INVESTMENT in growing South-South trade is vital to shore up the Philippines’ feed supplies, with regional soymeal demand set to grow by 68 percent in five years, according to report released by Rabobank, one of the world’s leading food and agribusiness banks.
South-south trade or cooperation is a term used by policymakers and academics to describe the exchange of resources, technology, and knowledge between developing countries.
In its report titled ‘Losing Steam: India’s Soymeal Exports Are Drying Out,’ Rabobank said that the Philippines and other Southeast Asian countries will become more reliant on Latin America to meet their growing need for soymeal as the region’s poultry, livestock, and aquaculture industries thrive on the back of rising consumer demand for these products, while India’s available soymeal for export becomes negligible and prices for Indian soymeal rise.
India has traditionally been the largest supplier of soymeal to Southeast Asia, providing 36 per cent of imports in 2008. However, as its own domestic demand has increased driven by animal protein and dairy industries and production has been constrained, Rabobank predicts that exports could dry out by 2020.
In parallel, in the past decade, Southeast Asia’s soymeal imports have doubled from six million tonnes in 2003/2004 to 13.7 million tonnes in 2013/2014, and at the current growth rate could reach 23 million tonnes by 2019/20 as the region’s consumers boost the protein in their diets.
In 2013/2014, the Philippines was one of the region’s largest importers of soymeal, purchasing 2.5 million tons overall. A lack of additional suitable land in Southeast Asia for crop production is a barrier to domestic production meeting regional growth.
Pawan Kumar, director, food and agribusiness research and advisory for Rabobank, said, “Soymeal is a vital feed commodity for the animal protein industry. The reducing role of India in soymeal trade and higher prices for Indian soymeal are already impacting trade flows globally, increasing Southeast Asia’s reliance on Latin America, and accelerating the growth of the south-south corridor faster.
“In particular, imports from Argentina and Brazil will further increase, giving bargaining power to suppliers in these countries in the absence of any other sustainable alternatives. This important balance shift will prompt players in Southeast Asia to seek strategic options to secure supplies,” he said.
“At the current rate, India’s soymeal exports will be negligible in the next five years, and a consolidation in the Indian oilseed crushing industry can also be expected,” Kumar concluded.
In 2013 to 2014 Southeast Asia’s top soymeal importers were Indonesia (4), Vietnam (3.3), Thailand (2.7), the Philippines (2.5), and Malaysia (1.6) million tons. Overall, the region produced 2.4 million tons of soymeal domestically and imported 13.7 million tons.
A report by Rabobank released in January said that production of soybeans in South America could increase by 30 percent in the coming decade, creating an extra 20 million tons for export.
The report also highlighted that, currently, poor infrastructure and logistics are major barriers to this growth—the cost of transporting grains from farm to port in Brazil is currently the most expensive in the world, five times higher than the US.
Rabobank Group is an international full-range financial services provider founded on cooperative principles more than 110 years ago.
Headquartered in the Netherlands, its operations include banking, asset management, leasing, insurance and real estate services, serving 8.8 million clients in 40 countries.
As of end-2014, Rabobank had assets of 681 billion euros, net profit of 1.84 billion euros, and a core Tier-1 ratio of 13.6 percent.