Progress Report and orientations for next 6 months

Project of Thanh Hoa luong value chain development (LDP)

(October 2007 – April 2008) Phase II

Document for meeting No.7 of LDP’s steering committee

April 18th 2008

Patrice Lamballe – GRET representative

Chu Văn Sáu – LDP project coordinator

Component ISUPPORTING LUONG VALUE CHAIN DEVELOPMENT

Main content1. Study and make list of luong processing

workshops in Thanh Hoa province

2. Training for luong processing workshops: owners, managers, accountant

3. Support Song Ma co-operative (X5).

4. Produce charcoal from luong by-products

5. Grow mushroom on luong sawdust.

1. Study and make list of enterprises in Thanh Hoa province

a. Objectives: update information on luong processing units in Thanh Hoa, make list and provide for production units, management agencies and donors.

b. Operations and results:- Together with office of processing (Dept. of Agriculture and

Rural development) make first list of 54 bamboo luong processing units in Thanh Hoa

- Consultant co-operative Ha Hoa - Phu Tho (HaDeVa) conducted the next survey in 5 days with 6 people

- Gather preliminary survey information and make summary table of 51 units.

- Project staff monitor regularly and update new information for timely addition when changes occur

c. Some noticeable points

Synthesis of 51 units shows:

• 25/51 units are operating as enterprises, the remaining are households of individual production and business (diagram 1).

• 20 units (39%) produce refined products (end products), 31 units (61%) produce rough products.

• Most of the units (26/51) were established since 2006

• Processing units gather mostly in Quan Hoa district (21/51)

• 4 main demands of units are: product diversification, market expansion, capital, and production of end products (diagram 2)

Survey results of luong processing units

Diagram 1. Units operating as production ones

6%14%

29%

51% C.Ty cổ phần

C.Ty TNHH

HTX

Hộ cá thể

Diagram 2.Demand of luong processing units

69% 65%55% 47%

0%20%40%60%80%

Đadạng

hóa SP

Vayvốn

2. Training for workshops owners

a. Necessity to implement training:- Processing units are mainly spontaneous, short of

experiences of management and market.- Their need of knowledge on management and business

is huge.- Currently there is no training activity in the locality.- Units need to meet and exchange to seek for further

cooperation opportunities (for instance: X5)

=>For the development of enterprises, owners need to be provided with business management skills and cooperate with each other.

b. Activities and results achieved Identified needs of processing units and local enterprises

Designed training programs and organized first session in December 27-28, 2008.

Conducted 3/ Σ6 sessions in the course, in 5 days with 52 cumulated participants

3 topics dealt with:- Enterprise cycle and decision-making skill- Financial management and accounting works- Marketing at enterprise level.

c. Problems encountered and proposals Problems encountered- Workshop owners directly arrange their production so it

is difficult to manage time- Knowledge and experience of business management are

different- Workshops locate in large area and often far from the

training organization place Proposals- Content should be close to reality- Participation of local concerned agencies.- Combination of connecting and supporting activities:

bamboo luong cooperation group, network (small scale)

3. Supporting Song Ma co-operative (X5)

a. Information of Song Ma co-operative• Date of formal starting operation: 01/11/2007

• Floating capital: 500 mil – Fixed capital: 1.100 mil dong: including land, workshop, equipment, power station, machines, truck

• Members: 7 people (X1; X2; X4).

• Loan from OHK (through GRET) : 1.060 million dong

• Direct workers: 25 people

• Stable job for workers in 10 satellite workshops

• Types of slat products:

roughly planed slats, planed+ boiled slats.

b. Production and market

• Raw slats bought : 1.5 million slats (3 months).

• Use all raw slats of X workshops and other 7 workshops (new cooperation).

• 2 output markets are TBF and Tien Dong, ensuring the consumption of all products of the co-operative

• Income of 1.4 billion dong and profit of over 50 millions after 3 months.

• Worker wage is from 1.1 to 1.7 million dong/month (payment by results)

Summary table of production and business results of co-operative (after 3 months of

operation: Nov, Dec 2007 and Jan 2008)

No. Item ValueI Sale revenue 1.402.866.772

II Cost 1.352.511.920

1 Production cost 1.182.182.920

  - Cost of slat purchase 1.027.319.000

2 Sale cost 77.100.000

3 Cost of managing the co-operative 61.359.000

4 Financial cost 31.870.000

III Net profit/3 months 50.354.852

c. Current difficulties

• Poor management skill of workshop owners.

• Unequal quality of input (raw slat).

• Limited finance (for expanding production scale and investing in new technologies for new products).

• Immediate payment of input, late payment for output (now 2 buying units owing about 350 million dong)

• Unstable and limited market (long time in stock makes

slats attacked by fungus).

d. Reasons of continuation of production

• Stable income for co-operative, jobs and income for workshop laborers

• Ensuring stability of 3 satellite workshops and 7 new cooperating workshops.

• Stabilizing input market and maintaining prestige with customers.

• Many potentials in future (key production location, many investors wanting to join).

• Possible to diversify products, improve technology for next stages of flooring boards

4.Producing charcoal from luong by-products

a. Necessity to build charcoal kilns- Treat low value wastes and by-products for higher value

- Use small luong culms not qualified to make slats and chopsticks.

- Gradually replace wood charcoal made from wood trees in future

- Minimize environmental pollution (using waste to make paper pulp)

- Build and develop new sub-sector: bamboo luong charcoal value chain

b. Charcoal kilns built and now operatingNorm Unit X1-

TPhủHTX S.Mã

X4 -ĐTrung

X7 -LChánh

X6 - X. Phú

Capacity m3 11 9 5,5 15 20

Material Ton 3,2 2,5 1,6 4,5 6

Fuel Ton 1.5 1,3 0,75 2 2,5Labor / cycle Day 20 18 12 23 25Charcoal Kg 600 400 350 750 1000Attar liter 100 75 50 120 150Productivity/month

Kg 1200 800 700 1500 2000

c. Current difficulties• Monthly production quantity is not enough to export (at

least 6 tons/month), to meet big export contracts needs

• Quality norms are not high enough to meet demand of some customers of high grade activated carbon

• Cost price is still high due to incomplete techniques, separate production

• Processing units are not ready to invest as formal market is not visible at the moment

• Customers of luong attar have not yet been found

d.Economic return of charcoal production (in 1 cycle using slat wastes, minislats of X6)

Item Unit Amount Price (d)

Total (d)

Total Cost 4.690.000Material Kg 6.000 350 2.100.000Firewood (luong knot) Kg 2.500 300 750.000Labour pay Day 25 40.000 1.000.000Packing pack 70 2.000 140.000Depreciation, financial cost

700.000

Turnover 5.750.000Finished charcoal Kg 1.000 5.000 5.000.000Attar (anticipated price)

Liter 150 5.000 750.000

Gross profit VND 1.060.000

e. Potential of charcoal production

• Some customer ordered 6-8 tons/month, at price of 6000d/kg in Thanh Hoa city

• Yield will reach 1 container 20” (6 tons)/month after system of 4 kilns has been built and working.

• Cooperation with NEAD company in technologies of activated carbon in Thanh Hoa

• University of Natural Sciences HCM City (Ms My Hanh) • Research of feasibility of producing charcoal briquette/sawdust• To break the vicious circle and thus prospect of developing charcoal

production – trading enterprises in Thanh Hoa

5. Growing mushroom on luong sawdust

a. Reasons for trial activities• Huge amount of luong sawdust is currently unused• Results of growing mushroom on luong sawdust is

not inferior to wood sawdust.• Local market is potential to expand.• Creating new job to increase income on the spot for

farmers/new model in rural economy nông ôn.

b. Some activities and results up to now

16 trainings, 167 cumulated participants. Households growing mushroom: stage 1-10hhs, stage 2-7hhs Types of mushroom grown: - Stage1: 3 types (linh chi, shell, wood’s ear)- Stage 2: 2 types (linh chi, wood’s ear), as shell mushroom is not suitable

with hot and sunny weather. No. of bags: stage 1: 5.170 bags, stage 2: 6.000 bags. No. of bags up to standard:- Stage 1: wood’s ear 77%, linh chi 36%, 88% shell.- Stage 2: wood’s ear 92%, linh chi 94%

c. Cost of producing mushrooms (average on 100 bags)

Norm Unit Wood’s ear

Linh chi Shell

Tent, tools Dong 11.000 11.000 11.000

Fuel Dong 22.000 22.000 22.000

Raw material Dong 25.000 25.000 25.000

Material Dong 67.000 87.000 72.000

Mushroom seeds Dong 11.600 60.000 48.000

Labour d/day 40.000 58000 40.000

Total expense Dong 176.600 263.000 218.000

d. Economic return of growing mushroom(averaged on 100 bags = 1m² floor)

Norm Unit Wood’s ear

Linh chi Shell mushroom

Fresh mushroom

kg 33,0 6,6 33,0

Dry mushroom kg 5,7 2,2 -

Selling price dong/kg 50.000 200.000 15.000

Total income Dong 285.000 440.000 495.000

Total expense Dong 176.600 263.000 218.000

Profit dong 108.400 177.000 277.000

e. Conclusion on mushroom trial

• Shell, wood’s ear and linh chi mushroom can be grown on luong sawdust and bring about economic effect

• Wood’ear mushroom is suitable for existing technical and market condition of farmers and can be grown all year round.

• Production at farm/co-operative scale is suitable to use sawdust (40-50 tons/year) and brings about investment effectiveness.

• Mushroom “seeds” of second and third grade can be produced on the spot to reduce production cost.

• Key model of cooperation mode among producers (co-operative/farm and farmer household)

Orientations of component 1 (market, processing)(1) Expanding intervention scale

• Base on the list (of over 30 processing workshops in North West of province (aiming to support workshops in L.Chanh, Q.Son)

• Thorough grasp of operation, support need and economic effect of workshops (1 trainee / University of Agriculture)

• Organise meeting of workshop owners• Resume courses on enterprise management• Get to know vocational education more

Orientations of component 1 (market, processing)(2) Expanding production scale and volume

• Conduct visits for potential investors (including Chinese)• Test production of charcoal / sawdust

– 140 tons sawdust – 20 tons products/month– Sales $10.000 – profit of $1.500-2.000

• Consider possibility to produce activated carbon in the province ?

• Improve technology of existing workshops (flooring boards, …) ?

• Agree on way to use capital repaid by X5 (VND 250 millions/year)

• Study on suitable credit system

Orientations of component 1 (market, processing)(3) Resuming intervention at medium and small scale

• Improve capacity of producing charcoal from slat waste and small culms on the spot (as temporary intermediary of output)

• Test slat splitting, making mat strips, sticks

• Test of more effective production diversification of blind strips

• Expand production of mushroom / sawdust– Production scale may reach the use of at

least 100-150 tons of sawdust/year– 1 co-operative in charge of input and output– Use the mushroom substratum as organic

fertilizer

Component IIFarmers and resources (agro-forestry activity)

Outstanding activities - results in last 6 months

1. Expand field of activity to new areas2. Test different intervention modes3. Capacity building-training4. Improve and promote effect of nursery5. New luong plantation and establishment of « models »

in spring 20086. Test and support intercropping on new luong

plantation area7. System of experimentation.

1.Expand field of activity to new areasDistrict Commune Village

Bá Thước(new

intervention district)

Thiết Kế  Cha village.

Thiết Ống  Sặng, Chun, Suội, Quyết Thắng, Chiềng.

Ngọc Lặc

Cao Ngọc Nghiện, Ngọc Mùn, Cây Thị

Phùng Giáo Làng Bằng, Chầm Lau

Phúc Thịnh  Làng Sòng

Kiên Thọ Thọ Liên, Thành Công, Kiên Minh

Vân Am  Ba Nhà, Làng Rẻ, Khén Nội

Quan HóaXuân Phú  Cang, Cỗi.

Hồi Xuân  Khằm, BanThường

XuânLuận khê An Nhân 

Tân Thành Thành Lợi, Thành Thượng, Thành Lai Total of 4 districts

11 communes (6 new ones)  27 villages (18 new villages)

2. Test intervention modesNo. Mode Village/commune Project’s support

2 Implemented by districtCây Thị / Cao Ngọc villages

Support of material, seeds, allowances for model control

3 Implemented by project staffTrial sites are essential

Thọ Liên, Thành Công, Kiên Minh/ Kiên Thọ. Làng Sòng/Phúc Thịnh, Ngọc Mùn/ Cao Ngọc. An nhân/Luận khê. Thôn Cha/Thiết kế. Bản khằm, Bản Ban/Hồi Xuân.

Project staff make plan of whole implementation

4 Implemented by local collaborators

Khén Nội/Vân Am.Thành Lai /Tân Thành.

Collaborators implement, project supports

5 Implemented by farmer group

Làng Bằng, Chầm Lau /Phùng Giáo. Thành Lợi /Tân Thành

Support through farmers’ groups and plan

6 Price support for seeds through nursery

Làng bằng, Chầm Lau, Thành Lợi Price support for seeds through nursery

7 Guided by communal People’s committee / D. Tien co-operative provides service

Thôn Sặng, Thôn Chun/Thiết ống Method, organization, material, seed

3. Education, training

a. Education to improve skill for collaborators and farmer group leaders

• 1 class on plan-making skill for farmer groups.

• 1 class on lesson plan making for 5 collaborators, 1 extension staff and 5 teams of group leaders.

• 2 group leaders and 3 collaborators made lesson plan and gave lecture

• 1 ToT for 18 commune extension staff of Ngoc Lac district.

b. Training sessions for farmers

DistrictLuong plantation techniques Technique of peanut and

soybean intercropping

Sessions Participants Sessions Participants

Ngọc lặc 7 183 4 72

Thường Xuân 3 97 0 0

Quan Hoá 4 132 2 44

Bá Thước 3 57 3 65

Total 17 469 9 181

4. Improve and promote effect of nursery

• Analyze strengthes, weaknesses, opportunities and challenges of nursery activities in 2006 – 2007.

• Diversify types of nurseries and plants.• Develop network of 1 main nursery (Lâm -Toán), 11 satellite

nurseries• Provided 24 000 luong seedlings qualified to plant in the forest.• 1 nursery to test multiplication methods, species diversification

(Xuan Phu)

5. New luong plantation and establishment of model in spring 2008

District

Total In which

Progress rateGathered Scattered

Area (ha)

No. of hhs

Area (ha)

No. of hhs

Area (ha)

No. of hhs

N.Lặc 62,5 116 50,0 103 12,5 13 Finished planting

T.Xuân 30,5 31 18 18 12,5 13 Finished planting

Q.Hóa 19,0 132 19,0 132 0 0 80% finished digging holes

B.Thước 36,5 60 35 57 1,5 3 Finished digging holes

Total 148,5 339 122,0 310 26,5 29

Comments – lessons learnt• Gathered model: difficult to negotiate with farmers, but more effective.

• Mode of cooperation with extension staff: rapid and effective implementation

• Mode of cooperation through nursery: effective, less time to monitor the field for staff.

• In Ngọc Lặc, Thường xuân: difficult to do due to competition of other crops

• Quan Hóa, Bá Thước are new implementation fields, not yet really adapted, leading to slow progress rate.

6. Trial, support intercropping on luong plantation

a. Objectives of trial in second year• Trial of some intercrops likely to give productivity on luong

plantation in first 2 years (4 crops) • Helps prevent erosion and soil improvement• Enough references to recommend to farmer.• Establish fund of intercrops at group and village scale.

b. Intercrops.• 3 main crops: peanut, soybean, sesame, species to compare are

maize, cassava, sugarcane; plant tephrosia on contours • Plant 3 more trials to compare forestry wooden trees

c. No. of households and intercrop area in spring 2008

District TotalIn which

Note Trial On large scale

Area (ha)

No. hh Area (ha)

No. Hh

Area (ha)

No. Hh

N.Lặc 9,97 100 1,52 9 8,5 91 Finish planting

T.Xuân 0,38 3 0,13 1 0,25 2 Finish planting

Q.Hóa 2,94 41 0,08 4 2,86 37 Finish planting

B.Thước 9,1 57 0,18 4 8,82 53 Finish planting

Total 22,4 201 1,9 18 20,5 183

7. System of trials 7.1. Trial on new luong plantation

Trial name Detail 2005 2007 2008 TotalMode of

propagationClump division / air

layering 1 3 0 4

Density According to project, farmer 1 3 1 5

Fertilizer Fertilizer type, fertilization method 1 3 5 9

Leveling Leveling, half-moon terrace 0 3 6 9Mixed forest Forestry cultivars mixed 0 1 1 2

Soil erosion Erosion rate of peanut, cassava, sugarcane soil 1 1 1  3

Intercropping Legumes, maize, cassava, sugarcane 0 5 2 7

7.2.Trial of forest rehabilitation

• In 8 places with total area of 6ha.

• In Coi village, Xuan Phu - Quan Hoa with over 2 ha area.

• 5 trial formulas (treatments).

• Marking to monitor quality of 1.5 ha luong forest

Orientations for component 2 (agriculture) Sustainable management of forest (1)

• 1. Occasional work, in short time:– Experiments of rehabilitation and

restoration of luong forest– Dissemination documents of

sustainable luong management– New plantation of luong in the North

West (model in Q. Hoa, Ba Thuoc)– Monitor, synthesize and analyze

short term crops (peanut, bean,…) – Ensure seeds availability for autumn

crop through rotating fund of seeds

Orientations of component 2 (agriculture)Sustainable management of forest (2)

• 2. Research and synthesis:– Compile synthesis document of knowledge on

luong– Synthesize document from short term crop

results in spring 2008– 1 trainee research on capacity of absorbing

carbon of luong culms / short term crops– Plant more in autumn crop where there is

combination of budget (combined with 661, CT 147, 100)

Component 3: Supporting agricultural policiesCommitments of meeting no. 6 (recall)

• 2 provincial seminars to promote new policies.

• 2 seminars at district level

• 3 leaflets introducing the project and development prospects of value chain

• 2 common activities with State projects.

• 2 visits conducted (to China)

Component 3: Supporting agricultural policies Create favourable environment and good conditions for

policies supporting businesses and luong growers (1)

• 1 provincial seminar on policy

– December 14th 2007, 70 participants– Participation: representatives of provincial agencies and 10

districts of Thanh Hoa – Supporting presentations of forestry department, forest

management, processing office, contributions of Ngoc Lac and Quan Hoa district

– 1 proceeding book to be edited. – 1 article on LDP commitment orientations– Departement of agriculture and rural development is building

policies based on the essence of that contributions

Component 3: Supporting agricultural policies(2)

• Joining the visit to China, in November 2007 – 7 people from Thanh Hoa– 2 districts : Lin An and Ạn ji / Zhe jiang– Took: pictures, videos, products, …– Main ideas :

• Timely investment of stakeholders (the government, …)

• Long-term investment of the Government• Synchronous investment, combining

mechanic workshop• Used over 90% of Moso bamboo• Sustainable management of forest

Component 3: Supporting agricultural policies (3)

• 1 seminar organized at district level

– Ngoc Lac district (February 2008)

– District’s vice-chairman participates

– 40 representatives (district, comm.)

– Introduction of project, activities and clearer explanation of support mode

– Discussion and agreement on support regulations and mode

Component 3: Supporting agricultural policies (4)

• 1 preliminary seminar in Xuan Phu commune, Q. Hoa– To understand better objectives and

role of project– Preliminary wrap-up 3 months of

operation– Knowing more about commune’ s

condition, orientations expectations– Preparing intervention plan– Measures taken:reduce competition

between farming and husbandry

Component 3: Supporting agricultural policies (5)

Common activities with Government Research, with Nead company, to produce

charcoal and activated carbon

Complete common technical leaflets (5) with forestry association, extension centre

Associate with policies of district, province (upland fields) : not in time/this spring crop

Diversify, test intervention method

Training for extension staff in Ngoc Lac

Orientations for component 3Creating favorable context for luong value chain

• Disseminate policies on bamboo (elaborating + distributing leaflets)

• 1 meeting to review progress after 2 seminars in 2007

• Continue to organize seminar at district level where important and needed

• Cooperate with district, province to build model in the area

• Introduce and get to know about Chinese « Neiyou » system (traceability and sustainable management)

Component 4 : Synthesizing–experience dissemination

(1) Capacity building

• Implement 3 training sessions for processing workshop owners– 1 session on basics of market

and enterprise– 1 session on enterprise

management and accountancy– 1 session on basic marketing

• Strengthen skills in the locality– One TOT for extension staff of

communes in Ngoc Lac district

Component 4 : Synthesizing – experience dissemination (2)

• Elaborate 3 technical leaflets on luong through seminars and exchange– Propagation techniques and nursery– Techniques of new plantation and

tending– Sustainable management and

exploitation• 1 plan for luong leaflets distribution • Elaborate 2 more leaflets on groundnut

and soybean (with exchange and complementation of relating agencies)

Orientations for component 4Synthesis, dissemination and capacity building

• Continue to introduce project, explain activities to intervention districts

• Leaflets introducing project and activities (market and agriculture)

• Technical leaflets (mushrooms (3), charcoal)

• Intensify exchange among relating projects and specialists

• Receive province, district delegations• Organize visits for stakeholders• Complete monitoring and evaluation

Summary of orientations for next 6 months• 1. Improve management capacity, get to know about vocational

education• 2. Seek for and organize visits for potential investors• 3. Produce charcoal (from sawdust, slat waste) at large scale• 4. Increase capacity of production diversification of workshops• 5. Technical guidance, sustainable management of forest• 6. Contribute ideas to form policies and cooperate for effective

expansion• 7. Broad presentation of activities of project, dissemination of

results

Recommendations for luong value chain1. Policies for charcoal processing and production chain

• How to support value chain structuring, establishment and association of enterprises ?

• Suitable banking system for current needs and demand of small and medium enterprises

• Reduce producing and selling wood charcoal to facilitate the development of luong charcoal

• Common activity with Dept. of Sciences and Technology to produce high quality charcoal ?

• What current policy to develop craft villages?

• 1 autonomous centre supporting agricultural and value chain development?

Recommendations for luong value chain 2. Policies to manage, rehabilitate and reafforest

• No. 02 land use policy is relevant; pay attention to crops, species to be grown (Cassia ?)

• Which activity / plantation on mountain fields ? • One concerted policy to create conditions for

best management of forests : – Agree on method of forest management and

rehabilitation– Implement trial at communes, village level ?– How to limit selling 1-1.5 year old culms ? – Facilitate testing system of origin

identification (traceability system like Neiyou)• Provide information to associate activities

Thank you !