“The Vietnamese market is attractive, and closed livestock breeding is an inevitable trend.”

Vietstock – “Vietnam market is attractive and closed animal husbandry is an inevitable trend”

BAF Vietnam Agriculture Joint Stock Company (HOSE: Buffett).

Over the years, Vietnam’s pig industry has enjoyed a high reputation in the international market. Although its area is “small”, ranking 66th in the world, its livestock production capabilities are among the best.

The Ministry of Agriculture and Rural Development announced at a meeting at the end of July 2023 that Vietnam ranks fifth in the world in terms of piglet number and sixth in the world in pig meat production. Not only that, the industry growth rate has remained at 5%-7% in the past 10 years.

These are also gentlemen Zhang Shiba – Chairman of the Board Buffett As shared in a recent interview, Vietnam’s pig industry is a fertile and attractive land for foreign investors.

The land is fertile and closed animal husbandry is the trend

Mr. Ba said that judging from actual data, Vietnam’s demand for pork is very large. The chairman of “Vegetarian Pig” commented that Vietnam has a population of 100 million, of which 60%-70% of the dietary structure consists of pork. “This is why Vietnam’s pig production ranks among the top five in the world”According to Mr. Ba.

“Affected by various factors such as population growth, Vietnam has a huge demand for pork, but the per capita pork retention is still low, about 30-32 kilograms per person. In comparison, the ratio in China is 65 kilograms, the United States and Europe It’s 90 kilograms. So as the population increases and the proportion of pork per capita increases, the potential will increase as the economy develops.”

Mr. Ba believes that another factor that proves the investment potential of the pig breeding industry is that the rate of small-scale breeding is declining.

“Small-scale livestock farming has declined and industrial livestock farming is encroaching and growing. This is really fertile land for businesses investing in livestock farming. The evidence is that foreign direct investment in Vietnam is very strong. Even Buffett and identifying livestock as central to the future. This is a large area of ​​land that is very fertile and has great potential for investment in livestock farming. “quoting the Chairman Buffett.

Fertile land requires effective and appropriate investment methods, especially in the context of the livestock sector currently facing risks from African swine fever (ASF). Mr. Ba introduced that at present, the animal husbandry model is in line with the general trend of “closed animal husbandry” in the world, with 3F: feed-farm-food (food distribution output), creating so-called “clean” products.

“Closed chain is a trend that the world has followed for hundreds of years. This is the standard model for the future of animal husbandry, aiming to achieve clean food from production to the table.”shared by Mr. Ba.

President Buffett It is believed that “clean meat” products must be closed-loop, because it is difficult to guarantee if one step is missing. “Many companies only invest in slaughtering, but the pigs bought on the market do not know what to eat, how to raise them, injection history, antibiotic residues, etc.; they also do not know what diseases the pigs have, and there is no history to trace… Therefore, the slaughtering stage alone cannot It’s called clean meat. To truly create clean, high-quality meat, companies must shut down the supply chain.” Mr. Ba commented.

However, Mr. Ba believes that it will be very difficult to close the chain.President Buffett It is believed that in the current market, most businesses can only make feed first, then breed, and then switch to selling pigs.

“Very few businesses do the last F (food). Buffett, because it’s a difficult and challenging story. Today’s consumers’ tastes and needs are mainly housewives, 90% of whom go to traditional markets to buy. They rarely go to supermarkets, thinking the prices are higher. It is indeed higher, because when there is closed control, the cost will be higher than the cost for traders to purchase pigs on the market and then slaughter them manually. What’s more, they have no control over the diseased and diseased pigs going to the market, resulting in market prices being cheaper than in supermarkets. This is a food preparation problem challenge. ”

The next issue is post-slaughter by-products. The husband and wife shared that the “best-selling” parts of the pig, such as pork belly and ribs, are consumed quickly, but only account for 20% – 40% of the pig. By-products such as butt, shoulders, head and tail appear to be more difficult to consume but make up the majority.

However, the Chairman Buffett I believe that the above difficulties can be balanced on the 3F chain. “When you can do 3F, one thing helps when the market is difficult. If the feed is too hard, the farm part is good. If the farm part is a little weak, the feed can make up for it. When the chain is closed, the merchant There is an entire industry, unlike when there was only 1F, if difficulties arise, there is no time to react.”.

In addition to suitable models, Mr. Ba also believes that in the context of the global move towards carbon neutrality (net zero), companies need to adapt to the current inevitable trend of “sustainable agriculture”. He admitted that the livestock industry actually has a huge impact on greenhouse gas emissions, which comes from the by-product of methane gas produced in pig manure digesters, exacerbating the greenhouse effect.

“BAF, with the advice and strict requirements of the IFC (International Finance Corporation), seeks more systematic investments to comply with environmental and wastewater treatment issues.

First, pig manure is no longer pushed into biogas digesters, but is converted into microbial organic fertilizer to fertilize rice fields and reduce greenhouse gas emissions.

The second is a wastewater treatment system that meets Ministry of Natural Resources and Environment standards. The cost of this system is significant, but investment must be made for future sustainability. Especially when exporting to all over the world, you need to comply with standards. “.

In 2030, 6 million pigs will be slaughtered, and trillions of yuan will be invested.

In addition to his comments on the outlook for the livestock industry, the Chairman Zhang Shiba The business situation and future plans of “Vegetarian Pig” were also revealed.

“In 2023 alone, total pork sales Buffett There are approximately 300,000 animals and 16 farms have been built or are under construction. In the fourth quarter of 2023, we will put 2 new farms into operation. In the first quarter of 2024, 4 new farm clusters will be added, and 16 farm clusters will be added by 2024. Our goal is to invest in 10-15 farm clusters by 2025. ““Mr. Ba said.

The above scale allows Buffett There are more ambitious plans to expand the herd. Mr. Ba said that by the end of 2024, the total number of pigs expected to be slaughtered will be about 800,000. By the end of 2025, total pork sales will reach 1.2-1.4 million heads; by 2026, it will reach 2 million; by 2023, the number of children will reach 6 million.

In addition, the company’s business strategy Buffett Something has changed. Financial Statement Disclosure for the Third Quarter of 2023 Buffett Suckling pigs will be retained to raise and sell meat, rather than selling weaned piglets directly as before. However, according to Mr. Ba, this plan has actually been implemented since May through processing projects linked to farmers.

“Actually Buffett The determination is to raise them all, but sometimes the farm is not stable enough to be developed. At the same time, the sow herd stabilized the reproductive cycle and was unable to stop it, resulting in an overselling of weaned piglets. However, starting in May 2023, we will work with farmers and small farms to raise these pigs on farms called processing farms.President Buffett explain.

This option brings many benefits. First, the annual sales of pork stocks increased rapidly. Second, weaned piglets do not need to be sold when the market is not good or even unsaleable, and the business can be carried out proactively. Third, and most importantly, is generating more revenue from the processing plant itself.

“Some small farmers are not confident in raising livestock because they are afraid of risks, so now they outsource it to us and get a certain amount of funds. Buffett Herds can be developed and bran sold to farmers faster because breeding techniques, varieties and foods must be synchronized across connected farms. Therefore, the income from not selling weaned piglets is the income from bran.bran plant Buffett Currently, production capacity is not yet at maximum capacity, so additional revenue from processing plants will create the fastest break-even point. “

Biggest challenges facing your program Buffett Substantial sources of funding are required, resulting in an increase in outstanding debt. Mr Ba acknowledged this, confirming that “when we stop investing, the debt will decrease”.

“The investment target to sell 6 million pigs by 2030 is very large, because this is equivalent to 80% of the current size of CP Group. Therefore, the level of investment is very high, not only in farms, but also in breeds, animal feed factories and food sectors. If investments increase, outstanding debt will of course increase. President Buffett explain.

However, Mr. Ba said that it is impossible to judge the situation in the next few years and can only look at the investment efficiency in 2023 – by then Buffett Investments are being made in expansion, and the market is not living up to expectations.

“Due to the decline in total economic demand, the recent price of live pigs has been lower than expected. The reduction in total demand, fewer jobs, and lower income have led to a decline in the consumption structure, which is the most important factor affecting pork prices in the near future.”

“In addition, there is a process of heavy investment and continuous expansion. It takes 1 year from start-up to completion of a livestock farm; after that, they start raising breeding pigs, which takes 5.5 months to sell to generate income. This means that a farm goes from It takes 1.5 years to build to profitability. During this period, the company still has to pay the costs incurred, and things that do not bring in revenue must be transferred to the existing pig herd.”

“However, if this results in a 2.5-fold increase in the size of the pig herd by 2024, that is a different story.”he affirmed confidently.

Mr. Ba believes that to achieve the 2030 target, the funds required must reach trillions of dong.However, he commented on the pressure on capital resources Buffett It won’t be too big because there is support from many banks and financial institutions, especially after the evaluation and funding by IFC.

“Getting IFC’s assessment and investment is like opening a door for other financial institutions to be interested. Currently, there are many banks and funds lining up to invest in our projects. Even some of the previous investments were borrowed from domestic banks , Buffett Restructure using cheaper sources of capital.So, there is potential Buffett Implementing this strategy is entirely feasible. “

“Currently, many companies are having to reverse course, reduce plans, downsize or change completely due to concerns about the risks posed by African swine fever. But I think we have to be firm on our goals. Buffett We currently have the advantage of cheap, long-term funding sources, which is extremely beneficial for investment. When everyone is struggling and everyone is scared, we have to be different and we have to invest more. “ President Buffett Add to.

Zhouan