Despite increased demand for imported soybeans and soybean meal, U.S. soybeans are facing challenges in the Thai market.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY
USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT
Required Report - public distribution
GAIN Report Number: TH1040
Oilseeds and Products Annual
Orestes Vasquez, Agricultural Attaché
Sakchai Preechajarn, Agricultural Specialist
Despite increased demand for imported soybeans and soybean meal, U.S. soybeans are facing
challenges in the Thai market as Thai consumers have preference for those of South American origin,
especially Brazil, on protein and oil content claims. On soybean meal, recent developments on its trade
in Thailand is disfavoring domestic soybean oil crushers, as feed mills are increasingly using financial
instruments to hedge against market volatility, hence are sourcing from abroad.
Due to a small and stagnant domestic soybean production, Thailand mostly relies on imported soybean
and soybean meal to support its feed demand from the steadily growing livestock, poultry, and
aquaculture industries. Imports of these two products are estimated to increase in both MY2010/11 and
MY2011/12. However, U.S. soybean market share in both of these years is estimated at 14 percent, a
level far behind Brazil?s estimated 75 percent market share, due to the Thai feed mill industry?s
fondness for Brazilian soybeans on claims of higher protein and oil content. Meanwhile, US exposure
in the Thai soybean meal market will be minimal in MY2010/11 and MY201/12 following less-
expensive supplies from South American countries.
Developments in the soybean meal trade in Thailand are disfavoring domestic soybean oil crushers.
Recently, several Thai feed mills have switched to buying more imported soybean meal from the
international futures market which has helped them better manage risk from volatile market prices, this
has also resulted in leveraging their bargaining power with domestic crushers that supply domestic
soybean meal. As a result, soybean meal imports in 2010 increased remarkably by 26 percent from
2.077 million tons in 2009 to 2.616 million tons.
In response to this marketing change, soybean oil crushers were forced to reduce soybean meal prices in
late 2010 and early 2011 and are seeking to increase soybean oil exports. Additionally, a group of
soybean oil crushers approached the Ministry of Commerce seeking authorization to export excessive
supplies of locally produced soybean meal, as exports of soybean meal are currently banned by the Thai
government. According to trade sources, this a direct result of the increasing fondness of Thai feed
mills in using the futures market to hedge price volatility which has had the effect of sourcing soybeans
from abroad and has added pressure on domestic crushers to consider the introduction of a futures
market in Thailand.
There have also been developments in the fish meal production in recent years. The Department of
Livestock Development successfully ran a campaign to improve the quality of domestic fish meal by
initiating GMP and HACCP training and certification for participating fish meal plants. Improvements
in quality and manufacturing processes of Thai fish meal have resulted in a fourfold increase in exports
from 26,826 tons in 2009 to 110,806 tons in 2010. Fish meal exports should further grow to 130,000
tons in 2011.
SECTION I: SITUATION AND OUTLOOK
Domestic soybean production remains small and stagnant at about 170-180,000 tons annually, as
officially reported by Office of Agricultural Economics (OAE) of the Ministry of Agriculture and
Cooperatives (MOAC), supplying about 10 percent of total demand. Lack of improved seed varieties
has resulted in stagnant productivity gains. According to trade sources, soybean acreage should remain
flat in the next few years. Soybeans are planted in the most suitable areas mostly in the North of
Thailand so that a group of farmers always maintains a segment of their land for soybean production.
Total soybean domestic consumption is estimated to grow 5 percent annually in both MY2010/11 and in
In 2010, the two largest soybean oil crushers completed their significant expansion plans by increasing
refining capacity by 3,500 tons/day to the Country?s original capacity of 6,000 tons/day or 60 percent
increase from the preceding capacity. However soybean deliveries to crushing plants are estimated to
grow only 5 percent in MY2010/11, as these crushers will underutilize the existing capacity as feed
mills source an increasing amount of soybean meal from abroad due to more attractive prices. This
trend should continue in MY2011/12 when soybean deliveries to crushing plants are forecast to grow
another 4 percent. Details on this development are discussed in the ?Soybean Meal? section.
The facilities that expanded their plant capacity are the Thai Vegetable Oil Co. (TVO) and Thanakorn
Vegetable Oil Products Co. (TVOP). TVO, the largest crusher, opened its new facility in May 2010,
adding an additional crushing capacity of 2,000 tons/day to its preceding capacity of 4,000 tons/day of
soybeans. TVOP, the second largest crusher, started operations on its new plant in late 2010 with a
capacity of 2,500 tons/day, adding to its preceding capacity of 1,300 tons/day. Out of 10 soybean
crushing mills in Thailand, TVO and TVOP utilize 90 percent of soybeans destined for oil crushing.
Demand for soy-based food will continue to grow steadily in line with health trends as consumers
perceive that these products provide nutritional benefits. The soy-base food industry prefers domestic
soybeans to imported beans due to freshness and GM-free assurance. However, with a growing annual
demand of 10-12 percent and a stagnant supply, processors are increasingly relying on imported
soybeans to meet their needs. In 2010, soymilk processors imported between 25,000-30,000 tons of
non-GM food grade soybeans (mainly from the US and Canada) to meet demand.
Thailand is a promising market for imported soybeans due to a steadily increasing demand and a small
and stagnant domestic production. In addition, soybean oil crushers, the largest importers, are quality
conscious since they need to produce high-quality soybean meal from imported soybeans to compete
with imported soybean meal as soybean meal accounts for 60 percent of revenue. In light of this and
according to trade sources, the two largest crushers have a preference to source imported soybean
supplies from Brazil due to relatively higher protein and oil content than other sources including the
US. Opportunities for U.S. soybeans are usually best immediately after the harvest season (November-
February) when U.S. supplies are plenty and price competitive.
In MY 2011/12 soybean imports will increase 6 percent to 1.90 million tons, in line with the growth in
domestic consumption. The U.S. market share is estimated to drop from 28 percent in MY 2009/10 to
14 percent in MY 2010/11 as supplies from Brazil and Argentina have recovered, and is forecast to be
hover around 14-16 percent in MY2011/12.
Under the Agreement on Agriculture, Thailand has a tariff rate quota (TRQ) of 10,922 tons and 20
percent tariff rate, however due to lack of domestic supplies, Thailand usually improves on its TRQ
commitment. On November 25, 2010, the Thai Cabinet approved unlimited quota for soybeans
imported from WTO member countries from 2011-2013 subject to zero tariff, as proposed by
Committee on Oilseeds and Vegetable Oils. Out-of-quota imports are subject to 80 percent tariff rates.
Details of the Cabinet?s agreement can be found in the following report dated November 23,
2009:?TRQs for Soybeans and Some Feed Ingredients Approved?.
The TRQ was implemented with the idea that Thailand would be able to increase its production in order
to offset imports; however the Government has realized that Thailand lacks a comparative advantage in
soybean production, and has reduced its effort to increase domestic soybean production. Nonetheless, in
order for eligible soybean importers to receive import permits, they are required to purchase domestic
soybeans at government-determined prices.
1.2. Oil Meal
Soybean meal production is estimated to rise 5 percent in MY2010/11 and another 5 percent in 2011/12
to 1.29 million tons in line with soybean supplies delivered for crushing. Soybean meal is considered a
key profit generator for the soybean oil processing industry as soybean meal accounts for 75-77 percent
of the total material after oil has been extracted. In addition, prices for soybean cooking oil are
controlled by the Ministry of Commerce, and soybean meal is used to hedge against periods of low oil
Domestic soybean meal consumption is estimated to grow 9 percent in MY 2010/11 as compared to 14
percent in MY2009/10. The high growth in MY 2009/10 reflects a record growth in poultry and shrimp
production, increased use of soybean meal in feed rations driven by its less expensive prices over other
substituting feed ingredients, and a favorable economic growth in Thailand in 2010 (estimated 7.0-8.0
percent). However in MY 2011/12, soybean meal domestic consumption is forecast to grow by 3
percent reflecting the likelihood of prevailing high feed costs will limit the growth of livestock and
poultry production along with a slowdown in both domestic and international economic growth.
In the 2010 Annual Report, Post reported that TVO and TVPO crushing companies successfully
improved their soybean meal as a premium brand product, in terms of freshness and protein content, and
would enjoy lower average production costs after its new plants started operating in 2010. Although,
they were able to improve quality and reduce costs, they unexpectedly faced challenges from Thai feed
mills as these were successfully able to use the futures market to source cheaper soybean meal from
abroad. According to trade sources, purchasing in the futures market is helping feed mills to better
manage risk from volatile soybean meal prices in the world market and have also increased their
bargaining power with domestic crushers supplying soybean meal. As a result, soybean meal imports in
2010 increased impressively by 26 percent from 2.077 million tons in 2009 to 2.616 million tons. In
addition, trade sources cited that this development is having the crushers considering developing a
futures market in Thailand in order to offer more competitive prices to the Thai feed mills.
As a result of the fierce competition from imported soybean meal, in the last quarter of 2010 and early
2011domestic crushers have reduced their soybean meal prices to compete with imported products. As
a consequence, for the first time in Thailand prices for locally produced soybean meal are currently
below those for imported soybean meal, which in the past were able to command a premium due to their
freshness. Trade sources reported that the soybean oil crushers have approached the Ministry of
Commerce requesting authorization to export excessive supplies of locally produced soybean meal, as
the Thai government doesn?t allow for exports of soybean meal.
Brazil continued to dominate the market, accounting for 50 percent in 2010 followed by Argentina 34
percent due to higher protein content and relatively cheaper prices. In this period, U.S. soybean meal
was able to increase its market share from 1 percent in 2009 to 7 percent in 2010. However, trade
sources believe that the U.S. market share may drop again in 2011 as less-expensive supplies from
South American countries are becoming readily available.
Imports of soybean meal are also subject to the WTO?s TRQ system, with a quota of 239,559 tons and a
20 percent tariff rate; they have also faced a more favorable treatment. On November 16, 2010, the Thai
Cabinet approved unlimited in-quota imports under WTO for soybean meal with a two percent tariff
rate as opposed to 119 percent for the out-of-quota imports. Only 8 trade associations will have access
to the WTO import quota, but are responsible to purchase soybean meal derived from domestic soybean
production from local soybean oil crushers at no less than 11.25 baht/kg ($375/mt). In addition, the
Cabinet also approved zero tariff rates for imports under the Thailand-ASEAN FTA (AFTA), Thailand-
Australia FTA (TAFTA), Thailand-New Zealand FTA (TNFTA), and Japan-Thailand Economic
Partnership Agreement (JTEPA). Under the ASEAN-Korea FTA (AKFTA), the import quota for
soybean meal for 2011 is unlimited and in-quota imports are subject to 5.56 percent tariff rates. The
details on the Cabinet?s decision are reported in FAS/Bangkok GAIN report ?TRQs for Soybeans and
Some Feed Ingredients Approved?.
In CY2011, driven by a bright export potential and prevailing attractive fish meal prices, production of
fish meal should grow by 10 percent to 550 thousand metric tons. Despite a likelihood of a decline in
trash fish catching, good returns in fish meal production have attracted several fish meal manufacturers
to source raw materials from food-grade fish supplies. Trade sources reported that many fish meal
plants have improved their facilities to produce high-quality fish meal geared toward the export market.
In addition, an expected expansion in surimi and canned tuna to meet export demand should lead to
increased amount of raw materials for fish meal production.
This boost in production has been aided by the Department of Livestock Development?s successful
campaign to improve the quality of domestic fish meal by initiating GMP and HACCP training and
certification to participating fish meal plants. Thus far, 32 fish meal plants received both GMP and
HACCP certification, and most of them are registered as plants eligible to export fish meal to China.
Consumption of fish meal in 2011 is estimated to grow 8 percent in line with a growth in shrimp
farming and livestock production and as fish meal becomes more competitive against rising soybean
meal prices. In 2010, average fish meal prices dropped by 3 percent from the 2009 level to 30.62
baht/kg (US$942/ton) due mainly to a pressure from soybean meal prices.
Despite a rapid growth in the livestock, poultry and shrimp industries, Thailand?s imports of fish meal
in 2010 dropped by 7 percent from 10,651 tons in 2009 to 9,838 tons due mainly to a change in feed
rations favoring the use of soybean meal.
Improvement in the quality of Thai fish meal turns has resulted in a fourfold increase in from 26,826
tons in 2009 to 110,806 tons in 2010. China was the largest importer of Thai fish meal in 2010
accounting for 43 percent of total exports, followed by Vietnam 24 percent, Taiwan 9 percent, Japan 8
percent, and Indonesia 7 percent. Fish meal exports should further grow to 130,000 tons in 2011.
The Thai Government intervenes in the import of fish meal by setting an import policy each year. On
November 16, 2010, the Cabinet approved tariff-free imports under AFTA, TAFTA, TNFTA, ASEAN-
China FTA (ACFTA), and ASEAN-Australia-New Zealand FTA (AANFTA). Under JTEPA, imports
from January 1-March 31, 2011 are subject to 3.33 percent tariff, as compared to 1.67 percent for the
imports from April 1-December 31, 2011. Under AKFTA, the tariff rates are 10 percent. Any imports
which do not fall in any category above (implying those imported under Thailand?s WTO commitment)
are subject to a 15 percent tariff for fishmeal with at least 60 percent protein and 6 percent for the
product with less than 60 percent protein.
1.3. Soybean Oil
In MY 2011/12, soybean oil production is forecast to increase 4 percent to 290,000 tons in line with
soybean deliveries to crushing plants.
Although in early 2011, palm oil shortages led to a significant increase in soybean oil sales, the impact
should be temporary as domestic palm oil supplies began to recover due to increased exports and the
increase seasonal supplies in March. In MY2011/12, domestic consumption of soybean oil should grow
2 percent to 290,000 tons reflecting prevailing high prices for cooking oil including soybean oil.
Bottled cooking oil is categorized as a controlled product by the Department of Internal Trade (DIT),
Ministry of Commerce (MOC). As a result, price ceiling controls are set. Manufacturers or
distributors seeking to adjust ceiling prices based on changes in production costs must submit their
request to the MOC and provide a valid justification, if valid, prices can be adjusted. Since refined
cooking palm oil faced shortages in January-February 2011,palm oil refineries encountered rocketing
production costs driven by the tight supplies and a government unwillingness to raise prices, which
resulted in refineries stopping their production or switching to manufacture in other containers (such as
plastic bags or zinc bin container) which they could sell at higher prices. Soybean oil crushers did the
same when consumer demand for cooking oil turned towards soybean oil consumption as substitute to
the palm oil shortage. Due to these price-controls, retail prices for soybean oil reported by Department
of Internal Trade are not realistic, currently DIT reports that cooking oil is selling at 45.50 baht/liter as
compared to control price of 46.00 baht/liter and average of 44.30 baht/liter in 2010. However, trade
sources reported that retail prices for cooking soybean oil climbed to 50-55 baht/liter in February
following record high prices for cooking palm oil.
Imports of soybean oil (crude and refined) are subject to a tariff-rate-quota (TRQ) system under the
WTO agreement. Additionally, a complicated and bureaucratic administration of import permits
discourages importers. In 2010, the TRQ for soybean oil amounted to 2,281 tons, subject to a 20
percent tariff rate. The tariff rate for out-of-quota imports is prohibitively high at 146 percent. This has
resulted in no imports in recent years and this trend should expect to continue in the next years.
With an increase in production and slow domestic growth and the fact that Thailand can enjoy a zero
tariff and quota schedule in ASEAN countries, exports of soybean oil increased significantly from 3,106
tons in 2009 to 19,899 tons in 2010. Major importers in 2010 include Vietnam 60 percent, Indonesia 15
percent, and Philippines 4 percent, of total exports. Based on this export trend and production
prospects, exports in MY 2010/11 and MY 2011/12 are estimated at 20,000 tons annually.
Section II: Statistical Tables
Table 1: Thailand?s Production, Supply & Demand Table for Soybeans
Note: The term of ?Feed Waste Com. Cons.? in this table is referred to a typical use of full-fat oil
soybeans by the Thai feed industry.
Table 2: Farmgate Prices for Soybeans, Mixed Grade
Source: Office of Agricultural Economics, Ministry of Agriculture and Cooperatives
Table 3: Thailand?s Production, Demand & Supply Table for Soybean Meal
Table 4: Bangkok Wholesale Prices for Soybean Meal, Derived from Imported Soybeans
Source: Thai Feed Mill Association
Table 5: Thailand?s Production, Demand & Supply Table for Fish Meal
Table 6: Prices for Domestic Fish Meal
Source: Thai Feed Mill Association
Table 7: Thailand?s Production, Demand & Supply Table for Soybean Oil
End of Report.