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External Shocks & Adjustments in Smallholder Livestock Production

D. Roland-Holst, M. Epprecht and J. Otte

The Future of Poultry Farmers in Viet Nam after HPAIHanoi, Viet Nam, 8–9 March 2007

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Outline

• Livestock sector characteristics

• The role of livestock in rural incomes

• Adjustment options to external shocks – value chain certification

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Livestock Ownership in Viet Nam

0

20

40

60

80

100M

ajor

Urb

an

Mid

dle

Urb

an

Sm

all U

rban

Nor

ther

nM

ount

ain

Red

Riv

erD

elta

Nor

th C

entra

lC

oast

Sou

th C

entra

lC

oast

Cen

tral

Hig

hlan

ds

Sou

thea

st

Mek

ong

Riv

erD

elta

% Households Owning Livestock

Source: 1998 VLSS

Urban Rural

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Households Engaged in:Livestock Poultry

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Livestock Ownership in Viet Nam

0

5

10

15

20

25

30M

ajor

Urb

an

Mid

dle

Urb

an

Sm

all U

rban

Nor

ther

nM

ount

ain

Red

Riv

erD

elta

Nor

th C

entra

lC

oast

Sou

th C

entra

lC

oast

Cen

tral

Hig

hlan

ds

Sou

thea

st

Mek

ong

Riv

erD

elta

CattlePigsChickenDucks/Geese

Herd / Flock Composition Urban Rural

Source: 1998 VLSS

Num

bers

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Poultry Flock Size & CompositionFlock Size Flock Composition

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Rural Income Sources

Wages9%

Self-employm

18%

Other11%

Agric.62%

Average: USD750 / household / yearPoverty line: app USD650 / hh / year

Source: 1998 VLSS, PPLPI 2005

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Viet Nam: Rural Household Types

Type:• ‘Diversified’

• with market-oriented agriculture (>75% sold)

• with semi-market-oriented agriculture

• ‘Agricultural’• market-oriented• semi-market-oriented• subsistence (<25% sold)

0

200

400

600

800

1,000

1,200

1,400

1,600

Type

1

Type

2

Type

3

Type

4

Type

5

OtherWagesSelf-emplLivestockCrops

Ann

ual h

ouse

hold

inco

me

in U

SD 35%

10% 33%

6%

17%

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Rural HH: Agricultural Incomes

‘Com

mer

cial

’0

10

20

30

40

50

60

70

80

90

100 Other agricincomeOther livestockincomeSaleschicks&ducksHome conschicks&ducks

Sem

i-co

mm

erci

al

Sub

sist

ence

Percent of Agricultural Income

Source:Viet Nam;1998 LSMS‘A

gric

ultu

ral H

ouse

hold

s’

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Spatial Heterogeneity

12345

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Income from PoultryShare Total per Area

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Chicken Ownership – Rural Viet Nam

0

20

40

60

80lo

w

low

-m

ediu

m

med

ium

med

- hi

gh

high

Proportion (%) of HouseholdsOwning Chicken

Income Quintile

200

USD

/yea

r

430

USD

/yea

r

690

USD

/yea

r

1,12

0 U

SD/y

ear

3,20

0 U

SD/y

ear

Income Quintile

0

5

10

15

20

25

low

low

-m

ediu

m

med

ium

med

- hi

gh

high

Average Chicken FlockSize

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Poultry Sector Composition

95%

5%

0%

0%

<50 50-249 250-999 >999

Flock size class

7.9 millionflocks

Flocks by Size Class

birds

55%16%

3%

26%

<50 50-249 250-999 >999

Flock size class

>118 millionbirds

birds

Poultry by Flock Size Class

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Profitability of Backyard Chicken

35.0Eggs consumed/sold (nr)

6.7Birds consumed/sold (nr)

575.0Return on investment (%)

50.0Investment/hen

287.4Gross revenue/hen

6.3Depreciation of hen

244.7Value of birds consumed/sold

49.0Value of eggs consumed/sold

Item

Average Return per Hen and Year(Monetary Values in 1,000 VND)

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Poultry Income by Poverty Status

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Poultry Keeping and Poverty

0

10

20

30

40

50

60

70

80N

atio

nal

aver

age

Nor

ther

nM

ount

ain

Red

Riv

erD

elta

Nor

th E

ast

Sou

th C

entra

lC

oast

Cen

tral

Hig

hlan

ds

Sou

thea

st

Mek

ong

Riv

erD

elta

All

Poultrykeepers

% Households below poverty line

Source: 2002 VLSS

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Coping Strategies for Smallholders

Endogenous• Gains through price increases

of substitute products• Intensification of other farming

activities (e.g. pig production)• Engagement in ‘new’ farming

activities (e.g. fruit)• ‘Release’ family labour for

labour market (e.g. construction)

• Draw on savings and social networks

Exogenous• Compensation

• partial (20% of value of culled bird)

• late (several months delay is not uncommon)

• none for revenue foregone• Restocking assistance

• delayed• inopportune

• Diversification assistance• ‘Supply-chain certification’

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Poverty & Market AccessPoverty Density Accessibility

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Resource Flows

49%

% Marketing outside district

27%

10%

1%

54% of poultry heads

15%

6%

24% of poultry

93% of farms

5% of farms

0.02%

>2000

1%

150-2000

50-150

<50

TCP Rehab - GSO survey data

49%

D.O.C. % from outside district

38%

27%

10%TCP Rehab - GSO survey data

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Quality Recognition in Supply Chain

Broiler: 23,000 to 24,000 VND / kgLocal: 44,000 to 45,000 VND / kg !!!

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Market Flow: Resources and IncomeSupply Chain – Resource Flow

Incentives:Quality

Technology Transfer

Behaviour:Market ParticipationRisk Management

Producers

Value Chain – Income Flow

Consumers

Asse

mbl

ers

Proc

esso

rs

Dis

trib

utor

s

Reta

ilers

Certification

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Certification & Risk Management

• Government gains• Testing moves downstream reducing costs• More rapid disease identification• Lower control costs

• Consumers gain• Food and disease risk reduction• Quality improvement• Product differentiation

• Producers gain• Market access• Extension services & technology transfer

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Conclusions

• Livestock play a complex role in the rural economy, but poultry can be an important catalyst for smallholder poverty reduction in Viet Nam

• In a dynamic export-oriented economy, an essential way to promote rural livelihoods is by improving the terms of urban market access for small farmers.

• A multi-level approach to (rural) development and poverty reduction may be desirable, e.g.• Macro – infrastructure investment and good governance• ‘Median’ poor – livestock development targeted at households above a

critical level of resource and financial capacity, focusing on extension services, standards, and product quality certification

• Poorest – labour market facilitation

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References & Further Reading

PPLPI Working Papers:

No. 21 The Contribution of Livestock to Household Income in Vietnam: A Household Typology Based Analysis

No. 24 Geographical Dimensions of Livestock Holdings in Vietnam: Spatial Relationships among Poverty, Infrastructure and the Environment

PPLPI Research Reports

Integrated Poverty Assessment of Livestock Promotion: The Case of Viet Nam

Pilot Programme for Certified Smallholder Poultry Supply Chains for Hanoi

For more information please visit the PPLPI website:www.fao.org/ag/pplpi.html www.fao.org/ag/againfo/projects/en/pplpi/publications.html

A Living from LivestockPro-Poor Livestock Policy Initiative