Despite the lingering challenges in global economic growth and the persistent pressures of politics and logistics, the livestock industry in Vietnam has undeniably embarked on a trajectory of positive recovery.

This is evidenced by the remarkable 48% increase in the export value of livestock products compared to 2023, a clear testament to Vietnam’s unwavering pursuit of market expansion and product value enhancement in the international arena.

Is sustainable growth or times factor?

While some other industries are still struggling to find solutions, the Vietnamese livestock sector has significant potential for development, thanks to policies aimed at supporting the growth of larger enterprises rather than small-scale household farming However, dependence on imported raw materials remains a major risk for the industry in the face of international market fluctuations

The issue becomes more serious when most essential materials such as breeding stock, feed, and nutrition all need to be imported This situation directly affects production costs, making Vietnam’s livestock products less competitive with international competitors or even closer, with FDI enterprises

Review the whole industry in the first 3 months of 2024, we see most of the pressure for businesses to cool down thanks to the reduction of the cost raw materials for animal feed production. In the first quarter of 2024, Vietnam imported 4.85 million tons, equivalent to 1.65 billion USD, although up 6.4% in volume but sharply down 12.3% in value over the same period in 2023. In particular, the main types of raw materials include: Corn, wheat, soybean meal.

So, the sharp decline in global commodity prices has contributed to the growth of the livestock industry in the first quarter 2024 However, the industry’s dependence on imports raises questions about sustainable and stable development if international agricultural prices rise again. Especially, the end of the second quarter is a crucial period for businesses to be mindful of price fluctuations in various commodities.

The commodity price cycle of raw material

Corn prices traded in conjunction with the Chicago Board of Trade (CBOT) at the Vietnam Commodity Exchange (MXV) have recorded a decrease of about 35% compared to the same period last year. The overall decline in agricultural prices is due to more positive prospects for supply as production levels in major producing countries such as the US, Brazil, and Argentina have recovered after consecutive years of damage

Currently, American farmers have entered the third week of the corn planting phase, with progress reaching 6% of the total projected area as of April 16th When progress reaches around 50%, the market will quickly focus on summer weather prospects, and typically psychological factors will lead to commodity price increases in the second quarter of each year

According to the March report from the US Department of Agriculture (USDA), the corn acreage in the US this year is expected to reach 36,4 million hectares, significantly lower than the 38,3 million hectares in the 2023-2024 crop year However, it is anticipated that the yield will increase to 11,13 tons per hectare from last year’s 10,89 tons per hectare, compensating for the reduced acreage In the coming months, the risk to yield will be the most important factor determining the prospects for US corn supply

From a statistical perspective, for the Chicago corn futures contract in July, there have been 15 out of 24 years where prices reached their highest levels during the summer in June The highest price frequency was recorded in May and April, with 5 and 4 years respectively Similar trends also occur in the soybean market. Despite being heavily influenced by fundamental factors such as consumption, imports, and weather, it seems that agricultural prices still exhibit cyclical patterns

To explain this trend, Mr Pham Quang Anh-  Director of the Vietnam Commodity News Center, stated: “For leading production countries like the US, heatwaves in summer often mean the possibility of crop damage, especially during the crucial development period in May and June. At this time, agricultural organizations and international news agencies will assess and provide production forecasts after considering the weather impact. Discrepancies in data often create uncertainty and drive up prices for livestock feed ingredients”

Potential risks for purchasing in the third quarter 2024

Outside of the US, the agricultural production situation in other major exporting countries is being evaluated unfavorably Brazil has completed planting its second corn crop, accounting for about 75% of the country’s total production, and is currently in a crucial stage of development before harvesting begins in June Meanwhile, Argentina is in the process of harvesting, with progress reaching 15% as of April 11 Argentina’s major grain exchanges have significantly reduced their corn production forecasts

The prospects for corn prices after the USDA’s April World Agricultural Supply and Demand report are assessed as challenging by Mr Pham Quang Anh. CBOT corn prices are unlikely to decrease significantly in the near future, as concerns about the South American harvest continue to dominate the market

For Vietnam, which still relies on imported corn supply, livestock feed businesses need to closely monitor the crop situation in Argentina and Brazil, as they are the largest corn suppliers to our country. Furthermore, with weather fluctuations and risks in the US as well as historical cycles, businesses should balance and ensure raw material supply for the third quarter before the potential price increase in June to maintain stable animal feed costs

Source: baochinhphu.vn