Poised for progress

by Teresa Acklin
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Economic growth expected to propel development of Vietnam's commercial feed and livestock industries.

   In recent years, the opening of Vietnam's economy to outside investment has aroused much interest in the world agribusiness community. Vietnam's steady economic growth, its agricultural base and its desire to upgrade production and processing systems offer obvious opportunities.

   Among the country's agricultural sectors, Vietnam's feed and livestock industries may be the most ripe for modernization and development. If income and population growth continues as expected, Vietnam's meat demand during the next decade is likely to expand at a faster rate than in any other Southeast Asian country.

   Vietnam's current annual per capita meat consumption is about 12 kg, a modest level in comparison with its neighbors. But meat demand in Vietnam is expected to double in the next 10 years, and the country's feed and livestock sectors will have to modernize and expand to keep pace.

   Currently, large commercial-scale livestock operations, feed mills and processing plants are virtually non-existent in Vietnam. Vertical integration is equally rare. Basically, say those who have studied the situation, Vietnam is “starting from scratch.”

   In 1993, Vietnam's livestock population totaled about 14.8 million pigs, 3.3 million cows and 150 million poultry; of the latter, about 80% were chickens and the remainder were ducks. Although some specialized intensive production operations have begun to develop in and near urban areas, the bulk of the livestock population — and feeding activity — is found on small farms in rural areas. Because of the economic reforms that began in the 1980s, about 97% of livestock now is privately owned.

   Mixed operations characterize most of these farms, and livestock often generates 50% or more of cash income. Cattle and buffalo, in herds of perhaps five head, are used as draft animals for crop cultivation, for transportation and as a source of manure. Poultry stock generally consists of as many as 30 indigenous birds, scavenge-fed, that provide meat and eggs for the household, as well as cash income.

   Pigs are the traditional and primary source of livestock-based cash income for rural households, as pork is the major source of animal protein in the Vietnamese diet. Most households raise one or two sows or several fattening pigs. Pork typically is sold fresh at village or city markets nearby.

   Vietnam's traditional feed practices are geared to this production system. In most situations, feed is mixed on farm; formulations rely on crop residues and household by-products such as rice bran, hulls, husks, vegetables and legumes.

   Historically, this system has enabled self-sufficiency in feedstuffs and has minimized the cash inputs required by producers, whose incomes remain among the world's lowest. The trade-off has occurred in productivity and quality.

   Vietnam has made strides in improving its productivity in recent years, mainly through breeding enhancements and the increased use of supplemental feeds, such as maize and soybean meal. From 1980 to 1992, pork yields increased by more than 200%; even so, the average annual yield remains at about 440 kg liveweight per sow, compared with about 1,500 kg in developed countries.

   Vietnam's traditional animal husbandry practices also have resulted in pork meat with a relatively high fat content. In the past decade or so, Vietnam's National Institute of Animal Husbandry near Hanoi has conducted research to improve breeds and reduce fat, and the lean meat rate has increased to 45% to 55% from 30%. Still, fat content remains much higher than in developed countries.

      COMMERCIAL OPERATIONS.

   Although the largest percentage of Vietnam's livestock and feed operations is based on small farms, some specialized intensive livestock businesses have been established in urban areas, a trend that is increasing. Semi-industrial broiler units, pig breeding and fattening farms have been established, although most are small and make up a low percentage of the country's livestock activity.

   For example, 2.5 million chickens, or about 3% of the country's total inventory, are improved-breed broilers and layers that are maintained in intensive production around Hanoi, Ho Chi Minh City and other urban areas. Many of these businesses are private household operations like their rural counterparts, although the “city” stock is kept confined and provided with balanced feed. The average size of these operations is 10 to 100 birds.

   Economic reforms also have encouraged larger-scale private entrepreneurs to set up shop, especially around Ho Chi Minh City. Some manage operations of up to 8,000 birds or 30 breeding sows. The larger fattening farms feed up to 300 pigs annually.

   Regardless of the operation's size, chickens are sold live, or freshly slaughtered and plucked, in nearby markets; commercial mechanized poultry slaughter facilities are virtually non-existent. Pork is processed by small, private- sector slaughterhouses or contract butchers and sold locally as well. Municipal governments are responsible for licensing and inspection of domestic slaughter facilities, but most livestock is processed in unlicensed, uninspected plants.

   About 5% of Vietnam's meat production is exported, mostly to eastern European countries, although economic difficulties there have limited this market in recent years. Meat for export is processed by 24 state-owned plants, and 64% of national capacity is concentrated in southeastern Vietnam; one plant in Ho Chi Minh City accounts for more than 50% of total national capacity.

      FEED MANUFACTURING.

   As in the livestock sector, Vietnam has little to no large-scale commercial feed production. Economic reforms have created both private and state-run feedmills, but nearly all are small and use limited technology, including homemade grinders and mixers. Output and capacity utilization are low, particularly in state-run plants where the age and condition of equipment and inadequate management play a role.

   Feed production differs in the northern and southern parts of the country. In the north, feedmill production tends to center on concentrates, packed in 5 kg bags. The local feed supplier typically is a small, storefront operation.

   In the south, feedmills produce mostly mixed feeds, packed in 25 or 50 kg bags. Mixed feed is loaded manually on trucks and sold to local farmers or livestock operators.

   Maize, broken rice and rice byproducts are the predominant feed ingredients. Grain storage and handling systems are rudimentary; most feedmills use open-air techniques to dry maize and rice stocks.

   Vietnam's feed quality typically is described as deficient relative to feed standards elsewhere. Quality suffers from a lack of nutritional balance, inadequate quality control during production and ineffective or non-existent government regulation. Laboratory analysis is rarely done.

      THE FUTURE.

   Vietnam faces many constraints to rapid development of its livestock, feed and processing sectors. Genetic weaknesses in livestock, inconsistent animal health services, a lack of quality feed supplies and public health risks from unsanitary meat processing and unhygienic marketing are problems that will take time to overcome.

   Difficulties also arise from broader issues. An inadequate transportation infrastructure; relatively low disposable incomes, particularly in rural areas; and limited credit and investment capital will temper the pace of development.

   But Vietnam's government not only recognizes the need to modernize and expand this sector, it is eager to do so; one goal is to increase per capita meat consumption to 30 kg by 2000. While that goal may be overly ambitious for the specified time period, consumption easily could reach that level at some point in the future.

   Rising urban incomes and more affluent lifestyles already are creating a change in the level of demand for meat, as well as in retail marketing patterns; pressure for more processed, chilled and frozen meats has emerged from expanding supermarket, hotel and restaurant needs.

   Various public research groups, such as the National Institute of Animal Husbandry and the Institute of Agricultural Sciences of South Vietnam, already have begun a process of affiliation and collaboration with colleagues internationally on training, research and technology transfer. Vietnam also is seeking to draw international expertise and financing through joint ventures in the private sector and through international lending institutions.

   For example, Vietnam's Ministry of Agriculture and Food Industry developed a U.S.$183-million package of project proposals for financing by the World Bank International Development Association. One proposal was for a U.S.$62-million loan to develop the country's poultry industry.

   This project would include construction of five export broiler/duck processing plants with a total capacity of about 25 million head. The plants would be vertically integrated, with a 100,000-tonne per year feedmill as well as breeding and broiler production facilities.

   Other projects included two new beef processing facilities and various smaller pork processing plants throughout the country. Improvements to existing feedmills and veterinary services also were contained in the package.

   Most observers in Vietnam and elsewhere are optimistic about the future of the country's livestock and feed industry. In addition to Vietnam's desire to develop its industry, observers point to the history of other Asian countries, where the livestock and feed sectors have grown exponentially in the past several decades. To some, Vietnam represents the “last frontier” in Asia.

   Last year, the U.S. Feed Grains Council, a private organization that works to develop export markets for U.S. coarse grains, sponsored a mission to Vietnam to assess the feed and livestock industries and their potential for growth. The conclusion was that growth most certainly would occur — and, despite all the obstacles, technology transfer might bring about development more rapidly than anyone expects.

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