Tax on soybeans hits animal feed producers
Source: 21-JUL-2008 Intellasia | Saigon Times Daily page 2
Jul 21, 2008 - 7:00:00 AM The agriculture ministry's livestock farming department says around 40 animal feed producers have closed their factories due to soaring raw materials prices in the year to date. Materials such as corn, bran and especially soybeans have marked up by 60% to 110% but their supply is still running short. The Vietnam Animal Feed Association has written to the government seeking help to ride out the. doldrums. Saigon Times Daily talked with association chair Le Ba Lich over coping solutions.

Saigon Times Daily: Like the animal feed industry, many others are also seeking government help to cope with the tough times. Is the problem faced by animal feed makers serious enough?

Le Ba Lich: All industries have their own problems. The paradox here is that while Vietnam is a major producer of rice, corn, cassava, soybeans and fish powder, the animal feed industry has long been reliant on imported raw materials. This situation will continue in the near future.

We have asked the government to help us cope with inputs and this can be done for the long-term benefit of the cattle raising industry and fanners.

Did the association propose lowering import tax for raw materials?

That's right but it's not just a matter of import tax. We proposed a package of solutions. For us, animal feed should be added to the list of essential goods like food, steel, cement and oil products, so that the government will have clear tax, investment and market policy for the industry's sustainable development. Many think animal feed does not have a direct impact on prices and inflation, so producers have received little attention. However, animal feed impacts strongly on prices of pork, chicken, beef and fish, among others since it accounts for up to 70% of livestock farming cost. Behind the rise in pork prices is the increasing animal feed production cost. We suggested reducing import tax for raw materials to 0% from the current range of 2-5%. Ironically, some materials that are not produced locally, such as lysine, are still subject to import tax. Another solution we proposed is to raise export tax on local materials currently used by the industry to 10-20%. Animal feed processors import cassava starch while this material is exported at 0% tax. In the first half of this year, members of the association imported 400,000 tonnes of corn, but traders in Dong Nai Province and the Central Highlands export this commodity.

To protect its animal feed producers, China bans corn export and encourages the import of it at 0% tax. Why could we not do that?

We don't have any statistics on locally produced raw materials from the Ministry of Agriculture and Rural Development. We're ignorant of the volumes of local soybean and corn, so we cannot actively prepare our plans for purchase, storage and import.

But under a ministry of agriculture plan for developing the local animal feed industry, the industry will no longer import materials?

-That's for a long-term, five or ten-years. But now the domestic supply of soybeans is not even enough for human use. We annually import more than two million tonnes of soybean residues which, of course, are taxed. If local suppliers can meet 30-50% of demand, taxing soybean imports can be justified. But in reality, only several% of soybean needs is met by local suppliers.