Overly dependent on imported agricultural raw materials, Vietnam's animal feed industry could do with some policy help that reduces their reliance, industry insiders say.
They see irony in the situation that a major agricultural exporter is heavily reliant on imports of the same sector's products to support a local industry that has significant growth potential.
According to the Ministry of Agriculture and Rural Development, there are 240 animal feed factories in the country with a combined capacity of around 10 million tons a year. In the first half of 2010, these factories produced 4.9 tons of animal feed.
Experts say the industry's growth is clearly hampered by the reliance on foreign raw material.
"Even if we want to use local materials, there is not enough to buy," said Pham Duc Binh, general director of an animal feed company in the southern province of Dong Nai.
Over the past month, his company has been trying to buy 10,000 tons of corn, but there was a shortage in local supply even during the harvest season. He said it was much easier to buy materials from foreign suppliers, at higher prices.
Binh said most materials needed for animal feed production, like corn, cassava, wheat and soybean meal, have to be imported. Local corn supply can only meet half of the existing demand of animal feed producers.
Most of these materials should be made available here, he said. In fact, the country used to be able to meet all of its demand not so long ago. But since the economy has opened up in recent years, imported materials have surged, accounting now for 90 percent of the total supplies for the domestic animal feed industry.
Vietnam imported more than US$2.1 billion worth of animal feed products and materials last year, including $1 billion of soybean meal and $300 million of corn. In the first eight months this year, the import value reached $1.475 billion, up 15.6 percent from the same period last year.
"Frankly speaking, the shortage in materials for the animal feed industry is because of agricultural policies," Binh said. Local producers have been hungry for materials for years, but the country's corn-growing area keeps shrinking, he said.
Crop yields in Vietnam are also too low compared to those in other countries, said Vu Ba Quang, an industry expert. Low output combined with shrinking crop area further weakened the supply of local materials for production, he said.
The country needs to have a large cultivation area that can ensure enough material supplies, he said. It will help lower prices of animal feed products and, in the end, benefit local farmers.
Binh said many places in Vietnam are not really suitable for rice cultivation, but these areas have not been shifted to growing other crops.
Farmers in coastal areas in the central region and the Central Highlands can earn more from growing corn instead of rice, he said, arguing that the government has been focused on rice growing for too long.
Nguyen Tri Ngoc, director of the Cultivation Department at the agriculture ministry, admitted that the authorities have not paid enough attention to developing areas specialized in growing corn and soybean.
He said the ministry is trying to improve the yields of these crops. The goal is to increase the area for corn from 1.1 million hectares to 1.3 million and its yield from four tons per hectare to six tons.
The government has announced it will start planting genetically modified crops in the next five years, including corn, cotton and soybean.