriented farms, albeit that most of them operate in a disease free environment. The 2003/2004 Avian Flu outbreaks forced a major strategy change on Thai poultry exporters, such that they now export cooked poultry products rather than frozen uncooked products as they did prior to 2004. Overall, exports of both poultry and pork are now lower than they were in 2002 because of the impact of disease outbreaks.
  Thailand’s aquaculture industry has two segments:

• A domestic market oriented freshwater sector, which produces mainly fish, predominantly Tilapia (30% of production), Catfish (30%) and Common Silver Barb (15%). This sector produces about 40% of all of Thailand’s aquaculture products and demand for its products have been relatively stable over the past 5 years; and
• An export-oriented brackish aquaculture sector, which mainly produces prawns and shrimps (50% of production), and shellfish (40%). In 2007 and 2008, this sector produced about 60% of all of Thailand’s aquaculture products. Demand for its products is dependent on the state of demand in the export markets.

The freshwater sector is highly fragmented with close to 450,000 farms. The brackish sector is more consolidated with around 40,000 farms, which also include some larger sized export focused businesses.

Raw materials for animal feed
Thailand produces around 9 million tonnes of agricultural products and related waste products that are used in local animal feed. Figure 1 illustrates what is used. Although Thailand is a major producer of rice and cassava, these industries are focused more on the export market than the domestic market. The domestic feed raw material supplies are heavily biased towards energy rather than protein. Thailand is well integrated into its regional feed supply bases and channels, including those in the neighbouring Indo-China countries, Myanmar (Burma), southern China and also in the Indian subcontinent., which countries are now key raw material supply bases for the Thai feed industry.
  According to the Ministry of Agriculture, farm animal feed demand equated to about 12 million tonnes in 2008 of which is 49% poultry feed, 39% pig feed and 12% cattle and other feeds. Aquaculture feed may not be included in the Ministry’s estimates: Prawn and fish feed are reported at 795,000 tonnes and 518,000 tonnes, respectively, in 2008, which are estimated to represent a total of about 12% of all animal feed produced in that year.

Fragmented Thai feed industry
Thailand’s animal feed industry includes more than 1,000 manufacturers today of which around 200 are ranked medium to large sized businesses.
  The majority of businesses produce livestock feed. About 150 of the businesses in the industry are aquafeed specialists, of which around 70 are producers of complete aquaculture feeds.The largest animal feed factories are those that are integrated into the poultry and pork businesses mentioned earlier. Some of these large businesses, e.g. CP and Betagro, are also marketing their feed products to a broad base of independent farmers.
  Betagro claims to be the largest feed manufacturer in Thailand with a recently expanded production capacity of close to 2 million tonnes. CP also claims market leadership. Amongst the other larger companies that operate in the industry are Bangkok Feedmill, Krungthai Feedmill, Lee Pattana Feed Mill, Laemthong Agri-Products, Thai Feedmills and United Feed Mill.
  Thailand’s edible oil companies are also involved as input suppliers to the industry. Thai Vegetable Oil is reported to be the main supplier of soybean meal to feed producers. Its senior management claims a 50% share of the market.
  The animal feed industry’s commercial activities are constrained by price control regulations. Animal feed is one of the products whose price is controlled and monitored by the Internal Trade Department of the Ministry of Commerce. These controls are in place as part of efforts by the government to control the price of meat/poultry in the end market to keep it affordable for a broad range of consumers in different income groups. The government controls over animal feed prices cause feed input and additive buyers to become highly price sensitive. This is a particular problem for buyers that might want to purchase inputs and additives from the developed world.

Animal feed imports
Thailand has a very large market for imported animal feed, which include both prepared animal feeds and feed ingredients and inputs (Table 3).
  The country also imports large quantities of wheat, mainly for the production of flour for human food production, although a few thousand tonnes of lower grade wheat may be used in feed. There is also a small market for imported barley. Oats and grain sorghum imports are minuscule and undeveloped.
  Very large quantities of soybeans are imported to Thailand for crushing purposes, which provides the Thai feed industry with equally large quantities of domestically available soybean meal.
  Although Thailand tries to buy most of its needs in the surrounding countries there is a demand for products from the developed world. For prepared animal feeds and premixes, starch industry residues, brewing and distilling industry residues and whey the USA is the leading supplier. Australia leads the markets for meat and bone meal and barley, but is also a sizeable supplier of whey. Other developed world countries with sizeable markets in Thailand include New Zealand for MBM, France for whey and the Netherlands for prepared animal feed and premixes.

Conclusions
Thai animal feed and livestock producers are generally buoyant about the future. In the face of the global economic crisis, they have readjusted their strategy to focus on lower priced items, which it is believed will still have strong demand in the USA, Japan and the EU.
  Although the forecast of a decline in exports exists, production will remain very large and Thailand will continue to be one of the world’s largest exporters of fish/seafood and poultry products.
  Most trade sources do not see a major decline in meat, poultry or fish/seafood demand from the Thai domestic market, which has been in quite a weak state for 2 to 3 years as a result of the on-going political turmoil and its effect on the economy. Overall, there is a trade viewpoint that demand for animal feed will not be radically different to that seen over the past 3 years.
 

This article is an edited version of a report prepared by Stanton, Emms & Sia for the Regional Agri-Food Trade Commissioner, Southeast Asia, and the Embassy of Canada in Thailand.