1

The 1st Regional Policy Dissemination and Consultation workshopSeptember 2015, Bangkok

“Pro-Poor Policy Analysis on Cattle Productivity and Links to Industry in Lao PDR”

FAO&IFAD Project: “ GCP/RAS/276/IFA & TCP/RAS/3405“Pro-Poor Policy Approaches to Address Risk and Vulnerability at the Country Level”

Presented by: Dr. Aloun Phonvisay(National Agriculture and Forestry Research Institute)

Content

1. Introduction2. Objective3. Research methods4. Research findings5. Risk and vulnerability of smallholder cattle

farmers6. Policy Recommendations

1. Introduction

• The research project: ‘Pro-Poor Policy Analysis on Cattle Productivity and Links to Industry in Lao PDR’;

• A part of the Project of “Pro-Poor Policy Approaches to Address Risk and Vulnerability at the Country Level (GCP/RAS/276/IFA & TCP/RAS/3405)”;

• Started since November 2014

2. Objective

• To provide an overview of cattle policy options:– contributing to mitigate the

vulnerability of smallholder cattle farmers;

– enhancing cattle productivity, thereby improving the Lao cattle industry

3. Research methods

• Desk reviews;

• Field data collection;

• Consultation workshop.

3. Research methods (cont.)

• Conceptual framework for analyzing risks and vulnerability

Analytical themes

Identification of risks and vulnerability

Recommendation for pro-poor cattle

policies(Risk reduction, mitigation and

coping programs)

Livelihoods

Cattle production systems and their

economics

Cattle marketing and trade

Institutions governing cattle development

3. Research methods (cont.)• Analyses of stakeholders in the cattle industry

3. Research methods (cont.)• Field studies: Six study provinces

4. Research findings• Importance of cattle and buffalo to Lao economy

– 1.4 billion USD of the total stock of large ruminants

Luang Prabang Huaphanh Xieng Khouang Vientiane Savannakhet Champasack Laos -

200

400

600

800

1,000

1,200

1,400

1,600

mill

ion

USD

Figure 1 Valuation of livestock production in US dollars in selected provinces and Laos

4. Research findings (Cont.)• Trends of cattle production in the six studied province from 1975 to 2013

1976 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20130

50

100

150

200

250

300

350

400

450

Luang Prabang Huaphanh Xieng Khouang Vientiane Savannakhet ChampasackTh

ousa

nd h

ead

Source: MAF (2006), DLF (2013)

4. Research findings (Cont.)• Cattle smallholder farmers

– 98% of the total cattle from smallholder farmers (DLF 2013)– Approximate 297,000 farm households (38% of the total farm

households) had cattle– This signifies the importance of smallholder farmers in the Lao cattle

industry

Cattle herd size (% of cattle holdings)

1-2 head 3-4 head 5-9 head 10-19 head20& over head

Average cattle per cattle holding

Whole country 32% 26% 28% 11% 3% 5.3

No. farm households (‘000) 95.04 77.22 83.16 32.67 8.91

Table 1 Cattle herd sizes or percentage of cattle holdings in the whole country

Source: ACO (2012)

4. Research findings (Cont.)• Role of cattle raising in smallholders’ livelihoods

Independent Variables Total household Poor household

Constant 4.959*** (0.000) 4.974*** (0.000)

Geography -0.070 (4.406) -0.103 (0.287)

Household size 0.039* (0.072) 0.042* (0.082)

Age of household head 0.628* (0.088) 0.661* (0.070)

Level education 0.018 (0.234) 0.024 (0.156)

Total land holding 0.002 (0.795) 0.000 (0.997)Experiences -0.007 (0.200) -0.005 (0.406)

Total cattle holding 0.788*** (0.013) 0.609** (0.054)

Disease infection -0.133 (0.130) -

Number of Observation 211 118R2 18% 24.00%F-Statistic 7.95 7.24Estimated P-values are in parentheses. *, ** and ***Significance at 10%, 5% and 1%, respectively, data estimation is based on the field survey of small household farmers in 6 provinces.

4. Research findings (Cont.)• Land availability

– 654,300 ha of grazing lands and 1.14 million ha of forest areas (MAF 2014)

• Of 654,300 ha of grazing lands:– 7,300 ha of grazing land in lowlands (1.12% of the total grazing

lands)– 490,000 ha of grazing land in uplands (75% of the total grazing

lands)– 9,900 ha of grazing land in highlands (1.5% of the total grazing

lands)– 147,300 ha of scattered grazing land in lowlands (each plot was

no more than 300 ha) (22.5% of the total grazing lands)

4. Research findings (Cont.)• Feed availability

Strategic crops

Harvested area (ha)

Production (tons) By-crop products (tons) Remark

Lowland rice (rainfed&irrigated)

775,465 3,174,120 - rice bran: 530,078, broken rice: 62,213, rice straw: 3,101,860 Can feed 1.69 million cattle

Cassava 45,185 1,254,188 - leaves: 74,261 Tubers and leaves can be used for 25-55% of concentrate feed ingredient

Maize 188,825 994,750 - stover: 1,740,813, cob: 870,406Can be fed with cobs and stover with available carbohydrate

Sweet corn 23,205 219,335 - stover: 383,836, cob: 191,918

Sugarcane 14,270 865,130 - tree top: 423,361, molasses: 128,849

Can be fed with molasses (10-20% of feed ration); use as feed block and molasses urea

Total 1,046,950 6,507,523 11,201,746 Can feed 5.1 million cattle

Table 2 Summary of strategic crops which can produce a large amount of by-crop products

Source: calculated from MAF (2014)

4. Research findings (Cont.)• Smallholder cattle production systems and productivity

– Free grazing systems which may present at least 60% of total cattle herd in Lao PDR (1 million head or 172,800 households)

– Closed extensive grazing systems containing two sub-types which are: • (a) individual or group-fenced fallow systems, and • (b) institutionalized communal grazing systems.• 30% of total cattle herd (513,000 head or 90,000 households)

– Cattle fattening and farm systems are intensive production systems may be up to 10% of the total cattle herd (170,000 cattle or almost 30,000 households)

– value chain of live cattle and beef trade remains short and minimal– live cattle export to Vietnam and China

Most cattle smallholder farmers still benefit less from preferential trade utilization due to:

1) a low quality of cattle product, not meet the standard of importing countries

2) an eligible export products such as live bovine animal not included in the list of tariff concession

3) an awareness of Free Trade Agreements of cattle traders relatively low

4) insufficient promotion of preferential tariff preferential utilization to exporters.

• Progress of cattle trade development

4. Research findings (Cont.)

4. Risk and vulnerability of smallholder cattle farmers• Summary of major risks faced by cattle smallholder farmers, and policy recommendation

Types of risk faced by cattle smallholder farmers

Major impacts on smallholders’ livelihoods and cattle production systems Policy recommendations

1. Risk from macro policy of market reform

- increase in agricultural land conflicts between smallholder cattle farmers and crop producers;- loss of cattle as important livelihood assets of poor smallholder farmers.

Policy for cattle land zoning

2. Risk of cattle feed and water shortage during dry season

- reduction of cattle productivity especially in calves and pregnant cows;- Vulnerable to cattle disease infection and outbreaks.

Policy for risk-coping

3. Risk of cattle disease outbreaks - significant economic loss to smallholders and their communities.

Policy for animal health services and veterinary supplies4. Risk of decline in cattle productivity

due to climate change phenomena- highly vulnerable to unpredictable disease outbreaks such as HS disease.

5. Risk of market exclusion from beef high-value chains

- loss of opportunity to capture high beef price from the high-value beef markets, thereby increasing income.

Cattle marketing and trade policy

6. Risk of being cattle specialization and marginalization from cattle development projects and financial institutions

- vulnerability of smallholders’ livelihoods if their specialized cattle production fails due to animal disease outbreaks or natural disaster events;- loss of opportunity to access to loan with the low-interest rate; thereby missing opportunity to improve their cattle production.

Cattle-related financial policyCattle research policy

Policy recommendations

First stage (1-2 years) Second stage (2-5 years)

(i) Policy for cattle land zoning

(ii) Policy for risk-coping

(i) Policy for animal health services and veterinary supplies

(ii) Cattle-related financial policy

(iii) Cattle marketing and trade policy

Table 3 Recommended policies for smallholder cattle development

• Development of cattle policy requires considering not only national economic gains, but also rural development and poverty reduction

• Aim for development of the Lao cattle industry in which cattle smallholder farmers play important roles in the supply chains.

(1) Policy for cattle land zoning

• Land zoning - the basics of cattle production:– Zonation must be on physical characteristics of smallholder

cattle production systems which are adopted in different agro-ecological zones i.e. lowlands and uplands;

– Defining grazing land areas are necessary for land zoning. This policy should be firstly prioritized for implementation.

• Zoning allows cattle development programs working

specifically and effectively through better management, monitoring and evaluation.

(2) Policy for risk-coping• Risks of losing productivity of cattle occur mostly in the

middle and late of dry season due to lack of feed which leads to deterioration of cattle body weight and health, thereby reducing cattle productivity and prices

– Provide emergency feed to strategic zoning areas with no or low costs to registered smallholder farmers;

– De-stock unproductive bulls and cows before feed shortage toward establishing a dry-season market at the district level that connects the de-stock owners with market-oriented smallholders who adopt cattle fattening.

(3) Policy for animal health services and veterinary supplies

• Promote small commercial animal health service providers in strategic lowland and upland zones;

• Create a business association of animal health services and veterinary supplies to guarantee the quality of products and services and to have close collaboration with the relevant government departments;

• Strengthen the capacity of DLF/PAFO/DAFO in monitoring and evaluating private enterprises that provide veterinary services with low standard

• Maintain operation of DAFO and Veterinary Village Workers for veterinary services in remote uplands and lowlands where private enterprises could not operate profitably

(4) Cattle-related financial policy• Provide loan with the lowest interest to smallholder farmers who adopt free grazing systems

under conditions that they have to adopt semi-intensive cow-calf production or fattening systems, and are trained by PAFO/DAFO staff regarding appropriate techniques and technology;

• Provide loan with low interest rate of 5% (e.g. without paying the interest rate until 4 years) to strategic smallholder farmer groups that adopt communal grazing systems so that they could improve cattle productivity through feed and herd management;

• Provide loan with a medium interest rate of 6-8% (e.g. without paying the interest rate until 2-3 years) to market-oriented smallholder farmers and groups, and small and medium enterprises that adopt cattle fattening systems;

• Provide loan with a medium interest rate of 10% (without paying the interest rate until 2-3 years with provision for extension if appropriate) to small and medium cattle feed producers, hygienic slaughter houses, and veterinary service providers;

• Strict monitoring and evaluation of effective loans must be made by both government banks and cattle technical sector.

(5) Cattle marketing and trade policy

• Standardize a tax collection fee of cattle sale in nationwide

• Create one stop service to collect fee and tax of cattle movement in order to facilitate and simplify of cattle movement, and to reduce transaction costs

• Formulate strategic cattle smallholder groups including gender involvement (e.g. women microcredit schemes for meat processing and other related agribusiness) to participate in the high-value beef chain through contract farming with private sectors and under supervision and support from the government

• Formulate cattle trader group or association to increase negotiating empower of cattle traders, exchange cattle trade information, and to ensure the benefit of cattle trade

(5) Cattle marketing and trade policy (cont.)

• Make a great effort to negotiate with China and Vietnam to include the live bovine animal into the list of Free Trade Agreement (FTA)

• Review and adapt some cattle trade regulations (restriction of cattle import and arrangement export quotas, SPS measurement) and harmonize the regulatory framework for cattle trade in compliance with ASEAN trade regulations

• Make a clear and concrete investment policies in livestock sectors, such as the list of livestock sectors should be opened for foreign investors, a land zones available for accession, including simplify and transparency investment approval in order to attract foreign investors in these sectors

• Establish AEC implementation unit, which is participated by MAF, MIC, private sectors and farmers to update, distribute information and estimate the possible impact of AEC implementation on smallholder cattle raising and traders

Conclusion

• Policy recommendations focus on smallholder cattle farmers, particularly the poor

• Implication for rural development and poverty alleviation• Long term commitment from the Government to national

economic gain• Support and align with the Livestock Policy developed by

the Department of Livestock and Fisheries• Optimal participation of smallholder farmers in the cattle

value chain is critical for sustainable development of the Lao cattle industry