Global Markets: Coarse Grains – Vietnamese Corn, DDGS Imports Supported by Decade of Strong Protein Production

    Vietnam’s feed ingredient imports, principally corn and distiller’s dried grains with solubles (DDGS), have  seen prodigious growth over the past decade. A decade ago, Vietnam imported 1.7 million tons of corn; for 2020/21, it is projected to import 12.0million tons.

    Similarly, in 2019/20 (Oct-Sep), Vietnam imported 1.2 million tons of DDGS from the United States, a volume nearly triple that of 10 years ago. A look at Production, Supply, and Distribution statistics for Vietnam’s meat production reveals some of the reason for feed ingredient demand.

    Chicken meat production in Vietnam has grown year over year for the past decade. Save for a few years, beef and veal production has also steadily grown. Though the impact of African swine fever on pork production is evident in the recent year declines relative to the 2018 high, corn imports have continued essentially unabated through these years, suggesting that producers in Vietnam are actively working to recover from the impacts of disease while maintaining production growth in other species.

    Vietnam also has an expanding aquaculture sector. According to the UN Food and Agriculture Organization, Vietnam’s aquaculture production of fish (as opposed to aquatic plants or shellfish) reached 3 million tons in 2018, the most recent year of official data availability, and preliminary data from the General Statistics Office of Vietnam estimates 2019 production at over 3.1 million tons.

    Per the National Oceanic and Atmospheric Administration (NOAA), corn and soybeans can be used in feed for herbivorous fish and possibly replace some fishmeal and fish oil in carnivorous fish feeds as well.

    Though Vietnam has become a top global importer of corn, most is sourced from South America. The United States does not have a firm foothold for corn in Vietnam, exceeding 1 million tons of exports only once in 2017/18 as Argentina faced a notable drought. However, as the United States is the world’s primary supplier of DDGS, much of Vietnam’s sizeable DDGS demand is met by U.S. product.

    U.S. sorghum gained market access to Vietnam in May 2020, but no major sorghum exports have been realized as of yet, and if newly reignited demand from China persists, it is likely that sorghum will continue to be edged out by corn from a price perspective in the near term.

    China Drives Coarse Grain Trade Dynamics

    Trade data for 2019/20 (October-September) are largely complete. Many countries imported record volumes of corn, despite initial concerns over a potential slowdown in feed use due to COVID-19. For 2020/21, global trade for major feed grains is forecast to grow significantly from a year ago. Corn imports are forecast to grow 7 percent from last year’s record, while barley imports are expected to grow 6 percent. Sorghum imports are estimated up 53 percent.

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    The primary driver behind the forecast growth is China. Domestic corn prices in China have been rising throughout calendar year 2020 reaching $378 per ton last month, the highest since July 2015. Since July, the country has been active in securing corn and corn substitutes (sorghum, barley, and field peas) to satisfy growing demand for feed in its animal sector.

    China’s corn imports are currently forecast to more than double from last year. Corn imports are subject to a tariff-rate quota (TRQ) on a calendar year basis, although there has been no public announcement by the government authority on additional quota being allocated, despite imports for January-October are already well above the TRQ of 7.2 million tons.

    Barley imports are forecast to be larger than a year ago as China steps up purchases from Canada, France, and Ukraine, while imposing antidumping and countervailing duties on barley from Australia. For sorghum, global trade is forecast higher on China’s growing need for supplies from the United States and to a lesser extent Argentina.

    With domestic corn prices continuing to run at near-record levels, China is expected to be a key player in global trade for corn as well as corn substitutes. Given China’s outsized impact on global commodity markets and as its import needs unfold into 2020/21, coarse grain trade is expected to be dynamic.

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