How to Fix the Asymmetry Between Paddy and Oil Seed Production and the Aquaculture Industry in Myanmar
Had this been done 60 years ago, our bet is that Myanmar would have been an economic powerhouse today rather than a basket case. The next best time to do it, is now. This is a simple strategy: Improve paddy technology and techniques, invest in oil seed production and processing and watch Myanmar become the largest exporter of farmed fish in the world (along with rice and edible oil).
We had this epiphany while driving to Maupin, a bustling farming village spread out along the Yangon-Pathein highway two-hours from Yangon and about one-third of the way to Pathein (Irrawaddy Division of Myanmar). The entire jarringly potholed drive is surrounded by large fish farms frequetly interrupted by rice mills, bagged corn storage warehouses and fresh fish, fruit and vegetable wet markets. “It is definitely an Ideal location for a Feedmill”, sings U Lwin Htoo (not his real name), a fish farmer, who rents out half of his 300 acres of aqua farm to Chinese fish farmers who seem, well at home and out of place in this part of the country.
From the road, Their rented farm looks like a poultry farm, but closer inspection reveals that the layer houses are suspended on poles above the fish ponds to supply Phosphorous rich chicken manure to the rohu, Paku and Pangasius below. This type of co-production is a popular practice in Myanmar, particularly among the NGO’s, but with questionable benefits to the fish and the farmer. At least the eggs will generate cash to cover expenses while waiting for the fish to mature some time between November and March.
Mr Htoo has survived hard times and built a profitable business for himself. In spite of the current economic climate, he is still optimistic. He just completed a warehouse and he’s looking for an investor or a Joint Venture partner to help him build a fish feed mill. His desired capacity is about 10 tons per hour just to meet a small fraction of the demand from his own and nearby fish farms. The proximity to customers and feedstock makes his business plan highly feasible. But there are some challenges.
It should not stretch reason to accept our thesis that, since the top three staples in the Myanmar diet are rice, oil and fish (in that order), there should be some symmetry in the supply chain and cost to produce, particularly as it relates to the by-product of processing rice paddy and oil seed and the raising of farmed fish. Our interest is to see that better resource and supply chain management, including improved farming technology and practices, better seed sourcing and storage, wiser use of fertilizers and pesticides, and improved post-harvest storage as well as processing particularly of paddy and oil seed will reduce the cost of feedstock and improve the production and quality of farmed fish generating more revenue from exports as well as domestic consumption.
In the past 20 years, Myanmar has undergone a massive transformation in aquaculture en par with the green revolution transforming nearly 400,000 acres of arable farmland into fish ponds. Nearly half of which are 10-acre or less ponds owned (or managed by) small scale rural farmers (farms are often owned by wealthy professionals in Yangon). And 90% of them are located in the Irrawaddy Delta, a few short hours from 6-million consumers who eat fish at least once per day. Since the early 2000’s, the prospect of improving farmer income through aquaculture has loomed large in the hopes of poor farmers, government ministries and even UNOPS who funded much of this aquaculture-revolution through LIFT.
Indeed, for the most part, the prospect of a better life has kept its promise. Fish farmers earn as much as 4 times the income of paddy farmers. The fact that they have achieved this level of success using outdated and backwards techniques and technology is telling of the ingenuity and determination of Myanmar farmers and foreshadows future success. In 2018, in spite of its lack of development, the FAO, in its “State of Fisheries Report” listed Myanmar in 4th place globally in terms of its inland fishery production and aquaculture. The success of the aquaculture industry on the backs of hard working Myanmar farmers foreshadows the vast economic potential for the industry in Myanmar. We believe we are being cautious when we argue that Myanmar could increase their aquaculture production (and therefore income) tenfold with just the basic input of good quality and affordable floating fish feed made affordable to fish farmers simply by improving paddy cultivation and oil seed processing. And entrepreneurs like Mr Htoo are the visionaries with the capacity and the experience as well as the track-record of success who can accomplish this task (with the right kind of support and investment).
The current situation makes this hope a little evasive, but only a little. It also points a way forward that could make Myanmar the global leader not only in paddy and edible oil production, but fish too! For now, the rising cost of oil-seed meal has made good quality floating fish feed too expensive for fish farmers and forcing many of them to rely in lower quality feed like broken rice and oil seed meal. When we researched feedstock last rainy season (June/July 2018), we found that local sources of protein (such as peanut and sesame meal) were in short supply and that many of the peanut and sesame oil crushing factories were closed due to a (seasonal) shortage of demand and/or lack of supply. In Myinchan (Upper Myanmar), where much of the peanut and sesame meal is processed, the crushers told us that they were unable to compete with cheap palm oil being imported from Malaysia. So many of them had paused production. Indeed, 75% of edible oil consumed in Myanmar is palm oil and most of it is imported, thereby depriving the livestock and Aqua industry of a domestic source for protein meal.
Further compounding the issue was the shortage of rice bran and broken rice and other paddy by-products forcing the price of fish feed out of reach for most fish farmers. This was worsened by the fact that local feedmills had to compete with Chinese traders who were buying up most of the available rice bran (until the Myanmar government stepped in to prevent them from exporting rice bran, so they began buying whole rice and processing it in mills in Yunan, further forcing up prices and reducing supply of rice and rice by products). The situation underlined the power of Chinese traders (who often operate in a grey zone for exporting Myanmar agriculture products) to destabilize the entire economy. This is a subject for a future blog post!
Because of the situation descried above, farmers are forced to feed cheaper low quality and undigestible unprocessed feedstock to their fish rather than provide them with good quality floating feed that can yield healthier, meatier and more profitable fish at harvest. Many of the poorer fish farmers may neglect their fish diets altogether and just hope for the best come harvest. This Strategy is resulting in poor conversion ratios and quality at harvest as well as lost profit to the farmers and the economy. Indeed, a better strategy will benefit Myanmar with a massive increase in foreign revenue reserves generated by EU and North American quality fish exports.
But it cannot improve without some type of reversal of the liberal import policies on palm oil, which has been nearly catastrophic for the Myanmar oil seed industry (especially peanut and sesame oil). Palm oil imports grew from 7000 tons in the 1990’s to 700,000 Plus tons in 2017, about 75 percent of all consumption in Myanmar. Granted that the companies benefiting from the liberal policies on palm oil imports are mostly local traders, we assert that even the palm oil traders would prefer to market their own locally produced and better quality edible oils, based on their own testimony. For them, importing palm oil is a matter of economic survival, not because they have a passion for the product. In fact, many of the importers are also processors of local oils, such as peanut and sesame oil. Asia Free Trade Area restrictions may impede the Myanmar government’s ability to carry an effective import replacement strategy. Alternatively, tax incentives and improved FDI access to the oil seed production and processing industry can contribute equally to rebalancing this situation and may be the preferred long term free market approach.
The case for FDI includes the fact that Myanmar is among the top oil seed in the world despite the fact that only 16% of cultivated land is used for oil seed. The country exports more oil seed than it consumes and it produces more than enough oil seed supply all of its domestic demand for edible oil, including a variety of oil seeds that would be considered high-end essential oils to supply a growing demand for functional foods. 1.7 M acres of land is used to grow peanut in Myanmar. In 2011, Peanut oil production was 250 000 tons, up from 129 000 tons in 2001. At the same time, peanut meal production grew from 157 000 tons in 2001 to nearly 300 000 tons in 2011. But the peanut oil industry is struggling to compete due to lack of investment, primitive technology and poor productivity. It cost 5000 to 6000 MMK to make 1 vis (1.63 Kg) of peanut oil ($1.96 to $2.36 per Kg for peanut oil compared to $0.96 per liter of Palm oil). Shelves are lined with nearly expired peanut oil that is priced nearly triple that of Palm oil. This is creating a desperate situation where some peanut oil producers may even be tempted to adulterate their oil with lower quality oil such as Palm or recycled oil passing it off as pure peanut oil, just to compete. The health consequences could be devastating for consumers and the FDA is working hard to eliminate this practice. For more on the state of the edible oil industry in Myanmar, visit our article here.
When we visited the wholesalers in November 2018 in Yangon, 1 vis (1.63 kg) of peanut meal was selling for between 1180 and 1250 Kyats per vis (between $464 and $491 USD Per Metric Ton). Sesame meal was cheaper (as low as $357 USD Per MT). At the same time, sunflower meal was available for 680 Kyats per vis ($267 USD per MT) compared with Soybean Meal (mostly imported from India as well as Argentina, Brazil and USA) was selling for between $464 and $511 per metric ton.
The question is, considering the established fact that Myanmar is a major producer of oil seed and a major consumer of edible oil (one of the largest in the world), why should nearly three-quarters of all edible oil consumed in Myanmar be produced in Malaysia rather than homegrown higher quality, job producing oil?Â And all this at the expense of the Fish and Livestock industry?!?!?
We contend that this situation can be resolved with better agriculture inputs and practices, improved post harvest cleaning and storage technology, and high quality extrusion technology from companies like Farmet, who also supplies refinery technology. Farmet oil press technology is ideal for the Myanmar context. They supply cold press oil presses starting at 10 Kg (check out the specs here for 10 kg/hr, and here for 20 kg/hr). These smaller presses are ideal for value chain development and livelihood projects, small scale farmers, and entrepreneurs and can produce highly profitable essential oils.
Farmet also offers oil press and refinery technology to scale:
You can watch videos of Farmet technology in action on their youtube page. Here is their Compact Oil Press Kit
For more information and pricing, send us an email.