April 2010

1. Improving competitiveness of household pig production in an adjusting Vietnam market Objective: Identify pragmatic options about technology, institutional arrangements and policy interventions to improve smallholder pig producers’ competitiveness in an adjusting Vietnam market. Component 1: Consumer Demand Analysis Assessing demand for different attributes of pork as a driver for pig production, market potential and implications for smallholders’ involvement and competitiveness. Component 2: Producer Analysis Examining current smallholder practices and performance to identify areas where smallholders can compete, what should change and policy, technology and institutional support for these changes to take place. Component 3: Market Actor Analysis Investigating market actors and linkages between supply and demand. Component 4: Pig sector modeling Modeling the linkages and dynamics in pig sector and projecting pig sector development under various policy scenarios. Component 5: Policy Advocacy and communication Facilitating dialogue among stakeholders about key messages from research findings to ultimately influence local and national livestock policies. • Methodology: • Consumer survey: • urban household in Hanoi and Ho Chi Minh City and rural households in 6 provinces representing 6 agro-ecological zone in Vietnam • Producer survey: • household producers and non-producers of pigs in 6 provinces • Market actor survey: • market intermediaries in three representative provinces in the north, central and south Vietnam • Pig sector partial equilibrium modeling • Main Findings: • Demand for pork • Pork is the dominant type of meat in Vietnamese diet and probably remains so in the future, accounting for 30% - 40% of total meat expenditures of households surveyed. (see Figure 1) • Demand for pork and other meat would increase considerably with growing consumer affluence. Consumers, however, tend to diversify towards other meat such as poultry, beef and seafood as income rises. • There is a strong preference for fresh pork, which constitutes a natural market protection from imported pork in chilled, frozen or processed forms. • Traditional open markets are still the main outlets for daily pork shopping (see Figure 2) • Pig disease and chemical residues are top-rank concerns of meat consumers with respect to food safety. During outbreaks of diseases, consumers tend to reduce meat consumption and/or shift to modern outlets for meat purchase as they are considered safer. • Risk assessment of pork supply chain in Hanoi and peri-urban areas showed that pork sold in traditional markets are no less safer than pork sold in supermarkets. Figure 1: Meat expenditure share • Supply of pig: Smallholder perspective • Household pig producers play an important role in supplying market demand and will likely remain so in the next few decades. Currently, household pig production accounts for at least 70% of total pork supply in Vietnam. • Pig rearing provides an important source of income and household employment in the absence of alternative livelihood options. Women make hugec contribution in pig husbandry Figure 2: Market outlets for pork • Access to improved breed is associated with scale. Improving breed quality that fits smallholder conditions is critical in improving pig quality and productivity. • High and rising feed cost is a critical constraint to pig producers, with purchased feed as a proportion of total feed cost rising with scale. (see Figure 3) Expanding options for own produced feeds, in terms of choices and quality, can potentially enhance smallholder competitiveness. • Under current conditions, small household pig producers are still able to generate incomes from pig rearing by exploiting areas where they have cost advantages, given low labor opportunity cost and lower cost of own produced feed and crop by-products. (see Figure 4) Figure 3: % share of own produced vs. purchased feed • Market access and linkages among market actors: • There are no clear differences in smallholders’ accessibility to input suppliers despite the fact that there is price differential across scale, probably due to transaction cost. • Small household pig producers appear to be able to capture a reasonable share of end product prices, suggesting a reasonably competitive output market, although there are differences across scale, with share rising with scale. (see Figure 5) Figure 4: Price-cost and gross margin-cost ratios • Conclusion and implications: • There are market opportunities for household pig producers as the economy grows and income rises. Consumer preference for fresh pork and for traditional market outlets favor small household producers’ participation in pork value chains and provide natural market protection against imported pork. • Small household pig producers are competitive and able to generate income from pig production as long as they can exploit areas where they have cost advantages. For the next few decades, smallholder pig rearing will continue to play an important role in pork supply, poverty reduction and household employment generation, especially for women in Vietnam. • Policies to support access to better technologies (breed and feed) and services that are appropriate to household pig production systems would considerably enhance their competitiveness and sustain their effective participation in Vietnam’s adjusting market for pork. Figure 5: Share of retail pork price captured by pig producers The good news is … And the bad news is … Pig rearing is an important and viable livelihood and employment option for poor households in Vietnam Food safety is an increasing concern among consumers in Vietnam, putting at risk the viability of household pig production, with imposition of policies and regulations to address animal disease and other food safety risks. April2010 ILRI Insert references or credits HERE INTERNATIONAL LIVESTOCK RESEARCH INSTITUTE