1 Analysis and improvement of beef-cattle value chains in the South Central Coastal Vietnam Researcher Team: Ho Cao Viet (PhD.), Huynh Tran Quoc (MSc.), Le Van Gia Nho (MA), Nguyen Van An (MSc.) Department of Agricultural Systems Research (DASR); Institute of Agricultural Science for Southern Vietnam (IAS) Summary In the context of project SMCN/2007/109, the study on analysis of beef-cattle and cassava value chain is carried out since 2009 in 3 provinces of Binh Dinh, Phu Yen and Ninh Thuan. Key findings of beef-cattle value chain are following: (i) Beef-cattle industry contributes an important part in income sources of farmer household in SCC region; (ii) Price of live cattle and beef meat tends to move upward, market force of beef meat is relatively high in southern, especially in large cities; (iii) Farmers have changed their awareness on capital investment & improvement of cattle species; (iv) Policies on slaughter houses installation, veterinary service, program of artificial insermination, enlargement of pasture & forages area, support of government and private enterprises will improve both quality and quantity of cattle herd in SCC; (v) Cattle husbandry use cassava product & by-products as a feed source in the dry season whereas shortage of feed and for fattening. Meanwhile, manure is a fertile component that improved quality of degraded soil in SCC; (vi) Income generated by cattle keep balance of family budget and cash-flow; (vii) Transparency of price information is main factors that influenced significantly to farmer; (viii) Cooperation of farmers, vertical coordination among farmers and enterprises business are best solution to reduce risk and loss due to of price falling. Key words: Value chain of beef-cattle, agent, farming systems, market. 1. Introduction In the context of project SMCN/2007/109, the study on analysis of beef-cattle value chain is carried out in period 2010-2012 in 3 provinces of Binh Dinh, Phu Yen and Ninh Thuan. The surveys on different agents of beef-cattle value chains were conducted in order to collect information and analysis of chains. Cattle husbandry has generated important income for farmer in SCC. However, beef-cattle value chain is dealing with many constraints such as: market price fluctuation, price competition of imported beef meat, high cost of production, etc. The other reasons also affected to price fluctuation and indirectly influenced to farmer’s benefit is that vertical coordination amongs farmers and agents of slaughter houses, small enterprises and distributors. The purpose of this study is to identify beef-cattle supply chains and improve it in the context of Vietnam social economic environment. 2. Objectives of study - Analyse markets and positioning beef-cattle value chain in order to identify advantages and disadvantages of the chain; - Implement of support activities, policies implementation to improve beef-cattle value chain performance; - Identify short-term solutions and long-term strategies for beef-cattle value chains based on stakeholders and agents engagement. 3. Methodology of study Approach method Analytical frameworks were proposed by international organizations such as GTZ, ACDI/VOCA, M4P (Market for Poors) and were applied because these frameworks are according with context of research. Methodology of value chain study of FAO (2005) is also applied in this study. Research method * The qualitative method: PRA method, formal discussion, key informal panel (KIP), problem tree, SWOT, Venn diagram were applied in order to identify structure of chain in different provinces,
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1
Analysis and improvement of beef-cattle value chains in the South
Central Coastal Vietnam
Researcher Team: Ho Cao Viet (PhD.), Huynh Tran Quoc (MSc.), Le Van Gia Nho (MA),
Nguyen Van An (MSc.)
Department of Agricultural Systems Research (DASR); Institute of Agricultural Science for Southern Vietnam
(IAS)
Summary
In the context of project SMCN/2007/109, the study on analysis of beef-cattle and cassava value
chain is carried out since 2009 in 3 provinces of Binh Dinh, Phu Yen and Ninh Thuan.
Key findings of beef-cattle value chain are following: (i) Beef-cattle industry contributes an
important part in income sources of farmer household in SCC region; (ii) Price of live cattle and
beef meat tends to move upward, market force of beef meat is relatively high in southern, especially
in large cities; (iii) Farmers have changed their awareness on capital investment & improvement of
cattle species; (iv) Policies on slaughter houses installation, veterinary service, program of
artificial insermination, enlargement of pasture & forages area, support of government and private
enterprises will improve both quality and quantity of cattle herd in SCC; (v) Cattle husbandry use
cassava product & by-products as a feed source in the dry season whereas shortage of feed and for
fattening. Meanwhile, manure is a fertile component that improved quality of degraded soil in SCC;
(vi) Income generated by cattle keep balance of family budget and cash-flow; (vii) Transparency of
price information is main factors that influenced significantly to farmer; (viii) Cooperation of
farmers, vertical coordination among farmers and enterprises business are best solution to reduce
risk and loss due to of price falling.
Key words: Value chain of beef-cattle, agent, farming systems, market.
1. Introduction In the context of project SMCN/2007/109, the study on analysis of beef-cattle value chain is carried
out in period 2010-2012 in 3 provinces of Binh Dinh, Phu Yen and Ninh Thuan.
The surveys on different agents of beef-cattle value chains were conducted in order to collect
information and analysis of chains. Cattle husbandry has generated important income for farmer in
SCC. However, beef-cattle value chain is dealing with many constraints such as: market price
fluctuation, price competition of imported beef meat, high cost of production, etc. The other reasons
also affected to price fluctuation and indirectly influenced to farmer’s benefit is that vertical
coordination amongs farmers and agents of slaughter houses, small enterprises and distributors.
The purpose of this study is to identify beef-cattle supply chains and improve it in the context of
Vietnam social economic environment.
2. Objectives of study - Analyse markets and positioning beef-cattle value chain in order to identify advantages and
disadvantages of the chain;
- Implement of support activities, policies implementation to improve beef-cattle value chain
performance;
- Identify short-term solutions and long-term strategies for beef-cattle value chains based on
stakeholders and agents engagement.
3. Methodology of study
Approach method
Analytical frameworks were proposed by international organizations such as GTZ, ACDI/VOCA,
M4P (Market for Poors) and were applied because these frameworks are according with context of
research. Methodology of value chain study of FAO (2005) is also applied in this study.
Research method
* The qualitative method: PRA method, formal discussion, key informal panel (KIP), problem tree,
SWOT, Venn diagram were applied in order to identify structure of chain in different provinces,
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interaction of each factors and agents in the chain, the impacts of institutions and policies on the
chain and so on. Collection and analysis of secondary data (annual reports of people committees,
statistical data, scientific report and information of MARD, DARD, NGO), institutional and
political papers was also performed. Individual depth-interview, case studies and observation were
applied in step of data collection. These databases are updated year by year.
* The quantitative method: face-to-face survey to collection data and information from each agent,
statistical analysis, cost and benefit analysis, value added analysis for each agents and overall chains
based on main sub-chains or products and build up the scenario.
Sampling method for survey: Non-propability sampling method (proportionate quota sampling
combined with convenience sampling) was applied in study. There are 3 reasons that method was
applied: (i) Population of farmers is large in studied regions and not-determined; (ii) Collectors,
middlemen, slaughter houses, semi-industrial slaughter enterprises are relative difficult to contact
and determine. Researcher has to set up a close relationship with them. (iii) Objectives are
identified characteristics of beef-cattle value chain and internal interaction of agents in chain.
Economical and technical parameters are calculated for chain. Five steps of sampling are following:
1. Basing on the availability of budget, timescale, performance to decide the sample size;
2. Select the representative regions for beef-cattle production in 3 provinecs that located in
SCC: district of Phu Cat (Binh Dinh), Tuy An (Phu Yen) and Ninh Phuoc (Ninh Thuan).
3. Select representative communes that located in these districts: Cat Trinh (Phu Cat), An Chan
(Tuy An), Phuoc Dinh (Ninh Phuoc).
4. Select farmers, arrange annual surveys and carry out face-to-face interviews.
5. Select local collectors, middlemen, slaughter houses and enterprises.
The sample is distributed as follow:
30 farmer households (different herd size)
5 collectors (1 & 2 level)
4 slaughter houses (in Binh Dinh, Phu Yen & Ninh Thuan)
2 semi-industrial slaughter companies (in Bien Hoa & Ba Ria-Vung Tau)
Data analysis: Applying the descriptive statistics for data analysis. There is a measurement of
econmic and financial parameters, overall calculation of chain that presented in the table below
(Table 1 & Figure 1 & 2).
Inputs Total production (P)
Intermediate Costs (IC)
Value of main products
Value of by-products Input materials
Value Added (VA)
Hired labor cost
Financial cost
Taxation
Gross Profit
(GPr)
Depreciation
Net Profit (NPr)
Figure 1 - Financial parameters in beef-cattle value chain
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Figure 2 – Financial parameters of overall chain
Table 1 – Economic parameters and cost-benefit analysis
Parameter Formula
Total Production (P) (Productivity x selling price of main product per unit) + Income of
Fluctuation of beef meat price occurred in 2010-2011 that varied from 180 to 250 thousands
VND/kg, and was double to triple folds much higher than price of pork. As a result, buying price of
live cattle moved up, improved beef meat market force, and cattle keepers recived higher income
than in previous year. Further, this sector still contributes an important part in farmers’ income; it
also generates available capital source, budget cash-flow, and effectively use by-products from
crops (cassava leaf, manioc peel and root, peanut stems, paddy straw, green forage etc.).
4.2 Positioning and analyzing the value chain of beef-cattle and the agents of chain Chain in domestic market
Products line
Beef-cattle value chain in SCC region includes four agents: (i) Farmersr; (ii) Collectors/middlemen;
(iii) Slaughter houses; (iv) Dealer/distributors and other agents.
Figure 5 – Beef-cattle supply chain in SCC
Farmer producing at small-scale, having 2 to 5 cattle heads with mixed litters at different ages
feeding together in farm. 1 to 2 years-old beef or few-months veal is often traded though local
collectors or middlemen during dry season (April to August) and holiday occasion. In recent years,
they invest capital on cattle species and fatterning. Transaction based on negotiation between
farmers and collectors in informal market. Therefore, farmers faced several problems: (i) Can not
decide selling price and don’t know clearly market demand; (ii) Do not measure accurately (farmer
Agricultural Extension Centre, Veterinary Services, Animal Varieties Centre, Private Services
DARD
Bank, Public Services, Processing and Trade Sector
Farmers
Collectors
Dealers,
distributors
Retailers,
processing units
Slaughter
houses
Live cattle
Live cattle
Meat, Born & by-
products
Meat, Born & by-
products
70%
cattle
75%
cattle
25% cattle
Meat & by-
products
Meat
Leather
Farmers Slaughter
houses
Leather
(10%)
Meat
(30%)
Bone,
blood
Slaughter houses in Biên
Hòa, HCM city
Local
market
Provincial
Dealer
Distributors
Factories in
HCMC
Retailers
Distribution systems in
HCM city
30% cattle
Middle-
men
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lost 5-10 kg per live cattle); (iii) Assess live cattle quality based on quantity factors and having no
doubtless among farmers and middlemen; (iv) 70% of farmers sell live cattle directly to local
collectors and 30% to small-scale slaughter houses.
Assume that farmer bought 1 year-old calve, this calve will be sold at two-years old, as beef-cattle,
for local middleman. Total production (P) includes value of cattle, that accounts for 60%, and
manure (by-product) is 31%. Intermediate cost (IC) accounts for 65% of P, including supplement
feed accounts for nearly 34% of IC. Value added (VA) accounts for 35% of P, which contributes
mainly by family labor. Net profit (NPr) generates only 230,000 VND per cattle per year (Table 3).
Table 3 - Financial analysis of live cattle husbandry of farmer, 2010-2012
Items Total (1,000VND) Proportion (%)
1. Total production (P) 5,800 100
- Cattle 4,000 69
- Manure 1,800 31
2. Intermediate cost (IC) 3,753 64.7
- 1 year-old calve 2,500
- Rice straw, peanut stems 433
- Cassava pulp, flour, salt 820
3. Value added (VA) 2,047 35.3
Labor 1,800
Gross profit (GPr) 247
- Depreciation 17
- Net profit (NPr) 230
Source: Survey data, DASR, 2010-2012
Collectors and middlemen: transaction through this network was formed spontaneously between
farmers and middlemen who are agents to decide buying-selling price of live cattle. Amount of
collectors and structures of network depend on regional and purchasing-power factor. Almost
transaction occurs mainly during December to nearly Tet festival. There were 60 to 70% of live
cattle selling in local slaughter houses and 25-30% was transported to the southern market. Market
force of live cattle is affected by southern meat market.
Local collector often has on-farm and off-farm activities, therefore income from cattle purchase
accounted for 20% of their income. 1-2 family members engaged to business. They usually invest
40 to 50 million VND for buying, transaction and stockage. Clients are farmers in village or inter-
villages. Payment is mainly by cash. Table 4 - Financial analysis of collector agent, 2010-2012
Items Total value (1,000VND) Proportion (%)
1. Total production (P) 4,500 100 Selling cattle 4,500
2. Intermediate cost (IC) 4,000 88.9
Buying cattle 4,000
3. Value added (VA) 500 11.1
- Transportation & communication cost 180
- Brokerage commission 50
- Veterinary control 10
Gross Profit (GPr) 260
- Net Profit (NPr) 260 Source: Survey data, DASR, 2010-2012
Average number of live cattle purchased monthly varies from 7 to 15, of which, 20% buying
directly from farmers, 80% must buy through middlemen. Then, cattles were sold to wholesalers or
local slaughter houses. December to January (Lunar calendar) are peak months for cattle
purchasese, estimated of 15 cattles per month in average. In which, crossbred Sind occupies of 60%
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and local species (called”Bò Vàng) is 40%. Purchase oral agreement among trader and farmer live
cattle will be deliveried at farmer’s gate between 7 to 20 days. Buying price is various depending on
to cattle breed, Crossbred Sind live cattle has higher price than local one, because it gives more
carcass weight than others. In recent year, price is also growing up yearly from 3 to 5 %.
Analyzing transaction of one live cattle, collector profits 260,000 VND within 20 days. Average
monthly profit of collector is estimated about 1.8 million VND. VA generated by collector occupies
of 11% of P, of which, 30% from transportation cost, and 10% from brokerage commission. Table 5 - Financial analysis of slaughter house, 2010-2012
Items Total (1,000VND) Proportion (%)
1. Total production (P) 5,305
1.1 Main products 4,345 81.9 1
st grade meat 1,540
2nd
grade meat 1,980
3rd
grade meat 825
1.2 By products 960 18.1 - Blood & Offal 555
- Bonne, skin, horn, hoof… 405
2. Intermediate costs (IC) 4,506 84.9
- Cattle 4,500 - Feedstuff 5
- Electric & water 1
3. Value added (VA) 799 15.1
- Labor 150
- Transportation & communication costs 80
Gross Profit (GPr) 569
- Depreciation 3
- Net Profit (NPr) 566
Source: Survey data, DASR 2010-2012.
Slaughter houses: small-scale slaughter houses located in local areas and equipped by simple tools.
They often buy live cattle directly from farmers (occupies of 30%) and local collectors (70%). Final
products of slaughter houses are beef-meat in various grades and consume by provincial distributors
and consumed in southern region. By-products of slaughtering (bone, blood, intestine, etc.) are sold
in local markets. Leather consumes by dealers and end-users are leather factories in Hochiminh city.
In present, in Binh Dinh, Phu Yen and Ninh Thuan, there are not existing industrial-scale slaughter
houses. Consequently, about 25% of live cattle is transported to slaughter houses that located in
Bien Hoa (Dong Nai province, 25 km far from Hochiminh city) and Hochiminh city.
In the case to slaughter a cattle weight of 170 kgs, slaughter house obtains about 5.3 million VND,
in which meat products keeps 82% of P, by-products (blood, tripe, bone, skin, etc.) occupies of
18%. Proportion of IC is 85% of P and other agents created 15% of VA. NPr occupies of 71% of
VA. If slaughter houses buy directly cattle from farmers/producers, they can profit 1 million VND.
Slaughter in Bien Hoa, Dong Nai, an external agent of beef-cattle value chain of SCC region
Survey in 2010-2012 covered agents of chain of SSC region. However, investigation of slaughter
houses that located in Dong Nai provinces, southern Vietnam also carried out in 2012.
In recent years, beef meat market in southern of Vietnam is very large and growing up. In Bien
Hoa, Dong Nai, there are slaughter houses that have capacity to slaughter from small to medium
scale and supply a large demand of meat in surrounding areas, especially HCM city. There are 6
slaughters that can process 50 to 100 heads of cattle per day in average (Trung Dong slaughter)10
that cattles are bought from different regions (SCC provinces, Tay Ninh, Cambodia, An Giang, Cu
10 Bureau of Veterinary of Dong Nai issued the licence papers for 42 slaughters and animal business enterprises in
2011.
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Chi). Until to October 2011, 12,300 cattles are imported from SCC provinces (compared to 14,000
in 2010). Figures pointed out cattle husbandry in central is affected largely by the southern market.
Market access would be well arrangement if there were a network of slaughter houses & processing
factories installed along the chain. Furthermore, transportation cost among central-southern
interprovinces is also a big problem to reduce competition if live cattle carrying out to southern.
Analysis of profit sharing in chain Contribution of agents is respectively following: farmers 61%, collector 15% and slaughter houses
24%. Share of profit: slaughter houses 54% in 1-5 days, collector received 25% in 7-20 days and
farmer shared 22% in 1-3 years. Feeding cattle still exists and necessary because family labor and
by-products are used and generates income in overview of animal cropping systems. If these
resources are no longer or farmers must hire or purchase, they would not receive any profit. Table 6 – Profit contribution of each agent in beef-cattle value chain
Agents of supply chain
VA GPr NPr
Value
(1,000VND)
Proportion
(%)
Value
(1,000VND)
Proportion
(%)
Value
(1,000VND)
Proportion
(%)
Farmer/Producer 2,047 61.2 247 23 230 21.8
Collector/Middleman 500 14.9 260 24.2 260 24.6
Slaughter house 799 23.9 569 52.9 566 53.6
Total 3,346 100 1,076 100 1,056 100
Source: Calculated from survey data, 2010-2012.
4.3 Strategy to improve beef-cattle supply chain Table 7 - Technical solutions to improve beef-cattle supply chain in SCC region
Problems Technical solutions Involved agents 1.Beef-cattle species
and grass varieties
2. Nutrient and feed
3.Veterinary
4.Marketing skill and
capacity
4. Quality of beef
meat
-Higher performance programs for breeding and artificial insertion
-Introducing high-biomass grass varieties and adapting with
extreme weather condition in south central coastal
-Apply nutrients-balance techniques, modify micro-elements & salt
in dry season, fattening by cassava flour and pulp, fermented rice
straw and cassava leaf, etc.
-Increase ratio of vaccination and mapping for disease prediction
-Training farmers on marketing skill and capacity
-Apply husbandry techniques towards organic farming and GAP
Extension service
Veterinary service
Media agency
Private enterprise
Research institute
University
Non-government
organization
Table 8 - Economic and market solutions to improve beef-cattle supply chain in SCC region
nutrients & micro-elements (nutrient lick block) in dry season (other project’s component).
Organize a vertical coordination amongs farmers and local collectors.
Plan a master-plan of slaughter house, processing factories targeting to southern market.
Improve skills of marketing and market access for farmers and extension staffs.
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