6. Pigs and pork sector

6.1 Status of the sector

Pigs and pork are the dominant sector in Vietnam's livestock industry. According to MARD, the sector produces about 80% of Vietnam's local meat supplies. This is considerably higher than second placed poultry (not in the scope of this study) with a share of about 11% of meat production.

Vietnam's pig industry is a vitally important part of its rural economy. The agricultural workforce in Vietnam comprises between 65% and 70% of the total national workforce today, and a large proportion of this workforce (small farming business owners and agricultural workers) derive some of their income from pig farming.

6.2 The location of pig farming in Vietnam

Pigs are reared all over Vietnam. This situation exists because pigs are "wealth", i.e. assets that can be easily sold, if the owner needs cash. Importantly, pig rearing also provides meat for the families that are involved in it.

According to MARD:

• the pig farming sector produces income for men who are not well educated or skilled and so cannot get another form of employment, and for women who are required to, or want to, work from home; and,
• around 70% of all smallholder farms operating in Vietnam are involved in some form of pig rearing activity today.

As can be seen from the official data in the table below, the bulk of the pig population is in the northern half of the country.

Vietnam's Pig Population by Region in 2009

Region	'000 Head	%
Red River delta	7,444	26.9
Northern midlands and mountains	6,317	22.9
North central and central coast area	5,888	21.3
Central highlands	1,636	5.9
South east	2,612	9.5
Mekong delta	3,731	13.5
Total	27,628	100.0

Source: General Statistics Office of Vietnam

6.3 Structure of the pig farming sector

Vietnam's pig farming sector is mainly comprised of smallholder farmers and household/backyard type farms, which number more than 4 million operations today. These types of farms produce between 85% and 90% of Vietnam's pigs.

In Vietnam, commercial pig farms are defined as farms that have more than 20 sows. These farms produce the balance of the country's pigs and have a higher yield in terms of pork output (see table below).

Efficiency Indicators in Vietnam's Pig and Pork Sector in 2008

Sub-sector	Pigs Produced %	Pork Output %
Smallholder / backyard farms	80 to 90	75 to 80
Commercial farms	10 to 20	20 to 25
	100	100

Source: Ministry of Agriculture and Rural Development

The commercial pig farms currently number around 11,000 operations, and they include:

• large sized farms, which have about 5% of Vietnam's sow population; and
• medium sized farms, which have up to 15% of the national sow population.

Most of these pig farms (80% of operations) are located in the vicinity of Hanoi and Ho Chi Minh City.

Some key points to note about these commercial farms are as follows:

• the large sized farms usually operate with more than 500 sows in pens.

These businesses are mainly the product of a government policy that has encouraged state-owned enterprises to invest in larger sized integrated "export-oriented" operations, covering breeding, fattening, feed manufacture, slaughtering, processing and marketing and distribution. Examples of such companies include Vissan, Khatoco (original business in cigarettes) and Saigon Agriculture Inc (Sagri).

This policy is reported to be underpinned by investment incentives for the new operations, and also permission to such organisations to easily import exotic breeding pigs, genetics and veterinary supplies for use in their operations; and,

• the medium sized commercial farms operate with between 20 and 500 sows in pens.

These farms are usually owned by businesses that produce agricultural waste / food by-products that can be used as feedstuffs, e.g. rice wine producers or rice milling operators. They generally operate with high quality crossbreed pigs and, even, exotic breeds. Their biggest challenge comes in differentiating their pigs in market that is highly competitive and awash with low priced pigs from the smallholder farmers.

Large integrated pig farming operations are also owned by foreign-invested businesses, including CP Vietnam Livestock, JAPFA Comfeed Vietnam and San Miguel Purefoods Vietnam.

6.4 The pig population

The pig population is reported to be around 27 million head today. Growth in the population has been variable over the past 5 years or so because of the negative impacts of pig disease outbreaks on the sector (see table below).

Recent Development in Vietnam's Pig Population – 2005 to 2009
('000 Head)

	2005	2006	2007	2008	2009
Stocks	27,435	26,855	26,560	26,701	27,628
% change	4.9%	(2.1%)	(1.1%)	0.5%	3.5%

Source: MARD and National Agricultural Statistics Department

6.5 Pig breeds

The pig breeds that are being used in Vietnam include:

• Imported breeds, namely Landrace, Yorkshire, Duroc, Pietrain and Hampshire, and,
• Local breeds, namely, the I-Pig, Mong Cai, Ban, and Thuoc Nhieu (an old crossbreed from the south of the country).

Trade sources comment that the smallholder pig farms in the northern areas of Vietnam, generally use local breeds of pigs, especially Mong Cai and Ban. In the south of the country, there is a different scenario because most pigs used are crossbred pigs that contain some level of exotic genes. Mong Cai crosses with exotic breeds are very popular with farmers, because they are highly productive in terms of piglets produced, which also have more rapid weight growth rates than other breeds.

6.6 Sector production output

Vietnam produced about 2.9 million tonnes of pigs for slaughter on a live weight basis in 2009, up from about 2.3 million tonnes in 2005 (see table below).

Pig Production (Live Weight) – 2005 to 2009 ('000 Tonnes)

2005	2006	2007	2008	2009
2,288	2,505	2,663	2,783	2,909

Source: General Statistics Office of Vietnam

Yields have also increased over the past 10 years. MARD advise that average yields have increased to an average of around 90 kilograms today, up from around 70 kilograms in 2000. This has been a key factor in Vietnam's pork output over this period, rather than significant increases in pigs produced.

Government surveys have confirmed that the market for pork is very broad based. The last Vietnam Living Standard Survey found that 98% of households in the country consume pork. In comparison only 80% of households consumed chicken. Pork is also reported to comprise between 40% and 50% of household spending on meat and poultry.

6.7 The pig industry development plan

The Ministry of Agriculture and Rural Development (MARD) has a core strategic focus to bring the cost of pork production down in Vietnam, so:

• Vietnamese pork is more affordable to domestic consumers;
• is more competitive in the export markets; and,
• can defend itself against imported pork under new WTO and FTA scenarios, which are now in place, or will be in place in 2012.

Imported pork is viewed as a significant potential threat in some lucrative channels (food service and modern trade retail) because MARD believes that Vietnamese pork is between 30% and 40% more costly to produce than in countries that are now exporting sizeable quantities of pork to Vietnam, e.g. Canada and the USA.

Vietnam's pig industry development plan is a key part of its National Livestock and Meat Industry Development Plan 2020, which was overviewed in an earlier section of this report. The specific objectives of the plan for pigs and pork are to:

• increase the pig population to 35 million head in 2020, and provide Vietnam with a solid industry foundation to maintain a very high level of self sufficiency in pork into the long term;
• increase the scale of production by larger existing players in the pig and pork sector, many of which are still state-owned enterprises that have not been privatised; and,
• improve the quality and professionalism of the pig and pork sector so that it can supply the quality conscious markets that are now starting to develop in urban Vietnam, and already exist in viable target export markets such as Hong Kong SAR and Singapore.

Unfortunately, this plan contains a significant policy dichotomy (and potential future policy dilemma) because of its high level focus on highly efficient commercial farms, rather on than the inefficient smallholder farmers which MARD also knows needs income from their pigs as part of its broader rural economic development programs.

6.8 The government's strategic viewpoint about the pig farming industry and its future development

MARD generally considers Vietnam's smallholder farmers to be competitive as pork suppliers to the Vietnamese population. This viewpoint is almost solely based on financial considerations, i.e. a lower product cost for consumers, which is viewed as highly positive for this segment of the pig and pork sector. Unfortunately, this viewpoint is undermined by a number of negative aspects that also exist for these farmers (see table below).

Strategic Viewpoints About Vietnam's Smallholder Pig Farmers Today

Positive Aspects

Negative Aspects

Produce freshly slaughtered (warm) pork, which is preferred by Vietnamese consumers when compared to fresh/chilled or frozen pork as supplied by larger pig farm/pork producers. Uses household labour and other unskilled labour, which does not have major demands on wages and working conditions. Tend to by-product/trash feed, which keeps the cost of production low (also see negative aspects on feed quality). Demands for profit from pig farming and pork production is lower than the return on investment (ROI) requirements of the larger pig farm/pork producers. Highly localised distribution access to consumers through neighbouring traditional wet markets (also see negative aspects on poor sanitary environment).

Do not use higher cost industrially made feed formulations, like the larger pig farm/pork producers. Do not receive the official industry development support that is available to larger pig farm/pork producers. Generally use poor quality genetic pig stocks. Use low quality feed.  Generally operate in a weak bio-security environment where the risks of animal disease outbreaks are high.  The poor sanitary environment of pig slaughtering, and the wet markets.  The quality standards of the pork produced does not meet that of Vietnam's modern retailers, food service operators, or major wholesalers that service higher-end demand from the key urban areas. Most SMEs do not have title to their land, so they are not able use land as collateral for loans to facilitate expansion of their operations. Pollution from pig farms is a major problem in some parts of Vietnam.

Source: MARD and ILRL, ACIAR and CGIAR 2007-2009 Pig Industry Competitiveness Research Project

Overall, the government's viewpoint (as highlighted above) is very short term and tactical, and probably not appropriate, albeit that it is the reality for smallholder farmers today. Unfortunately, it does not take into account a range of issues (drivers) that will develop in the pork market, both local and export, in the medium to long term. These drivers were highlighted in an earlier section of this report.

 

7. Beef cattle and beef sector

7.1 Status of the sector

Traditionally, cattle, like buffalo, were not reared for their meat. In the past, cattle in Vietnam were principally draught animals, which were only culled and used as meat animals at the end of their useful working lives. Today, the beef cattle sector is the third largest sector in the livestock industry, after pigs and poultry, and so is an important contribution to the rural economy.

7.2 The location of beef cattle farming in Vietnam

Beef cattle farming is practiced all over Vietnam, with the bulk of production taking place in the northern half of the country. The south of the country is disadvantaged because of the impact of its hot tropical climate on smallholders that attempt to rear larger sized animals such as beef cattle, including larger breeds of such cattle (see table below).

Vietnam's Cattle Population by Region in 2009

Region	'000 Head	%
Red River delta	695	11.4
Northern midlands and mountains	1,032	16.9
North central and central coast area	2,489	40.8
Central highlands	717	11.7
South east	473	7.8
Mekong delta	697	11.4
Total	6,103	100.0

Source: General Statistics Office of Vietnam

The bulk of beef cattle farming in the northern half of Vietnam is undertaken by smallholder farmers. While this is officially reported, around 75% of all commercial beef cattle breeding operations are located in the southern part of Vietnam and the central highlands.

According to MARD, Vietnam's largest and more advanced beef cattle farms, i.e. with herds in excess of 100 head, are mainly located in the south eastern provinces of Binh Phuoc, Binh Thuan and Ninh Thuan and in the Central Highlands area. These operations exist to service the strong demand for beef that exists in the Ho Chi Minh City market.

7.3 Structure of the beef cattle farming sector

Vietnam's beef cattle industry involves a number of different farming systems:

• extensive calf-cow grazing systems, under which grazing in the open is practiced in the daytime and penning is used at night. The farmers operating these systems generally do not feed their cattle mixed animal feed, whether made by the farmer or purchased from a commercial supplier. The primary motivation of these farmers is generally wealth creation for their family, i.e. they have an asset, e.g. old cattle or a calf, that can be sold when they need money;
• intensive calf-cow systems, under which the cattle are in pens most of the time but may spend a few hours each day free or tethered grazing. These farmers feed cultivated grass and also some locally made concentrate to their cattle. The primary motivation of these farmers is the commercial sale of fattened cattle, weaned calves or yearlings; and,
• cattle fattening systems, under which cattle are usually kept in pens all the time. These farmers are commercially motivated, and much better funded than other cattle farmers. They buy old and young cattle from both the intensive and extensive cattle farmers for fattening up. The smallholder farmers involved in this activity usually feed their cattle with cultivated grass. Larger operations tend to use cultivated grass and some concentrates.

Trade sources in the cattle trade in Vietnam advise that the quality of cattle that are derived from these 2 systems, and the cattle fattening systems, are generally variable. The cattle from the extensive farmers are generally too thin for market, and are in many cases, old. In direct contrast, the cattle from the fattening systems can be problematic to sell at a good price because they can be too fat for end market requirements.

7.4 The beef cattle population

According to Ministry of Agriculture and Rural Development (MARD), Vietnam's beef cattle herd stood at 5.9 million head in 2010, versus a higher 6.1 million head in 2009. Beef production amounted to 278.9 million tonnes, up by 8.2% from 2009 production output.

Recent Development in Vietnam's Beef Cattle Population – 2005 to 2009 ('000 Head)

	2005	2006	2007	2008	2009
Stocks	5,541	6,511	4,908	5,600	6,100
% change	12.9%	17.5%	(24.6%)	14.1%	8,9%

Source: MARD and National Agricultural Statistics Department

7.5 Beef cattle breeds

Vietnam's cattle herd has a complex structure involving local breeds, Laisind (Sahiwal X Yellow cattle) and exotic breeds, which include Brahman and Droughtmaster. Some key points to note on breeds are as follows:

• farmers using extensive cattle production are more likely to have herds that include between 70% and 90% local breeds, with the balance being Laisind. These farmers rarely buy cattle and so work with the gene pool that they started operation with. If they use AI, it is more likely that the semen will not be from an exotic breed bull; and,
• farmers using intensive calf-cow systems tend to have a broader based genetic mix, which can include 60% to 70% Laisind, 20% to 30% cross breeds and 10% to 20% local breeds. These farmers do tend to buy cattle to improve their herd. If they use AI, it is more likely that the semen will be an exotic breed bull than a Laisind bull.

Vietnam's problems today are reported to lie in a long history of cross-breeding between Bos Indicus and Bos Taurus breeds, which have been largely uncoordinated, and have resulted in a focus on increasing body size with no permanent improvement for most smallholder cattle farmers. Although this is a generalisation, researchers working in the cattle industry comment that this situation underpins many of Vietnam's challenges today.

7.6 Sector production output

Vietnam produced about 258,000 tonnes of beef cattle for slaughter on a live weight basis in 2009, up from about 142,000 tonnes in 2005 (see table below).

Beef Cattle Production (Live Weight) – 2005 to 2009 (Tonnes)

2005	2006	2007	2008	2009
142,163	159,463	206,145	226,696	257,779

Source: General Statistics Office of Vietnam (Not including buffalo for slaughter).

The last Vietnam Living Standard Survey found that about 40% of Vietnam's households consume beef, with less than 10% consuming buffalo meat. As mentioned earlier in this report, 98% of households consume pork, so beef has a very different market in Vietnam today. Trade sources comment that this exists because beef is a more expensive meat than pork.

According to MARD, the cattle market has become much more sophisticated over the past 10 years, and there has been quite a radical change in demand characteristics over the past 5 years in the area of carcass quality and age of the cattle at slaughter.

This has arisen because of a change in demand from the urban area markets. It has resulted in better pricing for crossbred cattle that can meet specific purchasing criteria on minimum body weight, lean meat content and animal age.

Local cattle no longer have much demand in the lucrative urban area markets, e.g., Ho Chi Minh City. The new specifications are becoming a major challenge for farmers that use the extensive calf-cow grazing system with a low grade herd because farms specialising in fattening cattle and cattle traders will no longer buy their cattle or will only pay a low price for them.

7.7 The beef cattle industry development plan

The smallholder beef cattle farming sector has recently been supported by MARD through its Livestock Husbandry and Stock Breeding Program 2006 to 2010, which is now in the process of being extended to 2020 as a high yield beef cattle development program. According to MARD, this program has been most active in the provinces of Nghe, Thanh Hoa and Binh Dinh over the period since 2006. As mentioned earlier in this report, the top-line livestock development strategy has a goal of establishing a standing inventory of 12.5 million beef cattle by 2020, up from about 5.9 million head today.

7.8 The government's strategic viewpoint about the beef cattle farming industry and its future development

MARD generally has a very good and deep understanding of the situation that exists for Vietnam's beef cattle industry and its future development. Its strategic viewpoints on the positive and negative aspects of the industry are overviewed in the table below.

Strategic Viewpoints About Vietnam's Beef Cattle Farming Industry Today

Positive Aspects

Negative Aspects

· Demand for beef is rising and much better prices are paid for higher quality crossbred cattle than low quality local cattle. This trend will continue and likely intensify into the long term, driven by more sophisticated demands of the food service industry, modern trade retailers (supermarkets), and the modern domestic consumer (middle income and younger), who is more focused on food health, safety and quality. Models already exist that prove the benefits of cattle farmers in Vietnam shifting from extensive farming systems to intensive and/or fattening systems. · There are existing benchmarks in well documented projects and commercialisation schemes on improved breeding and feeding systems across Vietnam (in both the lowlands and highlands) that provide an excellent foundation for new strategic developments in the cattle industry at the level of both smallholder and commercial farms. Successful projects also exist on strategies to deal with the impact of adverse climatic conditions, i.e. the hot and wet seasons, on cattle farming operations. The hinterland of the key urban areas has better land and pasture/feed material availability to develop integrated beef cattle farms and farming communities. The highlands provide a good resource base for feed material development, while the lowlands have different materials, including food industry by-products for use by commercial feed producers. The sub-tropical north, and highlands, and its more appropriate climatic conditions for larger animal production than the south.

The coastal strip has a growing shortage of land and feed resources to allow the existing cattle industry to expand due to urbanisation, industrialisation and basic issues with geography, e.g. tropical south and subtropical north. Existing farm sizes are small due to a lack of land for feed cultivation/grazing so herd sizes are often constrained to 5 head of cattle or less. Feed shortages exist at times of drought (dry season) and flood (wet season). Weak base level genetics and generally fragmentary herd genetics improvement strategies. The use of feed regimes that do not sustain micronutrient and mineral deficiencies in Vietnam's beef cattle herd, with negative financial consequences for many smallholder cattle farms. Farmer education levels, motivation and weak understanding of market mechanisms often undermine positive changes in farming systems and the quality of production output. Dissemination of information about new systems based on the successful models and benchmark systems located across Vietnam is very difficult because of funding and organisational weaknesses, and weak farmer education levels and motivation. Better coordination of dissemination of the results of commercialisation, and pure and applied research projects, needs to take place so that there is improved strategic direction of development efforts by all parties involved in them, both local and foreign. The high levels of fragmentation in Vietnam's database on cattle farming improvement and a resulting tendency to "rework the wheel" without effective reference to the results of past projects, when it comes to new development projects. This arises, in part, from competition for program and project funding, and also from communication system weaknesses within Vietnam. The weak bio-security environment and the prevalence of foot and mouth disease. Weaknesses in the extent and scope of extension and AI services, especially those targeted at smallholder farmers. The weak state of the cattle farming industry financial standing, business organisations, credit access, collateral for investment, and financial management skills. Infrastructural and transportation / distribution system weaknesses for potential beef cattle production areas that are physically distant from viable end target markets, e.g. the most affluent beef market, Ho Chi Minh City.

Source: MARD

 

8. Dairy cattle and dairy products sector

8.1 Status of the sector

According to MARD, the dairy farming sectors holds a share of about 20% of Vietnam's liquid milk market. It is a much smaller sector than the beef farming sector in terms of its herd, which numbers less than 200,000 cattle (including immature cattle and bulls), when compared to the beef cattle herd of around 5.9 million head.

8.2 The location of dairy farming in Vietnam

Vietnam's dairy farming industry is mainly concentrated in the south east (close to Ho Chi Minh City) and Red River Delta (close to Hanoi and Haiphong) areas of the country. These areas account for around 70% of operations based on their herd sizes (see table below).

The Regional Location of the Dairy Herd Across Vietnam

Region	% of Dairy Herd
North East	5
North West	7
Red River Delta	12
North Central Coast	4
South Central Coast	4
Central Highlands	3
South East	58
Mekong Delta	7
Total	100

Source: MARD

Some other points to note on industry location are as follows:

• about 10% of all of Vietnam's smallholder dairy are clustered around Ho Chi Minh City, which is the main "dairy farming zone" in the country. Hatay Province close to Hanoi also has a sizeable cluster, although this only comprises about 3% of Vietnam's smallholder dairy farmers; and,
• the past 5 years has seen a positive trend where women in the highlands of Vietnam are becoming involved in generating income from the sale of milk and cheese produced from cattle and goats. According to MARD officials, this trend has been stimulated by the supply of better milking cows (and milking goats) to smallholder farmers in the highlands.

8.3 Structure of the dairy farming sector

Today, all of the dairy farms in Vietnam are privately owned. All of the state farms that existed in the 1980s have now closed, merged, or become private sector farms.

Most farmers operate with milking herds of less than 5 cows. According to a survey conducted by MARD in early 2010, there are about 20,000 of these smallholder dairy farmers today.

There are a very small number of larger commercial dairy farms. Vinamilk and TH Milk (a new industry player) operate larger sized dairy farms. Vinamilk continues to develop its supply capabilities and its senior management reported importing more than 2,000 dairy cattle in 2010.

TH Milk, which is Vietnamese privately owned, is investing in development of:

• a very large dairy farming operation. This will operate on 9,000 hectares initially, and then expand to about 20,000 hectares over the next 10 years or so; and,
• milk and dairy product processing facilities, based mainly on Israeli technology, in central Nghe An Province.

It has plans to supply 50% of Vietnam's milk by 2017. This company has investment plans with an initial budget of over US$ 300 million for the period 2009-2012, which is mainly reported to be funded by a loan from a local bank. The long term investment budget is far higher than this, and is underpinned by a very large target in terms of:

• herd size which, if successful, would have close to 140,000 cows, with about 70% being milking cows, by 2017.
• raw milk production, which is being forecast at about 500 million litres in the same year.

Trade sources in the dairy processing industry are generally very sceptical about this company's plans, although government officials, while quite cautious, because of the massive scale of the plans, are generally positive about them. According to the company's management, it has already invested close to US$ 100 million in the project and has imported about 10,000 high quality cows, mainly from New Zealand. The company's Israeli technology partner is Afimilk (S.A.E. Afikim).

Overall, this investment is very large and would be an extremely ambitious project anywhere in the world, more especially in Vietnam with its massive inherent challenges for dairy farmers and milk. These challenges exist all along the supply chain from farmer to end consumer. On a strategic level, this industrial development project also appears to be highly production-oriented and, likely, import substitution targeted.

Strategically, there may be some weaknesses in this company's plans. The plans do not appear to have considered the state or structure of the end market for its products, the impact of competition from local or imported suppliers of its products (which include alternatives/substitutes), or the changing regulatory environment, which includes Vietnam's existing and rapidly developing FTAs, which are significant drivers for change, e.g. the fully open ASEAN Economic Community (AEC) market.

8.4 The dairy cattle population

According to MARD, Vietnam had 137,000 dairy cattle in 2010, up by 22,000 head from 2009.

Recent Development in Vietnam's Dairy Cattle Population
– 2005 to 2009 ('000 Head)

	2005	2006	2007	2008	2009
Milking cows	104,000	127,000	146,000	138,000	133,000

Source: National Agricultural Statistics Department, Vietnam

The herd sizes vary across Vietnam, with averages per smallholder dairy farm now being 6.3 head in the south, 3.7 head in the north, and 3.6 head in central Vietnam, based on the most recent survey by MARD.

8.5 Dairy cattle breeds

About 15% of Vietnam's national dairy are pure bred Holstein Friesian (Holstein Friesen) dairy cattle and about 1% of the herd is reported to be Jersey cattle. The balance are cross-bred cows (F1 to > F3), which are the result of AI cross breeding activities between Holstein Friesian dairy cattle, and Red Sindhi and local Yellow Cows (see table below).

Dairy Cattle Herd Structure by Dairy Cattle Gene Content in 2006 (%)

	National Herd	Northern Region Herd	Southern Region Herd
Holstein Friesian	15	35	8
Jersey	1	2	-
F1	24	33	21
F2	25	17	28
F3	22	9	24
> F3	13	4	19
Total	100	100	100
% of national herd	100	17	65

Source: MARD and Dairy Vietnam

The structure of the population of dairy cattle by genetics in Vietnam is a product of government policy, development programs that are linked to imported genetic supplies, and the climate/other dairying environmental issues. The low % of the national population of Holstein Friesian pure bred cattle in the south exists because of this region's hot and tropical environment, and the much larger size of its regional dairy herd, when compared to the north.

Yields from pure bred Holstein Friesian cows in Vietnam has increased over the past 15 years, but are still low at around 3,900 litres per lactation, when compared to much higher yields achieved in the Developed World. In addition to this, crossbred cows are achieving a maximum of between 3,000 and 3,500 litres per lactation.

According to sources with Dairy Vietnam, the most appropriate dairy cattle for climatic and other dairying environment conditions in Vietnam have 70% to 80% Holstein Friesian genes.

In some cooler highland areas, e.g. Dalat, it is possible to work solely with pure bred exotic dairy cattle. While this is the case, these areas are unable to establish and sustain large dairy farming herds because they are too remote from processors and the end market. Consequently, farms in these areas are still niche players in Vietnam's dairy farming industry.

8.6 Sector production output

MARD estimates that raw milk production amounted to about 350,000 tonnes in 2010, up from around 278,000 tonnes in 2009. The big jump in output is attributed to the sizeable growth in dairy farming herds under the control of Vinamilk and TH Milk (see table below).

Raw Liquid Milk Production in Tonnes – 2005 to 2009 (Tonnes)

2005	2006	2007	2008	2009
197,700	215,900	234,400	262,200	278,200

Source: MARD

10% of Vietnam's population consumes around 80% of Vietnam's domestically produced milk and other dairy products. Per capita consumption of liquid milk from local cows was about 9 kilograms in 2009, very similar to that in 2006.

Trade and government sources comment that high demand for liquid milk in Vietnam's biggest cities, especially Ho Chi Minh City, its most affluent consumer market, is one of the key stimulants for dairy farming activity across the whole country. While this is the case, trade sources comment that most Vietnamese consumers have unsophisticated demand characteristics. They do not understand the difference between;

• more expensive pasteurised chilled/fresh milk produced from local raw milk; and,
• less expensive shelf stable UHT/sterilised milk that is recombined in Vietnam from imported dairy and non-dairy ingredients.

In view of the low household incomes, including at the level of today's middle income groups, the bulk of demand is currently for the lower cost recombined liquid milks.

The market for locally produced raw liquid milk has two broad segments:

• industrial demand, which takes about 80% of raw milk; and
• the informal market sector, which takes the balance of raw milk supplies on a highly localised basis.

Industrial demand comes from Vinamilk (55% share of demand), Dutch Lady/Royal FrieslandCampina (18%), Anco (formerly the Nestlé operation), HanoiMilk and IDP.

8.7 The dairy industry development plan

Dairy farming industry development in Vietnam continues to be guided by the National Dairy Farming Development Plan (NDFDP), which was first published in 2001 and was augmented by a Dairy Industry Master Plan in 2005. Under these plans:

• the core objectives are:
  1. import substitution;
  2. generating rural area employment; and
  3. increasing rural incomes; and,
• the main long term target is meeting a goal of supplying 20 kilograms of per capita consumption in locally produced raw liquid milk by 2020. This target is based on the supply to, and usage of Friesian Holstein crossbred milking cattle by, local farmers of all sizes.

This development plan is also underpinned by other policies to support low income smallholder farmers. These policies provide free or subsidised AI and veterinary services, subsidies and interest free loans for cattle purchases; and financial assistance for the development of farm infrastructure, feed production and milk collection and transportation facilities. There are also reported to be additional support provided by specific provincial governments, including tax exemptions and rights (but not land title) to use state-owned land for fodder production.

When the NDFDP started operations there were many teething problems. This included the lack of properly targeted financial support for smallholder farmers; speculative pricing of breeding stock in localised markets; haphazard planning, implementation and chaotic operation of the plan at provincial level; targeting weak farmers who had no experience and could not develop any viable form of economies of scale appropriate to demand from milk collectors; insufficient extension service coverage (especially animal health services); milk quality issues; market proximity issues for new farms in remote areas; failures by farmers to sign required contracts; and a lack of market (and good raw milk prices) in some areas where the plan was implemented.

According to MARD, the above problems happened because of political pressure from local governments to expand the NDFDP to cover 33 provinces, rather than the 12 most viable provinces identified and originally proposed for the plan. This led to a lack of good program control and to a spectacular failure of the NDFDP in some regions of Vietnam.

These program failures resulted in a consequent major waste of program funds and resources in the northern provinces of Pho Tho, Thai Nyugen, Son La, Tuyen Quang and Thai Binh. There was also a massive failure in Tra Vinh province in the south of the country.

While this happened, the current NDFDP programs are generally well controlled and are now regarded as highly successful. A detailed investigation into the large NDFDP program failure in Thai Nyugen province led to a large number of valuable lessons for MARD and the other parties that are involved in program implementation and operations.

8.8 The government's strategic viewpoint about the dairy farming industry and its future development

MARD went through a massive learning curve, with huge learning costs in terms of time and funds, when the government initially launched the National Dairy Farming Development Plan. Consequently, it now has quite a good understanding of the situation that exists for Vietnam's dairy cattle industry and its future development.

Its strategic viewpoints on the positive and negative aspects of the industry are overviewed in the table below.

Strategic Viewpoints About Vietnam's Dairy Cattle Farming Industry Today

Positive Aspects

Negative Aspects

Government support for development of the dairy farming sector is strong. MARD has learnt a lot from the original batch of failed National Dairy Farming Development Plan programs across Vietnam, and is now focused on supporting farms on a zonal basis. Milk yield has been improving for about 10 years, through a successful crossbreeding program. World market price increases for imported milk powders and weaknesses in the Dong (local currency) against the US$ has increased demand for locally produced raw milk. This has also increased the farm gate price for raw milk in recent years. Farmers with a long term and focused experience in dairying, i.e. more than 10 years, are the most successful in Vietnam. Locally available dairy farming extension services (including AI providers/breeding advisors, cattle nutrition, and SME business advisors) are vital to a dairy farmer's success, e.g. active support from MARD (if this is available), the large milk processors (extremely important according to MARD), NGOs and aid agencies. The private sector is doing a better job than the government because it is better funded than the government. Vietnam has appropriate breeding resources based on imported genetics to facilitate expansion of the dairy farming herd, if the breeding program is properly managed to maximise yields from cross-bred cows. Vietnam now operates with a national herd recording system that aims to control future degradation in the quality of its dairy herd. This system is reported to be monitoring around 40% of its national herd today. There is a good knowledge base about the factors that generate a good quality smallholder dairy farm in Vietnam, based on 20 years of development programs. Two business models for dairy farming development have been established with some level of success: Commercial investment in a large farm using modern technology, e.g. Vinamilk's operations; and, The comprehensive supply systems that tie smallholder farms into the commercial market for raw milk, e.g. that operated by Dutch Lady. By-product feeding has possibilities in Vietnam because large quantities of food industry waste is generated in the key urban areas.

Government strategic focus in northern Vietnam has not always been well targeted because dairy farms set up in new locations did not survive longer than 5 years of operations. Rapid training of dairy farmers tends to fail and result in closed dairy farms and the related waste of funds, resources, and time spent by advisors. Dairy farming organisations are not constituted in the forms that exist in the Developed World. Herd sizes are generally very small, which makes it difficult to attract commercial buyers of milk. They find it is not viable to deal with small farms due to high raw milk collection costs. The government has very limited funding to provide the required extension services and training for new farmers and, importantly, continuing industry education to existing dairy farmers. There is generally a need for training in good dairy farming practices. Vietnam's dairy farming herd has weaknesses in terms of yield because sizeable proportions of the herd still have weak dairying genetics due to weaknesses in past herd development programs. There are weaknesses in the way in which new farm viability is assessed in Vietnam, with farms failing because the knowledge about what makes a successful dairy farm in Vietnam was not / is not always used in localised decision-making processes. Although productivity of the national herd has been increasing, weaknesses in farmer practices are still undermining yields. There is a lack of dissemination of success stories across Vietnam, so there is generally a lack of nationwide learning from successful farms. Milk production is generally seasonal, and also lacks economies of scale. This situation, and disease outbreaks, causes smallholder farmers to exit dairy farming activities at times of crisis. The milk collection, processing, and milk and dairy product marketing support functions for dairy farmers have significant weaknesses in most areas of Vietnam outside of the areas supported by Vinamilk, Dutch Lady and Anco. The risks in Vietnam's weak bio-security environment and control functions are significant for dairy cows and their owners. This is linked to Vietnam's inherently hot and humid climate that is not ideal for high yield dairying activities. Vietnam has no enforced national milk quality regulations so milk characteristics and quality standards of raw milk are highly variable.

Source: MARD

 

10. Goats and sheep and meat and milk sectors

10.1 Status of the sector

Goats and sheep have long been part of the farming scene in some parts of Vietnam. Sheep have a much lower level presence than goats in the national livestock herd.

The goat industry is a niche sector within Vietnam's livestock industry and is considered highly valuable in areas where it is difficult to produce other types of livestock, or where farmers need to diversify their incomes.

The sheep industry is very small and rather problematic to develop under the conditions that exist across much of Vietnam.

10.2 The location of goat and sheep farming in Vietnam

Goats and sheep are commonly reared in the mountainous areas, their foothills and the drier areas of Vietnam. Meat goats (and sheep) are produced using free grazing methods on land that is not being used for crops. Milk goats, where they exist, are penned and subjected to managed feeding using grass and other locally available fodder.

The goat farming industry is highly fragmented and located all over the country (see chart below).

 

Goat Herd Distribution Across Vietnam in 2007 – 1.7 Million Head

Source: National Institute of Animal Husbandry, MARD, Vietnam

Sheep are produced mainly in Ninh Thuan (also referred to as Phan Rang) Province in central Vietnam and some areas in the north. 90% of Vietnam's sheep herd is reported to be located in the Ninh Thuan (Phan Rang) Province. The Goat and Rabbit Research Centre has a sheep R&D centre, which operates under the National Sheep Research Program, within this province. This centre was set up in 2005.

10.3 Structure of the goat and sheep farming sector

Goat and sheep farms are almost exclusively smallholder operations, and have all of the challenges that exist for such farmers in terms of scale, farmer knowledge, breeds, feed, funding, disease control issues, dry season-wet season challenges, and product quality.

Traditionally, goats are raised as an asset that can be sold when cash is needed by the farmer and his family, so there is generally a lack of "professionalism" in the goat farming industry. While this is the case, significant efforts have been made over the past 25 years to integrate goat farming with crop production, e.g. pepper, cashew, cassava (tapioca), yellow corn and other marketable cash crops, e.g. fruits and vegetables. A project run in conjunction with the Swedish government between 1999 and 2004 established a number of model goat-crop integrated smallholder farms in southeastern Vietnam.

According to MARD, these integrated goat-crop farms are very successful because the goats create manure that can improve crop yields and diversification, and also better feed material availability. This, in turn, has led to larger goat herds being developed and, very importantly, to a sizeable increase in the incomes of farmers involved in such activities.

10.4 The goat and sheep population

There has always been a much larger goat herd than sheep herd, with the earliest available national livestock survey data reporting standing herds of 370,000 goats and 2,000 sheep in 1990. The current herds are reported to be around 1.7 million goats and about 60,000 sheep.

Vietnam's Goat and Sheep Herd – 2004 to 2008 (Head)

	2004	2005	2006	2007	2008 (P)
Goats	1,006,000	1,314,000	1,472,000	1,712,000	1,500,000
Sheep	31,200	40,200	58,500	64,200	67,000

P: Provisional data.
Source: MARD and National Agricultural Statistics Department

10.5 Goat and sheep breeds

Goat breeds include local goats (the Bachthao and Co breeds), Anglo-Nubian, Anglo-Nubian-Local Crossbreeds, Barbari, Saanen, Alpine, Boer (Texas), Jamnapari, Beetal and various meat crosses between local Co and Bachthao and imported goats, and also between the different imported goats. The local Bachthao goat is a dual purpose goat, whereas the local Co goat is a small size meat goat.

120 Boer, Sannen and Alpine goats were originally imported in 2001 by MARD from the USA to kickstart the first stage of its fledgling National Goat Breeding Program. The Indian goats were earlier imports that were gifted by the Indian government to the Ministry of Agriculture in the mid 1990s.

There is only one sheep breed with a significant sized herd in Vietnam, namely a localised breed known as Phan Rang, which is a meat breed. This breed is reported to be well adapted to the harsh and dry climate and natural range lands in central Vietnam where it is mainly farmed. It is the remnants of sheep that were originally introduced by foreigners, possibly missionaries, in the 19th and 20th centuries from a number of countries, including China and India. Some rams have been imported by MARD from Australia, more recently, for cross breeding purposes to boost carcass size, and these include Dorper and White Suffolk.

10.6 Sector production output

Goat and sheep meat output is estimated by the Ministry of Agriculture and Rural Development (MARD) at around 20,000 tonnes in 2010, up from around 16,000 tonnes in 2005, with the bulk of production being goat meat. MARD's 2010 production figure is much higher than that reported by the FAO, which was reported at about 11,000 tonnes of goat meat in 2010.

Growth in goat meat output is reported to be averaging at between 4% and 6% per annum over the past 5 years, after taking into account a dip in production due to animal disease outbreaks in this period.

No data is readily available on goat milk production in Vietnam. According to Dairy Vietnam, goat milk and goat cheese production is very small today. One estimate from MARD indicated that goat milk production was only about 900,000 litres in 2009.