Five years ago, T. was the owner of a small-scale animal feed manufacturing company in Dong Nai Province, but today he only supplies raw material for other feed makers, while his firm was shut down last year.

“I had to bargain off the plant and equipment, and returned the land plot to its owner,” he said about the closing of his business, which used to supply some 150 tons of feed for neighboring animal farms on a monthly basis.

“Fortunately, since I didn’t borrow much from bank loans, selling the plant did help me to settle debts,” he added.

T.’s case is not an exceptional one Dong Nai or the neighboring province of Binh Duong, which are considered the southern hubs of the animal feed making industry.

Many small businesses that produce less than 10,000 tons a year have had to either shut down or reduce production.

“We have received many offers to sell plants and equipment from small businesses, but we are still considering,” said Nguyen Thi Le Hong, chairman of Proconco, one of the local feed makers with the largest production.

Hong said even Proconco is facing hardship, with sales dropping by up to 20 percent in the first two months of this year.

Import reliance

While more and more international companies have emerged in the Vietnamese animal feed sector, some 40 out of 243 local manufacturers had to cease operations in 2012, and the figure is expected to continue to rise, according to Le Ba Lich, chairman of the Vietnam Feed Association.

“Some 70 other small businesses are on the brink of closing and giving their market share to the foreign rivals,” Lich said.

Paradoxically, the more the local feed industry develops, the more it has relied on imported raw materials, he added.

“We still have to import most of the materials as Vietnam failed to create a plan to develop the raw material areas for the industry over the last 20 years,” he explained.

Vietnam still has to import up to 60 percent of its need for protein-rich materials such as corn and wheat, and 100 percent of the necessary mineral and microquantity supplies, according to VFA.

The country spent more than US$3 billion to import 8 million tons of materials last year, the association said.

Contrary to the troubling times of the local feed makers, the foreign-invested businesses and those operated under a venture between local and foreign companies have posted strong growth and repeatedly expanded their market.

The 15 such businesses are currently operating 44 plants and producing a combined 7.1 million tons of feed a year, accounting for 56.2 percent of the national market share, according to VFA.

Most of the feed making plants with an annual capacity of at least 50,000 tons belong to foreign companies, the association said.