Improving Competitiveness of Pig Producers in an Adjusting Vietnam Market: The case of Nghe An

1. Improving Competitiveness of Pig Producers in an Adjusting Vietnam Market: The case of Nghe An Dr. Ma. Lucila A. Lapar International Livestock Research Institute On behalf of the Project Team Presentation for a Policy Dialogue Vinh City, Nghe An 18 August 2010

2. Main objective of the study • Main hypothesis: Smallholders are not competitive. • To identify pragmatic options about technology, institutional arrangements, and policy interventions to improve the competitiveness of smallholder pig producers in an adjusting Vietnam market.

3. Meat consumption patterns in Nghe An • Pork and fish are the dominant meats consumed (81% of consumers). • Per capita consumption of pork is 1.5 kg/month or 18 kg/year (compared to 22 kg/year national average). • Fresh pork remains the most preferred form, generally purchased from traditional ‘wet’ markets. • Demand for pork will continue to rise with income (expenditure elasticity of almost 1), thus providing livelihood opportunities from markets for pigs and pork.

4. Emerging food safety concerns • Pig disease and chemical residues are the main concerns of consumers with regards to food safety in pork. • Traditional wet markets remain the most preferred and widely used market outlets for fresh pork and other meats, even if they are perceived to be less hygienic than modern outlets. • No empirical basis yet available to validate this concern for the case of Nghe An. • Recent empirical findings from Hanoi suggest that high levels of pathogens are found in pork from both traditional and modern outlets. The most critical point of contamination is the slaughterhouse. • Some food preparation practices of Vietnamese consumers help mitigate the food safety risks.

5. Yield has been rising faster than population. Source: GSO 1999-2004, Nghe An Statistical Yearbook 2005-2009

6. Productivity has been rising due to improvements in yield more than increases in numbers. Source: GSO 1999-2004, Nghe An Statistical Yearbook 2005-2009 and author’s computation

7. Productivity index: Nghe An vs. National Source: GSO 1999-2009, Nghe An Statistical Yearbook 2005-2009 and author’s computation

8. Distribution of respondents by location

9. Distribution of household respondents by production system & scale Note: Definition of scale by production system

10. Farm total output by scale

11. Other characteristics of supply • Low volume of sale: • at least 1 slaughter pig per m onth by small and medium producers • at least 1-2 piglets per month by small and medium producers • Low weight at sale: • about 10-11 kg of piglets • about 15-19 kg of growers • About 65-72 kg of finished pigs • Mainly sold locally to neighbors, local traders, and butchers supplying local retail markets

12. Adoption of pig breed by scale (%)

13. Adoption of feeding system by scale (%)

14. Cost Structure of Smallholder pig farms in NgheAn: Feed cost accounts for largest share of total cost.

15. Share of purchased feed rises with scale.

16. Gross margin by Scale

17. Cost and returns: Nghe An vs. national average It is cheaper to produce pigs in NgheAn, but they also sell at lower price.

18. Gross margin by type of breed

19. Gross margin by feeding system

20. Pig Supply Chains in Lowland

21. Pig Supply Chains in Upland

22. Value Added along Pig Supply Chain in Nghe An Household-based pig production is estimated to generate value added of about 12,500 VND/kg liveweight of output. This translates to about 1117 billion VND contribution to GDP (approx. $ 59 million), based on 2008 pig production figures.

23. Access to services • Very low incidence of non-use of veterinary services (only 4% did not receive vet services), suggesting easily accessibly, available, there’s demand • High incidence of non-recipients of extension services (81% did not receive extension services) • Difficult to access (54%) • No demand/farmer has experience (22%) • Not available (4%) • High incidence of non-recipients of credit (71% did not receive credit) • No demand/no need (63%) • High interest on loan (21%) • Complicated procedures (11%)

24. Key findings and implications for policy • Small household-based pig producers in Nghe An are competitive in the current markets being supplied. • For as long as they can exploit their cost advantages in utilizing low-cost feeding strategies in combination with appropriate breeds to maintain a cost-efficient production system, they will be able to remain competitive. • Effective provision of services (extension, credit, and veterinary) to improve capacity to deal with production and market risks will further enhance the ability to remain competitive. • Emerging food safety concerns will pose a challenge to viability of small, household producers unless appropriate steps are taken to ensure that they remain able to meet market requirements (e.g., upgrading of slaughtering and market facilities, improving access to market information, improving disease disease surveillance , etc.)