Pig in particular and livestock in general has been part and parcel in farmers’ livelihood in Vietnam. The increase in meat demand along with economic development in the past several years has fuelled growth of livestock production and its products. However, livestock production, especially household-base production, has recently been challenged by a number of threats, including both its own constraints and foreign competition, that endanger its sustained development. How can pig production grow and compete in the context of adjusting Vietnam market?
Background of the project and Objectives
Livestock production is an important activity of rural farmers, of which pig takes the largest share in livestock portfolio. Demand for pork has been increasing rapidly as a result of economic growth and urbanization, opening opportunities for pig producers to expand their production and earn income. There are, however, constraints to pig production in the last several years, which challenge the development of pig sector, especially smallholder producers, of which the majority are poor. These constraints include pig diseases, high input cost, instable output price and competition from imported products. The question is what technological, institutional and policy options are able to enhance smallholder competitiveness so that they can sustain and expand their business as a viable livelihood strategy.
The project “Improving competitiveness of pig producers in an adjusting Vietnam market” aims to respond to the question. The overall purpose of the project is to identify options, be it technologies, policies, institutional forms, to allow pig producers to raise income through better access to higher-value pork supply chains in the context of rising demand for products with specific attributes and within the broader context of changing dynamics in Vietnamese pig sector. The project is funded by the Australian Centre for International Agricultural Research (ACIAR), an Australian government agency to support research in agriculture in Australia and developing countries. According to Mr. Geoff Morris, ACIAR country representative in Vietnam, ACIAR is aware of the role of smallholder livestock keepers in meat supply and has funded several research projects in Vietnam on livestock sector in general and pig production in particular. This project is a proof of ACIAR’s continued support.
The project has been jointly implemented by a group of research and development institutions, including the International Livestock Research Institute (ILRI); the Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD), particularly its Centre for Agricultural Policy (CAP); the International Food Policy Research Institute (IFPRI), the University of Queensland (UQ) and Oxfam Hong Kong. The project commences from April 2007 and will end by the end of October 2010.
To fulfill to overall purpose, the project attempts to achieve five objectives, corresponding to five project components:
Establish empirically the level of market demand for commercial and traditional quality attributes of pork in Vietnam, characterize these attributes and validate any associated significant price differentials and their determinants.
Compare input supply and services arrangements and output marketing arrangements between smallholder pig raisers selling into higher priced market outlets versus those selling into lower priced ones, if and how this is changing, barriers to smallholder access to these and their impact on income.
Characterize the structure and conduct of the input and service providing firms and organizations and pig market, and compare the geographical distribution of and access to these inputs and services by different types of pig producers, and identify smallholder constraints to entry into higher value market chains.
Assess the potential impact of selected institutional, technology and policy options for increasing the access of smallholder pig producers to improved inputs and services and accessing the high value chains under current market-oriented conditions.
Promote awareness and uptake of the pro-poor policy, institutional and investment options emerging from the project among stakeholders, decision makers, investors and market actors in the pig industry in Vietnam.
To achieve these objectives, consumer surveys, producer surveys and market actor surveys are conducted. An additional risk assessment is carried out in urban and peri-urban Hanoi to evaluate initially the level of hazards and risks along pig supply chains. A partial and spatial dynamic equilibrium model is set up to predict various technological, policy and institutional scenarios of pig sector in the next decade. Current policy environment is also reviewed to identify policy gaps.
Key research findings and Implications
The principal assumption of the project is that changes in pork demand as a result of increasing affluence and urbanization would transmit backward along pig supply chains to pork retailers, traders and to producers, pushing for the evolution of pork supply. The supply of pork, on the other hand, might face constraints to meet this increasing and changing demand. Hence, the approach is to study both demand and supply chains together with various market actors in pig supply chains, with focus on smallholders.
Demand for pork in Vietnam
Results from consumer surveys conducted in Hanoi, HCM and six rural provinces reveal consumers’ strong preference for fresh, unchilled pork, which provides domestic producers a natural protection from foreign rivals. Consequently, traditional outlets remain most preferred market outlets for fresh pork purchase. These outlets are traditionally linked with pig supply chains that involve smallholder producers.
Consumption patterns are not all in favor of smallholder producers, however. A finding from the survey that consumers generally prefer carcass with higher lean content reveals a disadvantage of smallholders in supplying pork for high-value markets, given their adoption of higher-fat content pig breeds associated with higher proportion of local blood. Moreover, there emerge food safety concerns, especially pig diseases and chemical contamination. The surveys indicate that consumers tend to reduce or stop pork consumption (about 50%), substituting it by to other meat (about 30%); or shift to perceivably safer, modern outlets (more in HCMC than in Hanoi).
The conventional wisdom that modern outlets such as supermarkets offer safer meat is, however, not empirically grounded in Vietnam. Rapid tests in urban and peri-urban of Hanoi reveal high proportion of pork samples in both traditional and modern outlets that failed to meet acceptable standards for a variety of common hazards that lead to human diseases. Fecal contamination appeared the greatest contributor to bacterial load, probably at slaughter points. Surprisingly, samples from supermarkets contain significantly higher hazards than those from wet markets.
The level of hazards is, fortunately, unassociated with the level of risks to human health. In fact, consumers report low levels of gastro-intestinal disease. No association is found between the amount of pork consumed and the incidence of the disease. Instead, the disease is more likely to be linked with vegetable consumption.
Pork supply in Vietnam and smallholder producers’ competitiveness:
As pork is the dominant type of meat in Vietnam, it also dominates total output of livestock products. Household pig production supplies at least 80% of total pork. The survival and development of smallholder pig production is, thus, important to not only the livelihood of poor farmers but also the supply of pork to meet growing demand.
Contrary to a widely-accepted view that only large commercial farms are competitive, the project findings show that household-based farms are competitive in supplying fresh pork to meet present demand and will remain competitive provided that they can exploit areas where they have advantages. Specifically, smallholder pig producers can earn revenue sufficient to cover production cost and generate some positive profits by following low cost feeding strategies that make use of own-produced feeds. Feed cost accounts for at least two-thirds of total cost and own produced feed is cheaper per unit of feed value. Therefore, increasing the proportion of own produced feed can effectively decrease total feed cost. This is an advantage of smallholder producers having higher proportion of own produced feed and they can exploit this cost advantage to improve competitiveness. There is no evidence of economies of scale in pig production, except in farrow to wean system.
Contribution of pig production to household income and employment
While smallholder pig production supplies a dominant share in total pork supply, it also generates income and employment to a huge number of poor households in rural areas. It is estimated that pig producers take more than a half of income generated along pig supply chain. The income contributes 14 percent of total rural household income or 24 of agricultural income.
Pig production generates numerous jobs in rural areas. Result from the project extrapolation indicate an estimate of about 4 million full-time labors engaging in pig supply chain, which generates income of about $3.3 billion or approximately 5.5% of Vietnam’s GDP as of 2007. Household labor constitutes the main labor input in pig production, of which female labor accounts for at least a half.
Future scenarios for pig sector development in Vietnam
Using a partial and spatial recursive dynamic equilibrium modeling framework covering three sectors (maize for human and animal feed, small pig production for fresh pork market, and modern pig production with large scale farms for chilled and processed pork in modern outlets and for export), the project predict the continued dominance of smallholder pig production in the next decade. Modern pig sector, despite its faster growth, will still hold a small proportion in total pork supply under all technological and demand scenarios, given its low starting base. The development of the modern pig sector will largely depend on technology growth rather than on demand in the context of relatively free international trade in pork products.
Policy environment for pig sector development in Vietnam
The recently approved Strategy for pig production development towards 2020 has outlined several targets that MARD aspires to achieve. The strategy focuses largely on large commercial farms and modern pig supply chains as a way to increase pork supply and address quality, food safety, pig disease and environmental problems arising along the chains. Specifically, MARD wishes to see large scale farms play dominant role in supplying pork (70%) with increased proportions of exotic breeds (37%) and industrial feed (70%) and improved veterinary service and on-farm hygiene inspection. Large scale pig traders and slaughters with modern facilities in segregative livestock production and processing zones. Live pigs and carcass are traded through whole sale market centers with strict quality and safety inspection. Generally, smallholder production is not considered explicitly in livestock policy. More often, poor smallholders are the target of pro-poor programs, which are often short-term or cover only limited areas. As is shown in above section, while large commercial production is to way to go in the future, it is not ready to replace smallholder farms in the next decade or two. The strategy’s targets are, thus, hardly achieved. Instead, there necessary policy amendments so as to support the parallel development of vast majority of household-based pig farms.
Are the research findings valid? Insights from a stakeholder in Nghe An
Mr. Vi Luu Binh, deputy director of DARD Nghe An adds some real, local flavor in the picture. He found that findings from the project, by and large, match with his own observations in lowland areas of Nghe An and hence, he intends to organize a meeting between the project team and Nghe An officers so that these officers can access to the approach and key results of the project and can incorporate these in their policy design and implementation.
Mr. Binh also defies ungrounded faith in large commercial farms as a solution against pig disease and environmental contamination. In fact, he cited cases of large farms in Nam Dan and Do Luong districts to prove that large farms are no less vulnerable to diseases and once there is outbreak, the loss from large farms can be huge. Larger farms might also create large environmental issue. Given that smallholders are supplying the majority of pigs, he stressed that focus must be on small farms.
The above findings show that smallholder pig production will still be important in the next decade and probably longer future while modern pig sector, even if it can grow faster, will remain fractional. Efforts to improve efficiency must, therefore, include small- and medium-scale pig producers because modern sector will not be able to satisfy demand. Exclusive focus on modern, large farms might lead to stagnation in smallholder pig production, shortage of pig supply and loss of employment in rural areas.
Smallholder pig producers are indeed competitive in producing pork that meets the demand requirements of Vietnam’s fresh meat market. Particularly, they can generate income from pig production by exploiting areas where they have cost advantage. Expanding options for own-produced feeds, in terms of choices and quality, can enhance their competitiveness, particularly in areas that are far from commercial feed sources, and complemented with improved access to extension. There are, however, constraints that hinder smallholder scaling up, such as limitations in available land and household labour.
In terms of economies of scale, smallholder producers can significantly reduce cost and increase profitability by marginally raising their production scale in farrow to wean system (e.g., from 1 sow to 2-3 sows). As there is no evidence of economies of scale in other systems, the overall improvement of pig industry’ efficiency can only be achieved by continued support to household pig production, which constitutes a dominant part of the industry.
The project also highlights the importance of technological improvements . In modern pig sectors, this will help reduce pork import or maintain export. The upgradation of technology in traditional pig sector involving smallholder farms will reduce cost, enhance competitiveness and maintain smallholder market positions.
The emergence of food safety concerns will shape future demand patterns for pork and thus supply response. It is important to note food safety policy should be based on evidence, since as the risk assessment indicates, conventional wisdom might be false. Currently risk to human health by pork is not fully understood. It is also necessary to distinguish between hazards and risks and policy must be based on risks rather than hazards.
While smallholder producers are generally competitive, challenges are there to threaten their sustainable development. The project identifies and proposes several interventions than potentially enhance competitiveness of small producers.
First, there should be increased investment in research for development, particularly in developing cost-effective feed technologies and improving access to and sustaining supply of pure local stock for crossbreeding with exotic breeds. Appropriate breeds and feeds that fit various conditions of smallholders must be identified. National research systems should review and re-program their research agenda to effectively respond to current needs and challenges.
Second, the delivery of supporting services such as extension and veterinary should be improved in terms of quality (training, better equipment) and accessibility (institutional support to improve efficiency). Support is needed for veterinary network at village level.
Third, there needs to be a comprehensive pork risk assessment to inform policy, improve consumer safety, and safeguard participation of smallholders in the pork supply chain. Slaughterhouse and market facilities to improve hygiene and food safety standards in pork should be upgraded.
Fourth, strategies for collective actions and other forms of organization that will reduce transaction costs of input procurement and output marketing should be piloted. There should be supporting policies to foster an enabling environment for their propagation.
Fifth, set up pilot schemes for testing the viability of a quality assurance system and disease surveillance systems that are feasible in smallholder context and its cost-effectiveness in delivering safe pork.
Sixth, there must be uunbiased infrastructure support for moving livestock production out of residential areas, building biogas and other waste treatment systems, establishing market information system and support in favorable credit, tax concession, etc.
Mr. Le Viet Ly (Association of Animal Husbandry)
The presentations are interesting but they do not yet adequately deal with the livestock development strategy. As the presentations show, large farms will not be able to dominate pig sector in the next decade. The aspiration of having largely large pig production systems set in the strategy is, therefore, impractical. As Mr. Ly has observed recently, large-scale farms might create larger-scale environmental issue, as in Nghe An. Since consumers still prefer fresh pork, there are opportunities for smallholders to participate in pig supply chains that supply fresh pork in wet markets. Smallholder farms can be competitive as they can exploit unused or low cost feed in pig production.
A current constraint with pig production is the shortage of land and feeds for livestock husbandry. In dairy industry, Vietnam now has to import dry grass and plant grass in green houses. Can livestock production be sustainable this way?
Mr. Ly proposes more studies on the development of large farms in recent years to see whether it is possible to materialize MARD livestock strategy to 2020. He expects the findings from this project can reach policy makers through IPSARD connection with MARD. The findings should also be widely disseminated to leaders of provincial DARDs, as in Nghe An.
Ms. Le Thuy Hang (National Institute of Animal Husbandry)
The project has not yet deal with waste management. She thinks there should be study about the overall situation of waste management in pig farms in Vietnam.
Mr. Pham Van Duy (Department of Livestock Production – DLP)
He appreciates the approach and findings from the project. However, he thinks that the findings of the project are just from project sites and might not represent overall national situation. Thus, he would like to provide some national figures. According to DLP data, there are more large farms with higher proportion of exotic pigs and sows than those the project reported.
In his view, smallholder farms face three major difficulties in competition. First, smallholder farms adopt breed, feeds of varied types and quality and different raising procedures. Hence, products from smallholder farms are inconsistent. That makes it difficult for them to compete and join higher-value market chains. Second, the output volumes of smallholder farms are low so it is hard for them to access large trader with stable sale price. Third, also due to low and inconsistent quality, output from smallholder farms often have lower price.
The strategy put forward by MARD, according to him, was not to support large farms but to guide provincial livestock planning and development. It is not fixed and can be adjusted. The main questions are whether livestock producers can meet market demand and survive in the context of growing competition or not. Currently, pig production fails to compete in domestic market. In addition, pig disease and environmental pollution are also problems.
While he appreciates recommendations from the project, he believes that many proposed actions can hardly be materialized. For example, it is infeasible to have unbiased, neutral treatment between large and small farms in technology transfer, since small farms are not able to apply advanced technologies. The certification of farms is also impossible. Other propositions such as upgrading slaughterhouses and markets involve various issues: how and how much to support.
Dr. Nguyen Viet Hung (School of Public Health)
Dr. Hung agrees with Mr. Le Viet Ly and Mr.Vi Luu Binh. However, he finds that the project did not deal adequately with the relationship between livestock and human health. Biogas is a way for addressing environmental issue but not animal diseases. Thus, there needs further study on the relationship between livestock production and supply chains and human health.
Mr. Santanu K Bandyopadhyay (Senior Technical Coordinator, FAO Vietnam)
There is increasing demand for pork in Vietnam. How to meet this demand? Livestock production requires huge resources such as land, water, etc for building pig pens and for raising crops for feeds, which are not yet well forecasted. Also, there should be study on the economics of smallholder farms that meet minimum environmental and food safety standards. Are farms competitive and profitable under these conditions?
Mr. Guillaume Duteurtre (CIRAD)
Mr. Guillaume found that the presentations are interesting and useful. He also appreciates Dr. Vi Luu Binh’s presentation and comments of Dr. Le Viet Ly. In his opinion, livestock production involves various dimensions and the question is how to incorporate the multidisciplinary nature of pig production in future research. He proposes two areas of research priorities. First, livestock geographical location/transformation, that is, characterize differences in livestock systems across locations. Second, more study should be on institutional analysis of livestock value chain.
Dr. Phan Thi Giac Tam (Agro Forestry University)
Dr Tam finds that smallholder poultry producers can be competitive since it is fairly easy to distinguish poultry raised by smallholders and those by large farms. However, she is a bit concern about the case of pig. It is difficult to distinguish pork of different breeds and farms in market, except some special indigenous breeds. Moreover, In HCMC, people now tend to favor “cool” pork (fresh pork that is well maintained in good temperature) in modern outlets. There may need more study on consumers’ preference, she think. In her view, manure from pig production is not a big issue since farmers can sell manure or can use manure for crop production.
Mr. Pham Van Ky (IDE)
Mr. Ky agrees with findings from the project. He thinks that there should be more study on the role of pig traders/collectors in pig supply chains. Financial support should be given to suppliers or traders in pig supply chains, instead of direct support to farmers.
Dr. Steve Staal (ILRI)
Dr. Steve Staal appreciates all comments from workshop participants. He realizes that there is an increasing consensus on the role of smallholder pig production compared to three years ago, when the project first initiated. He also agrees that smallholder pig production still face various difficulties in accessing breeds, feeds, services, etc. He believes that while large, modern pig production is the road to go in the future, but in the next decades, smallholder farms remain important. There are two topics that need more study. First, the risks of livestock production to animal health and human health are not yet fully investigated and need further study. Second, there must be more study on environmental pollution to identify the degree of pollution and methods to address it. Smallholder pig production will not be sustainable without addressing those issues.