Presentation by Lucila A. Lapar, Nguyen Ngoc Toan, Steve Staal, Nick Minot, Clement Tisdell, Nguyen Ngoc Que and Nguyen Do Anh Tuan at the 28th triennial conference of the International Association of Agricultural Economists, Foz do Iguaçu, Brazil, 18- 24 August 2012.

1. Smallholder competitiveness: insights from pig
production systems in Vietnam
Ma. Lucila A. Lapar, Nguyen Ngoc Toan, Steve Staal, Nick Minot, Clement
Tisdell, Nguyen Ngoc Que, and Nguyen Do Anh Tuan
28th triennial conference of the International Association of Agricultural Economists
Foz do Iguacu, Brazil
18-24 August 2012

2. Improving competitiveness of pig
producers in an adjusting Vietnam market:
Aim of the Project
 To identify options for technology, policy, and
forms of market institution or coordination
that will allow smallholder pig producers to
raise incomes through better access to
higher value chains (including niche markets)
in the context of rising demand for products
with specific quality attributes and within the
broader context of the changing dynamics of
the pig sector in Vietnam.

3. Issues around smallholder pig
production
• Perceptions that smallholders are not competitive
vis-à-vis large industrial farms,
• Sources and vectors of disease and food safety
risks
• Sources of environmental pollution
• Policy bias towards large farms (due to above, and
in terms of preferential taxes and input price
support and subsidies)
• Dominant suppliers of pork; significant contribution
to livestock output
• Although continuously challenged by resource
constraints, lack of access to input markets,
supportive services and enabling institutional and
policy environment

4. Methodology and data
• Structured survey of 1,051 households in
6 agroecological zones (700 pig producers,
351 non-producers), and 600 urban
household consumers in Hanoi and HCMC
• Descriptive statistical analysis to
compare, contrast, describe; VC analysis
• Econometric analysis of feed and breed
choice; AIDS demand model
• Pig sector model (partial equilibrium
model that simulates markets for maize,
traditional sector pigs, and modern sector
pigs)

5. Project
Hanoi, Ha tay survey sites
Phu Tho
across 6
agro-
Nghe An ecological
regions of
Vietnam
Dak Lak
HCMC, Dong Nai,
Tien Giang

6. Future scenarios for the Vietnam pig sector
• The modern pig sector is likely to remain small
over the next ten years and beyond; even with
stagnant technology growth in traditional pig
sector, it will only surpass market share of 10%
after 10 years.
• Growth in modern pig sector depends on
technology rather than demand; in short to medium
term, growth in demand are absorbed by offsetting
changes in export.
• On the other hand, technology affects the growth
of the modern pig sector regardless of whether
modern pork products are exported or not.

7. Projected share of pork supply from
large-scale producers
Share of large-scale modern sector in pig production 14%
Base simulation
12%
High income growth
10%
High tech growth in modern
sector
8%
No tech growth in traditional
6% No tech growth in maize
4% High income elasticity of
modern
High income elast and tech
2% growth in modern
Worst case for traditional
0% sector
0 1 2 3 4 5 6 7 8 9 10
Year

8. What does micro-level evidence show
to support future trends?
• Demand for pork
• Supply of pork
• Costs, efficiency, competitiveness
• Contribution to income, employment

9. Demand for pork
• Strong preference for fresh, unchilled pork;
natural protection from imports
• Preference for lean pork
• Fresh pork demand is inelastic to own
price
• Poultry, eggs, and seafood are
complements to fresh pork
• Pork demand rises with income

10. Preference rating for pork
10 9.4
8
6
4
2.2 2.1
2
0
Fresh/unchilled Chilled Frozen
Preference rating
Vietnamese consumers have a strong
preference for fresh, unchilled pork; this
provides natural protection from imported
pork.

11. Changing nature of demand for pork
1% 12%
8%
4% Lean
High fat
Mixed cuts
75% Don't know
Others
The majority of Vietnamese consumers indicated
preference for lean pork compared to other types of pork.
No significant change in lean meat consumption from 10
years ago, but significant reduction in consumption of high
fat meat from 10 years ago.

12. Preferred market outlets for fresh pork
100%
80%
60%
40%
20%
0%
Hanoi HCMC Overall
Modern retail outlets Permanent open market
Traditional temporary outlet
Traditional market outlets remain the most
preferred purchase outlets for fresh pork
by Vietnamese consumers.

13. Emerging concerns of food safety
Nearly half the consumers (43%) had
concerns about pork.
Most common was fear of disease from pork,
followed by fear of chemical contamination,
un-fresh pork, and bad smell.
Only 1% expressed nutritional concerns.

14. Average ranking of major concerns
about meat safety
HN HCMC All
Diseases of livestock 1.2 1.1 1.2
Hormone used in animals 2.8 3.0 2.9
Antibiotic use 3.0 2.9 3.0
Hygiene in market outlet (including
3.8 2.6 3.2
meat seller)
Hygiene in slaughtering 3.9 2.8 3.4
Concentrate feeding of animals 3.7 4.1 3.8
Other 3.5 3.1 3.2
Animal diseases tops the list of major concerns of
urban consumers about meat safety.

15. Consumer response to pig disease
outbreak
Hanoi HCMC
Stopped/reduced
consumption Stopped/reduced
7% 6% consumption
Shift to modern
Shift to modern
outlets
29% outlets
35% 50%
52% Substitute other Substitute other
meats meats
15%
6% Other Other
•About half of consumers either stop or reduce pork
consumption; about one-third substitute other meats.
•More consumers in HCMC than in Hanoi shift to
modern outlets for pork.

16. Proportion of pork samples that did not
meet standards for different hazards
100
80
60
40
20
0
Poor total Unacceptable Unacceptable Unacceptable Any
bacteria total bacteria staph. listeria unacceptable
Supermarket Wet market
•High level of microbial contamination in pork sold
in Hanoi and Ha Tay.
•Fecal contamination is greatest contributor to
bacterial load, likely to be at slaughter point.
•Pork sold in supermarkets contains significantly
higher hazards than pork sold in wet markets.

17. Hazards vs. Risk
Although hazards were high, pork consumers
report low levels of gastro-intestinal disease
(1 episode/person/year).
There is no association between amount of
pork consumed and incidence of gastro-
intestinal disease (p=0.60).
There is strong positive association between
consuming vegetables and reporting illness
(p=o.006).

18. Supply of pork
• Historical dominance of pig sector in
livestock production (2/3 of total volume of
livestock output over last 2 decades)
• Yield (kg liveweight/head) has increased
from 70 kg/head to 100 kg/head
• Size distribution dominated by small-scale
household pig producers (1-5 sows), 84%
in 2006, 92% in 2001

19. Dominance of pork in livestock total
output
Year Pig Chicken Cattle Others Total
1990 65 11 14 10 100
2000 68 14 9 9 100
2005 72 12 8 8 100
2009 62 13 11 14 100
Source of data: FAOSTAT 2009.
Household pig production supply at least
80% of Vietnam’s pork.
But growth in supply has failed to keep
pace with rising demand, resulting in
accelerated increase in real pork prices.

20. Supply of pork in Vietnam
Most Vietnamese pigholding households keep very few pigs but
on average the size of their herds is slowly rising. Although not
shown, the percentage of pigholding households with 21 pigs or
more rose from 0.3% in 2001 to 1.75% in 2006.

21. Costs, efficiency, competitiveness
• Own-produced feed holds significant share
of pig feed in household pig production,
providing low-cost feeding strategies
• Use of industrial feed associated with scale
of production
• Use of crossbreeds with high % of local
breeds (e.g., Mong Cai) suitable to
smallholder conditions
• Adoption of improved breeds associated
with scale of production, wealth of
producers

22. Costs, efficiency, competitiveness
• Feed conversion ratio (FCR) estimates
using maize equivalent (ME) suggest no
significant differences in feed efficiency
across scale
• There are no significant differences in
cost/unit output across scales
• While not significant, differences in unit
cost is highly sensitive to feed cost (65-
90% of total production cost)
• No clear evidence of economies of scale
found in household pig production in this
study.

23. Structure of Feed Cost
by Production System and Scale
Purchased feed Own produced feed
100%
80%
60%
40%
20%
0%
Small Medium Large Small Medium Large Small Medium Large
Farrow to Wean Farrow to Finish Grow to Finish
Increasing the proportion of own-produced feed to
total feed use can decrease total feed cost.
This provides cost advantage to small
producers that use higher proportion of own-
produced feed.

24. Feed-use efficiency (in maize
equivalent)
Kg maize
equivalent/kg
liveweight gain
6
5
4
3
2
1
0
Medium
Medium
Medium
Overall
Overall
Large
Large
Large
Small
Small
overall
Small
Farrow to wean Farrow to finish Grow to finish
Purchased feed Own produced feed

25. Cost per unit output in household-based pig
production
25
20
15
Small
Medium
10 Large
5
0
Farrow to Wean Farrow to finish Grow to finish
Economies of scale in piglet production; no
significant difference across scale full cycle
slaughter hog production and pig fattening

26. Gross margin (‘000 VND per kg output)
16
14
12
10
Small
8 Medium
Large
6
Overall
4
2
0
Farrow to Wean Farrow to finish Grow to finish
Household-based pig production can
generate gross margins ranging from 4,000
to 15,000 VND/kg liveweight of pig produced.

27. Cost-efficiency and economies of
scale
 Own produced feed is cheaper per unit of feed value.
 As farm size increases:
 Proportion of purchased feed increases
 Effective unit cost of feed increases
 Feed costs account for at least two-thirds of total costs.
 Small producers can exploit this cost advantage to improve
their competitiveness.

28. Share of pig income in total household
income
9.2% Crop
Pig
20.2% 38.2%
Non-pig
livestock
Other
agriculture
11.6% Non-agriculture
production
13.9% Wage and salary
3.6%
3.3%
Income from pigs accounts for about 14%
of rural household income, or 24% of rural
household income from agriculture.

29. Value added along the pork supply
chain where household producers
participate
Pig Consumers
Producers Butchers Retailers
Feed
Suppliers
• +2400V
ND • +1800
($0.13) • +6200 • +1300
VND VND
• 21% VND ($0.09)
($0.33) ($0.07)
• 15% • 11%
• 53%
Value added generated in pork value chains
where household pig producers participate is
about 11,700 VND per kg liveweight (or $0.62)

30. Share of retail price that accrues to
producers (based on average pork
retail price of 40,000VND/kg in 2007)
Farrow to finish Grow to finish
63% 61% 65% 65%
56% 60%
Small Medium Large
Producers receive at least half to two-thirds
of the retail price of pork. This share
increases with scale.

31. Employment generation in household
pig production
Smallholder pig production generates
employment estimated at about 4 million full-
time labor along the pork supply chain,
valued at about $3.3 billion or approximately
5.5% of Vietnam’s GDP in 2007.
Household labor constitutes the main labor
inputs in household pig production.
Women labor accounts for at least half of
total labor days in household pig production.

32. Implications on production efficiency
 Smallholder pig producers are competitive in
producing pork that meet the demand requirements of
Vietnam’s fresh meat market.
 Expanding options for own-produced feeds, in terms
of choices and quality, can improve efficiency and
enhance competitiveness, particularly in areas that
are far from commercial feed sources, and
complemented with improved access to extension.
 Limitations in available land and household labor will
be constraints to scaling up by household pig
producers.

33. Implications on economies of scale
 Within smallholder piglet production, marginal
increases in scale can reduce cost and increase
profitability (e.g., from 1 sow to 2-3 sows).
 It is not clear that policy support and investment in
large scale operations will reduce unit cost of pork
production or increase employment.
 Policies directed to strengthen capacity to deal with
production and market risks and enhance
competitiveness of household pig producers are likely
to generate efficiency gains for the sector.

34. Implications on food safety
 Growing awareness among consumers about food
safety will shape emerging demand for pork and
supply response.
 Food safety policy should be based on evidence;
currently risk to human health by pork is not fully
understood.
 Food safety policy should be based on risk rather than
hazards; risks must be distinguished from hazards.
 Risk is multi-source, and various transmission
pathways for diseases including waste water and
urban/peri-urban agriculture need to be considered.

35. International Livestock Research Institute
Better lives through livestock
Animal agriculture to reduce poverty, hunger and
environmental degradation in developing countries
Project website: www.vietpigs.com.vn
ILRI
www.ilri.org