PIG SUPPLY CHAIN Improving the competitiveness of pig producers in an adjusting Vietnam market

1. PIG SUPPLY CHAIN Improving the competitiveness of pig producers in an adjusting Vietnam market Center for Agricultural Policy Hanoi, April 7, 2009

2. Outline • Objective and methodology • Characteristics and mapping of pig supply chains • Main findings

3. Objective and methodology • Objective: to have overall information of pig production and trading patterns in different regions in Vietnam by mapping out types and geographical locations of producers and markets. • PRA tools: • Wealth Ranking • Value chain analysis • The VENN diagram • Problem Tree Analysis • Key informant interviews (DARD, market actor survey)

4. Provinces and surveyed sites • Phu Tho  key informant interviews • Ha Tay, Dak Lak, Tien Giang, Dong Nai  using variety of PRA tools • Survey sites are selected on the pig population (for district selection), and the distance from commune to the district centre (for commune selection) to see how different is in the supply chain between regions.

5. Sample selection for group discussion • 15-20 pig producers of three scale (based on local criteria) was selected accordingly to our initial requirement. • Wealth ranking: for dividing producers into two groups (large and small in terms of pig head) • Next PRA exercises was done separately for the two groups under facilitation of project team

6. Key informant interviews • with relevant DARD officers, Livestock Division of surveyed district, commune  overall info on local natural, eco-socio conditions, pig chains, quality control. • with market actors (pig households, feed agent at all levels; pig traders at different scale, butchers, retailers, etc.)  cross-check information for sure

7. Pig production in 5 provinces

8. Supply chain in Ha Tay • Existence of many feed companies • Small scale is popular together with large scale and contract farming relative dependence and willingness of pig producers • Price is often paid less for small producers compared to large (300 dong/kg) due to lower meat quality, limited amount of supply and poor bargaining power. Big producers have certain bargaining power with buyers (some refer to CP price as negotiation price) • Big producers seem to prefer selling to big traders/wholesalers than retailers, but during peak time (Lunar Year), it is vice versa (getting more 1,000 dong/kg paid by retailers) • Traders can be divided into two types: (1) big scale hire a place in a slaughter house; and (2) small scale traders can also be butchers (in this case, no stamp) but still can sell anywhere  quality control is poor. • Traders get higher prices when selling to external buyers than local ones • A little share (5%) is exported to China • Nearby big market (Hanoi)

9. Big Slaughter House Feed Company (CP) Feed piglet Export to China 5% Big Trader 10% Market outside district 30% Animal feed Agent 1 Local consumer Carcass trader (bring carcass to external districts) 30% 20% Carcass trader (sell carcass for retailers within districts) Animal feed Agent 2,3 50% 5% 5% 70% State-owned Breed Center (piglet&semen Permanent Market Small trader – butcher 60% 5% 10% 20% Piglet Trader/ producer 95% Meat traditional processing hh Temporary Market CONTRACT PRODUCER LARGE-SCALE PRODUCER 5% Hire a place for slaughtering only Market actor linkage SMALL-SCALE PRODUCER Pig supply chain in Ha Tay pigs

10. Supply chain in Dak Lak • Small and disperse scale, but speciality pigs (Heo Soc) with high prices, good taste, may have some niche markets • Contract farming is not available (feed companies not based here, just provide producers with techniques only) • Low bargaining power is the most restriction of small producers (ethnic people)  prices paid are much less than large ones (around 3,000 dong/kg less) • 70% of big traders (mainly in city-urban) act as big slaughterers who can sell to external traders and carcass traders; small traders (mainly in remote areas) may act as butchers • Prices paid by external buyers (from nearby provinces, districts) are often higher than by local ones • Slaughtered pigs are required to have a certified stamp  quality control is quite good • Provide pig to some provinces but far from big markets (HCMC..)

11. State-owned Breed center (semen) Wholesale Market (HCMC, Nha Trang, Binh Phuoc, etc.) 90% Big traders - Big slaughter operator Private agent / farm (semen/piglet) 60% 10% 25% 2% 13% External traders (Dak Nong, Gia Lai) 20% Animal feed company & (piglet, feed &veterinary) Carcass trader/distributor Local consumer Piglet 80% Permanent Market 10% Feed Agent 1 5% 80% 100% 60% 90% 1% Temporary Market Meat traditional processing hh 95% Collectors 20% Feed Agent 2, 3 10% 15% 80% Street vendor 9% 10% 10% Piglet Trader LARGE-SCALE PRODUCER Hire a place for slaughtering only Market actor linkage SMALL-SCALE PRODUCER Pig supply chain in Dak Lak

12. Supply chain in Dong Nai • Industrial scale production (owned and managed by private households) • No contract farming system due to their unwillingness to involve (low income) • Big traders may play as big slaughter operators  have income from slaughter service only, and selling live pigs to wholesale market in HCMC rather than do slaughtering in their own slaughter house. • Quality control system is quite good (concentrated slaughter operator, very few small slaughtering households in remote areas without no stamp never can sell in permanent markets) • Nearby big markets (HCMC) and industrial processing zones

13. 30% Animal feed Company (supply both feed&breed) Big slaughter Operator Wholesale Market (HCMC) 5% 100% 40% 80% Big Trader 30% 95% 20% 10% Meat traditional processing hh Animal feed Agent 1 90% Permanent Market 5% 80% 15% Temporary Market Animal feed Agent 2 80% Small Trader 20% Small slaughter house Street vendor Piglet Trader 90% 10% LARGE-SCALE PRODUCER Hire a place for slaughtering only Market actor linkage SMALL-SCALE PRODUCER MEDIUM-SCALE PRODUCER Pig supply chain in Dong Nai Veterinary Center

14. Main findings • small producers in all provinces seem to be more difficult to access to inputs at original prices than larger producers (due to through a lot of middlemen) • Small producers only access to cheap buyers because of their limited supply, low product quality and last but not least, that is weak bargaining power  price paid to small producers are less than large ones, and the gap is higher in Dak Lak than other provinces • other market actors such as collectors/assemblers, traders, butchers, are often the ones who can decide prices rather than producers (especially small scaled) • Traders (Dak Lak, Dong Nai) may act as big slaughterers, in which those in Dong Nai are more service-oriented in slaughtering activities (have income from slaughtering houses, while not do slaughtering work for their pig purchased there). • External traders are often the ones who pay higher prices than local ones

15. Main findings (cont.) • Contract farming seem to be not very popular in every provinces (except for the case of Ha Tay), due to the unwillingness of producers (the case of Southern provinces such as Dong Nai and Tien Giang) or the inexistence of this type of production in remote areas such as Phu Tho or Dak Lak. • Ha Tay, Dong Nai have some certain advantages than Dak Lak in terms of distance to big local markets and export market, larger production scale. • However, quality control in the Southern provinces seems to be better than that in the North • Niche markets should be considered for small households (the case of Heo Soc in Dak Lak)