vietnam livestock genetics -...

Vietnam Livestock Genetics

A Review of the Market and Opportunities for Canadian Livestock Genetics Exporters

Prepared for:

The Counsellor and Regional Agri‐Food Trade Commissioner, Southeast Asia,

and the Embassy of Canada in Vietnam.

Prepared by:

Stanton, Emms & Sia

80 Raffles Place, Level 36‐01,

UOB Plaza 1,

Singapore 048624

Tel: +65 6334 7030

Fax: +65 6223 2010

March 2011

This report contains market information collected by Stanton, Emms & Sia, some of which

may be considered commercially confidential. The Government of Canada assumes no liability for the accuracy and reliability of the market information and intelligence provided herein.

1. Introduction

The report has been prepared by Stanton, Emms & Sia for the Counsellor and Regional Agri‐Food Trade

Commissioner, Southeast Asia, the Embassy of Canada in Vietnam and AAFC.


1 Stanton, Emms & Sia (March 2011)

Its goals are to provide Canadian exporters, their associations and export marketing organisations, and

Canadian government departments and agencies, with insight into the following matters:

the drivers and change agents that are impacting on Vietnam’s livestock industry;

the current development policy environment for the Vietnam livestock industry, and the

government and related institutional support that exists for implementing the government’s

policies;

an update on the state of Vietnam’s livestock industry, including a performance report on

developments since the last report prepared for Canada on the industry and its development

prospects and strategies in the mid‐1990s;

updates on the status of the following sectors within the industry, including an update on their

specific development plans:

o pigs and pork;

o beef cattle and beef;

o dairy cattle and milk and dairy products;

o goats and meat and milk; and,

o sheep and meat.

an update on the status of the market for imported genetic materials, including the state of the

regulatory environment for such products;

the status of Vietnam’s livestock industry as an exporter of meat; and,

a review of future strategic directions and opportunities for Vietnam’s livestock industry, and of

opportunities for Canadian exporters of livestock genetics and related supporting products and

services over the 5 years to 2016.

The information in this report has been provided by, and obtained from, a wide variety of sources

including the Ministry of Agriculture and Rural Development (MARD) and its component departments,

institutions and offices, other Vietnam government departments and agencies, FAO, OIE, SIDA, ADB, GIZ,

CIAT, IFAD, ILRI, Dairy Vietnam, Vinamilk, Vissan, San Miguel Corporation, Wellcome (DFI), Metro Cash &

Carry, and Big C Supercenter.

It should be noted that the buffalo and poultry sectors were not within the scope of the study that

supported this report. The study was undertaken between January and March of 2011.

2. Macro drivers and change agents for the livestock industry

This study was conducted at a time when the Vietnamese markets for meat and dairy products, and

their supply bases, are still in an evolutionary state, which is being driven by a complex range of factors,

including the following matters:



Vietnam’s population, currently about 88 million persons, is forecast by the United Nations to grow

to 126 million people by 2050. Based on this scenario, the FAO advises that Vietnam’s production of

meat and milk will have to double over the next 40 years to meet what it believes the new local

demand scenario will be in 2050;

economic growth at rates that are amongst the highest in the world, albeit that Vietnam’s GDP per

capita is very low (see table below);

Vietnam’s Economic Performance – 2005 to 2009

2005 2006 2007 2008 2009

% GDP growth 8.4% 8.2% 8.5% 6.2% 5.3%

GDP per capita US$ 631 US$ 724 US$ 804 US$ 931 US$ 1,051

Source: National government, the Asian Development Bank and World Bank (Nominal basis GDP data)

While Vietnam’s nominal GDP has only just passed US$ 1,000, the equivalent figure calculated by the

World Bank on a PPP (purchasing power parity basis) is US$ 2,790. This reflects the fact that

purchasing power in Vietnam is much higher than is perhaps evident from the basic statistical data.

This has been driving imports of meat, which are now substantial.

The reality of the situation in Vietnam is that there is a large cash economy, a dollarization of the

economy and also sizeable foreign currency remittances, which drive spending in the wealthier

urban areas. Economic analysts comment that about 20% of the population (15 million persons)

probably control 80% of the real “private sector” economy, with massive and growing income

disparities existing between them and the rural poor (60 million persons);

meat production costs in Vietnam are high, relative to other countries, because of inherent

shortages in good quality indigenous feed materials and the use of imported animal feed

ingredients, inputs and feed products. Trade and government sources comment that local feed

production costs have substantially risen over the past 5 years, because of higher world market

prices for key feed ingredients;

meat production is continuing to increase at high rates, even in recent years (see table of latest

available data below);



Meat and Poultry Production in 2009

Meat type Production in ‘000 Tonnes % Increase from 2008

Pork 2,931 4.5

Poultry meat 503 12.2

Beef 258 13.7

Buffalo 75 4.8

Source: MARD Live‐weight Slaughter Survey

exports of meat and poultry to Vietnam have been increasing rapidly over the past 5 years and

peaked at 667,000 tonnes valued at US$ 1.093 Billion in 2009 (see chart below);

Vietnam’s Imports of Meat and Poultry – 2005 to 2009 (In US$ ‘000)

Source: National Governments (Includes 2009 provisional data for Vietnam)

Trade and government sources comment that the increase in imports has arisen from a

combination of factors. These include:

o the devastating impact of animal diseases (foot and mouth disease, PRRS and various Avian

diseases) on the supply of local meat and poultry and the marketability of local meat. Even

concerns over human H1N1 (Swine Flu) had a negative impact, and,

o the surging demand for meat and poultry, in particular, lower cost cuts of beef, poultry and

offal as the middle income groups in the cities grew in size on the back of higher disposable

incomes arising from rapid economic growth (see chart below).



Imports of Meat, Poultry, Offal and Fat to Vietnam in 2009

‐ 667,000 Tonnes

‐

Source: Official External Trade Statistics Data

short term measures, i.e. tariff rate increases, being applied in an attempt to control an explosion in

meat imports. These actions are reactive, and highly confusing for importers and the broader

market, because imports have dealt with local shortages, and so generally kept the market in

balance and local meat market prices reasonable.

These protectionist measures are even more confusing because they have been taking place when

Vietnam is phasing in tariff reductions under its commitments to the WTO, the ASEAN Free Trade

Area (0%), ASEAN‐Australia‐New Zealand FTA (phased tariff rate reductions) and ASEAN‐China FTA

(0%);

Overall, there is a high degree of trade policy chaos in Vietnam at the time of writing (March 2011),

largely because too many government departments and agencies are involved, and most do not

understand the WTO or FTA commitments and protocols that Vietnam now has to work within. The

core focus at present continues to be tactical protectionism and dealing with balance of trade issues,

rather than moving forward in a strategic and transparent manner with a focus on implementing its

existing trade policy commitments; and,

there is dynamic change in the meat and poultry distribution channels, which is now speeding up,

and change is also starting to develop in the demands of the most lucrative urban area consumers.

According to retail trade sources in Vietnam, the past 5 years has seen a rapid adoption of

supermarket shopping by younger Vietnamese in areas where there are supermarkets.

Younger Vietnamese will also be the key factor in future changes in the distribution channels,

because they are, and will be, a very large section of the modern consumer market as it develops. It

should be noted that about 30% of the population (28 million persons) are below the age of 18 years



and that Unilever is now forecasting that its core target market in Vietnam will be 20 million younger

persons by 2020.

There is now a rush of new investments into Vietnam’s supermarket, hypermarket and cash & carry

wholesale outlets by existing players and new entrants. It is important to note that the new

operations that are being planned are nationwide in urban areas outside the two key cities of Ho Chi

Minh City and Hanoi. While the share of modern trade (supermarkets) in the urban area meat and

poultry market is currently very low at around 5%, these new investments will change this as more

younger shoppers adopt supermarkets as “their place to shop” over the next 5 to 10 years.

The existing modern trade retailers, e.g. Wellcome (DFI), Big C and Saigon Coop, already operate

with modern meat distribution channels. These include:

o deli‐style counters operated by a meat brand‐owner, e.g. Vissan (several retailers) or Hormel

Monterey Pork Shop (Wellcome Supermarket). Big C tends to work with preferred farming companies; and,

o chilled meat display cabinets, some of which display branded meat or poultry from a specific

supplier or farm. Trade sources comment that this strategy has been adopted because it is very difficult for a retailer to control all aspects of its meat supply chain on an internal basis because of the significant bio‐security weaknesses that exist in Vietnam’s meat and poultry supply chain. It should be noted that Metro Cash & Carry has a different system. Under this system, it is actively training Vietnamese meat farmers to comply with Good Agricultural Practice so they can become the company's suppliers. This is being done under a project that is partly funded by the German government.

3. Vietnam’s livestock industry had a tough period in 2009‐10

The Department of Livestock Production, MARD, has acknowledged that 2009‐10 was one of the

toughest periods in the development of Vietnam’s livestock industry. Although some previous years

were problematic, the industry was hit by what some officials and trade sources have described as “close

to the perfect storm”, which included:

widespread outbreaks of animal diseases, in particular PRRS (Blue Ear pig disease), FMD and HPA1

bird flu,

the necessary culling of standing inventories of breeding animals, immature and animals close to

ready for processing and marketing;

increases in farm input costs, which MARD estimate averaged at 15% over the first 9 months of

2010;

an unstable end market, because of user and consumer fears over disease‐infected meats;



the impact of shortages and related inflationary pressures on wholesale and retail prices, and,

much higher competition from imports, with MARD estimating 80,000 tonnes of pork and offal were

imported in the first 9 months of 2010. These imports were entering Vietnam at a time when its FTA

commitments were starting to take shape in terms of easier access for some of its trading partners.

For example, China, which now has 0% market access for pork, beef and offal and a preferential 10%

import duty (WTO Bound: 20% or 40%, depending on product type) on chicken meat.

4. The development policy environment for the livestock industry

4.1 Vietnam’s 2020 livestock industry development strategy

In 2008, the Ministry of Agriculture and Rural Development (MARD) adopted a new development

strategy for Vietnam’s livestock and meat industries with a timeframe of 2010 to 2020. The broad

objectives of this strategy are to:

reorganise and industrialise livestock production and processing in Vietnam. The goal is an industry

that:

o is more integrated, intensive and geared towards the use of modern production and processing

capabilities and facilities, including modern slaughterhouses; and,

o uses better quality manufactured animal feeds made in Vietnam; and,

create higher productivity, improve product quality, and develop an industry that can meet safe

food requirements, as demanded by:

o the export markets, e.g. in Hong Kong SAR and Singapore; and,

o the more health and safety conscious domestic consumers in future.

MARD set the following targets in formulating its 2020 strategy:

expanding the share of livestock production, when compared to total agricultural production to 42% in 2020. Currently, the share is between 26% and 28%;

increasing meat and poultry production to 5.5 million tonnes by 2020, when per capita consumption

will have reached 56 kilograms, with commercially produced meat accounting for 40% of production

in 2020;

establishing standing inventories of 12.5 million beef cattle and 35 million pigs by 2020;

increasing production of raw liquid milk to 1 million tonnes by 2020, when per capita consumption

will have reached 10 litres of local milk;

establishing a standing dairy cattle inventory of 500,000 dairy cattle by 2020; and,



poultry production increasing to 306 million head by 2020.

While the targets for pigs and poultry may be attainable, those for the cattle industries are likely to be

challenging. The main issue in meeting the targets lies in the level of investment that is available and the

willingness of the private sector to invest in the cattle industries.

In the other ASEAN countries, there has always been private sector funds available for integrated

chicken and duck production, more limited funds available for large scale pig farms (in Thailand and the

Philippines), but very little in the way of funds available for cattle farms, especially dairy farms, which

are high risk at the level of climate and disease environments in ASEAN. To this extent, the goals set in

the 2020 plan for cattle may be more “wish list items” than attainable targets.

Activating the 2020 strategy includes the establishment of 7 new modern slaughtering and processing

centres in strategic locations across Vietnam and incentives for the private sector to invest in upgrading

their existing meat processing operations and new modern meat processing plants.

This is an area in which the private sector has been very reluctant to invest over the past 10 years

because of concerns that returns on investment would be very poor. The main threats to such

investments are weak food health and safety laws and weak enforcement of such laws by the

government, combined with the risks of SME / wet market linked slaughtering practices.

At the time of writing (March 2011), Vissan Co Ltd, which is part of the SATRA group owned by the Ho

Chi Minh City government, is in the process of building Vietnam’s largest integrated meat processing

complex in Long An Province in southern Vietnam. According to Vissan’s senior management, this facility

will cost the company around Dong 700 Billion (about C$ 33 Million). It will have an annual capacity of

40,000 tonnes of pork, 5,000 tonnes of beef and 9,000 tonnes of poultry meat per annum. Aside from

these meats, its main processed output will be hot dog sausages, Chinese‐style dried sausages, canned

meats and pâté. The plant is expected to be commissioned for operation in late 2012 or early 2013.

Overall, Vietnam’s 2020 livestock industry development strategy has one major weakness, namely bio‐

security, which is highlighted very clearly in the export market scenarios for Vietnam.

Discussions with the Agri‐Food and Veterinary Authority of Singapore highlight that, while Vietnam is

attempting to develop new livestock‐meat businesses that operate in bio‐secure environments, these

will also operate in the broader based national (or regional) environment that is not at all bio‐secure,

namely the production environment in which the much needed smallholder farmers operate. From the

practical standpoint, this makes the market scenario for “Vietnamese meat” highly problematic because

of supply chain risks, both actual and perceived, e.g. contamination and transmission cases.

These supply chain risks, and the known prevalence of animal diseases, will make it very difficult for

Vietnam to develop and sustain demand for its higher quality meats in the following markets under

conditions where there is a major outbreak of diseases that are known to be/or become a danger to

human health (as has happened on occasions over the past 10 years or so):



the export markets, e.g. Singapore and Hong Kong SAR; and,

potentially, the domestic modern trade (major supermarket chain controlled) and food service

“quality meat” segments involving middle income consumers that are “food health and safety

conscious”.

High profile examples of these problems and their impact on farmers and their businesses exist in China

as a result of a number of different high profile food health and safety scandals, scares and incidents

involving meats and milk products.

The following sections of this report provide more details on some of Vietnam’s industry specific

development plans.

4.2 Institution, academic and research support functions for the Vietnam livestock industry

Vietnam has a solid institutional base to support the development of its livestock industry. This

comprises local institutions that operate under the auspices and control of MARD, an extension services

system, and active input from international organisations such as the World Bank, Asian Development

Bank (ADB), SIDA (Sweden), CIDA (Canada) and GIZ (Germany), etc.

While this is regarded as a solid base, Vietnam’s large physical size, the highly fragmented nature of the

livestock industry and weak financial standing of most farmers, means there is insufficient funding to

cover all needs and coverage requirements.

The key local institutions involved in supporting development of the livestock industry are as follows:

National Institute for Animal Sciences (NIAS), formerly the National Institute of Animal Husbandry

(NIAH);

Vietnam Agricultural Science Institute;

National Institute of Veterinary Research;

National Center for Inspection of Drugs and Bio‐products;

Institute of Policy and Strategy for Agriculture and Rural Development; and,

Institute of Agricultural Science of Southern Vietnam.

Within these organisations there are also sector‐specific service providers and R&D organisations, e.g. in

goat farming activities, and related processing activities. This sector is supported by a dedicated entity

known as the Goat and Rabbit Research Centre, which is part of the NIAS and is headquartered at Son

Tay in Hatay Province.

Trade sources comment that most of the above organisations now have strategies that are seeking the

opportunity to become more involved in commercial activities because of the limited funding that they

receive from the central government. There are also comments that these organisations tend to be

more academic than practical in their activities, because their low funding:

reduces the quality of their services and facilities; and,



minimises their involvement in on‐farm activities, e.g. R&D trials, model farms and other research

dissemination activities.

This lack of funding is a key reason why there is high demand (and competition) for international aid

funds from MARD and the above listed institutions.

Vietnam’s livestock development projects also involve some universities, e.g. Tay Nguyen University and

Hue University, which have been involved in high profile livestock development projects in Vietnam.

Other universities that have also been involved in projects are reported to include the Thu Doc

University of Agriculture and Forestry, Hanoi Agricultural University, and Angiang University.

Vietnam’s extension services system operates through the National Agricultural Extension Centre of

MARD at central government level and provincial and district level extension centres.

4.3 Foreign country involvement in livestock industry development programs in Vietnam

The past 20 years has seen significant foreign involvement in Vietnam’s livestock industry development

programs. Aside from Canada’s involvement, some examples of other countries and their involvement

are as follows:

Country Sector of Involvement or Project Name

Belgium Vietnam‐Belgium Dairy Project.

Australia Various cattle and goat projects since the mid‐1990s.

Israel Banh Chanh District Model Dairy Farm.

Italy Goat farming.

UK Goat farming.

Germany Goat farming.

Sweden Goat‐crop farm integration model development

Taiwan Goat farming management advice.

Australian involvement in its Vietnam cattle industry development programs was spearheaded by its

tropical beef resources and capabilities in Queensland and has focused on crossbreeding with Red

Brahmin, Belmont Red and Droughtmaster.

A number of internationally structured NGOs also have projects in the sector, e.g. Heifer International.

5. The livestock industry and its development in overview

5.1 Performance report on longer term growth trends in the livestock industry

The livestock industry has been in a long term growth trend over the past 25 years. According to the

Ministry of Agriculture and Rural Development (MARD), growth has been taking place at around 5.7%

per annum since the mid 1980s. This is much faster than the growth rate of about 4.3% per annum for

the whole of agriculture over this period.



As can be seen from the data in the table below, livestock production has made massive leaps forward

since the mid 1980s. No long term data is readily available on the sheep farming sector.

Livestock Production Average Annual Growth – 1986 to 2005

Sector Head ‘000 (Latest) 1986 to 1990 1991 to 1995 1996 to 2000 2001 to 2005

Pigs 27,628 0.8 % 6.0 % 4.6 % 5.2 %

Cattle 6,470 3.8 % 3.2 % 2.6 % 8.5 % E

Buffalo 2,887 2.0 % 0.8 % (0.5 %) (1.2 %)

Goats 1,484 NA 15.2 % 1.2 % 25.9 %

NA: Not applicable. E: Estimate. Source: Ministry of Agriculture and Rural Development

There are some differences in the growth scenarios for different sectors:

buffalo is a mature and declining sector, which is not receiving any significant growth push from the

industry or government;

the beef cattle and pig sectors, in contrast, have been growing at relatively high growth rates in a

reasonably consistent manner; and,

the goat sector is immature and has seen variable growth rates as it moves from near zero base on

the back of stimulus by the government, aid agencies, other donors/funding agencies and, also,

some private sector involvement.

It should be noted that the buffalo sector is not within the scope of this report. According to the most

recent MARD survey, Vietnam’s livestock inventory is continuing to restructure with annual declines in

the number of draught buffaloes and draught oxen kept by 4.7% and 15.6%, respectively, in 2009.

As can be seen from the growth trend in standing pig population highlighted in the chart below,

Vietnam’s pig population surged from around 12 million pigs in 1990 to 27 million in 2005. Thereafter

development trends hit a plateau, mainly because of a number of disease crises, with some

commentators also considering the industry has matured in its current state and has “gone as far as it

can under the old development strategy and industry structure”.



Long Term Development of Vietnam’s Standing Pig Population – 1989 to 2009

Source: Vietnam Government and FAO

The cattle and goat populations have also seen successful growth performances up until 2006‐07, when

disease outbreaks caused the populations to shrink and plateau out. The cattle population doubled in

size between 1990 and 2006 (see chart below).

Long Term Development of Vietnam’s Standing Cattle and Goat Population – 1989 to 2009


Overall, growth in the livestock population has been very positive over the past 20 years, and has

provided Vietnam with a basis for keeping up with rapid growth in demand for pork, beef and raw liquid



milk at a time when the economy was booming and there was significant population growth (see charts

below).

Long Term Trends in Pork Production in Vietnam – 1989 to 2009


Long Term Trends in Beef Production from Cattle in Vietnam – 1989 to 2009


Long Term Trends in Raw Cow’s Milk Production in Vietnam – 1989 to 2009




Another positive factor has been the increase in yields due to the use of improved breeds and feeding

systems. According to FAO long term data:

cattle carcasses in 2008 were an average of about 13% larger than in 1989;

pig carcasses in 2008 were an average of about 12% larger than in 1989; and,

raw liquid milk yields in 2008 were an average of about 150% higher than in 1989.

Overall, Vietnam, as a lower income developing country, has been very successful in shifting its industry

from the underdeveloped status in 1989 to where it is today.

5.2 The industry today and local market scenarios for livestock products

According to the Ministry of Agriculture and Rural Development (MARD), the livestock industry now accounts for between 26% and 28% of total agricultural production.

According government statistics, Vietnam has millions of smallholder farms that are involved in livestock

production. While up‐to‐date accurate data is not readily available on this sector, firm government

estimates indicate that about 4 million “household” farms are producing pigs. The number of

commercial livestock farms is much smaller.

According to a government survey, Vietnam has about 21,000 registered commercial farms that are

involved in livestock production today. These farms are located all over the country, although the bulk of

them are reported to be in the north of the country (see chart below).



Location of Livestock Farms in Vietnam in 2009 – 20,809 Operations

Source: General Statistics Office of Vietnam

According to MARD, about 54% of all of these farms are involved in pig farming activities.

Meat industry and retail trade sources forecast that meat and poultry demand in Vietnam will grow at

between 8% and 10% per annum over the 5 years to 2016. There is a possibility that dairy product

demand could exceed 10% per annum over this period because Vietnam has a very large number of

people below the age of 25 years of age, and dairy products are in high demand from these consumers.

This demand scenario will see the current mismatches in supply versus demand become even larger

because of the “natural” constraints in rapidly expanding local production of meat and milk. Realistically,

local production is likely to grow at much slower rates of between 3% and 5% per annum.

The biggest risk in Vietnam today is food price inflation, which will impact on meat consumption and

could spin off into some political problems for the government. For this reason, although the

government wants to constrain imports, it is more likely that its future policies will be oriented around:

continued aggressive development of the local livestock industry, and heavy investment in animal

disease prevention programs; and,

increased imports to balance out supply mismatches and deal with the growing shortages that will

almost certainly lead to inflation because of the way in which the market operates in Vietnam.

5.3 Vietnam’s animal disease profile



Vietnam still has a long list of diseases that are reported by the OIE (World Organisation for Animal

Health) as having “clinical disease” status, or as “being suspected but not confirmed”. Aside from the

Avian diseases that have had major impacts of poultry production in Vietnam, which includes H5N1, the

diseases affecting other livestock include:

notifiable diseases:

o multiple species diseases: Anthrax (limited to certain areas), Aujeszky's Disease (Suspected but not confirmed), Leptospirosis (clinical disease), and Rabies (limited to certain areas); and,

o pig specific diseases: Classical Swine Fever (clinical disease); and,

other diseases:

o multiple species diseases, either with a clinical disease status or listed by the OIE as “suspected, but not confirmed”: Brucellosis (Brucella abortus), Foot and Mouth Disease (FMD), Heartwater, Paratuberculosis, Surra (Trypanosoma evansi) and Trichinellosis; and,

o species‐specific diseases, either with a clinical disease status or listed by the OIE as “suspected,

but not confirmed”: for pigs: Porcine Cysticercosis (limited to certain areas) and Porcine Reproductive and

Respiratory Syndrome (PRRS or Blue Ear Disease); for cattle: Bovine Anaplasmosis, Bovine Babesiosis, Bovine Genital Campylobacteriosis,

Bovine Tuberculosis, Enzootic Bovine Leukosis, Haemorrhagic Septicaemia, Infectious Bovine Rhinotracheitis / Infectious Pustular Vulvovaginitis, Lumpky Skin Disease, Theileriosis, Trichomonosis and Trypanosomosis; and,

for sheep and goats: Salmonellosis (S. abortusovis) and Sheep Pox and Goat Pox.

According to MARD, FMD and PRRS (Blue Pig Ear) disease often co‐exist in Vietnam and have created huge problems for the pig and pork industry in the recent past. This has resulted in more imports of pork and pig’s offal with a resulting negative impact on Vietnam’s trade balance.

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


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

2005 2006 2007 2008 2009

‘000 Head ‘000 Head ‘000 Head ‘000 Head ‘000 Head

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

2005 2006 2007 2008 2009

‘000 Tonnes ‘000 Tonnes ‘000 Tonnes ‘000 Tonnes ‘000 Tonnes

2,288 2,505 2,663 2,783 2,909


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


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


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

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.


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

2005 2006 2007 2008 2009

Tonnes Tonnes Tonnes Tonnes Tonnes

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


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.

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).




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.

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


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

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.


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

2005 2006 2007 2008 2009

Tonnes Tonnes Tonnes Tonnes Tonnes

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


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.

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.

10. Goats and sheep and meat and milk sectors


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

2004 2005 2006 2007 2008 (P)

Head Head Head Head Head

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 20

th 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.




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.

10.7 Overview of the goat industry development program and its impacts

According to the Goat and Rabbit Research Centre, MARD’s Goat Industry Development Program is a

long term project (funded for 15 years) with the goals of:

introducing modern goat farming techniques to Vietnam with a focus on more intensive farming

using higher yielding breeds (crossbred goats) and better standard feeding and animal health

systems and extension services;

increasing rural area incomes as part of improving the rural economy; and,

developing improved markets for goat‐based products in Vietnam, mainly meat, but also milk and

goat skins.

The targets that were set for the program are as follows:

a standing goat herd of about 4.2 million head of goats, both meat and milking animals, by 2015;

annual slaughter of about 1.25 million meat goats in 2015;

national goat meat production of between 40,000 and 45,000 tonnes of meat in 2015; and

national milk production of between 2,000 and 2,500 tonnes of raw liquid milk in 2015.

This program has been well supported by foreign donors and aid agencies. There have been some high

profile aid funded development projects in the goat farming sector, which have assisted the program to

develop a number of viable benchmarks to guide future development of the sector.

According to MARD, one of these was an award winning project revolving around women goat farmers

and the extension of their activities into goat cheese production and its sale to the Hanoi retail and food

service sector markets. This project started operations in 1998 and was funded by a number of EU donor



governments and agencies, and was run in conjunction with MARD’s Goat and Rabbit Research Centre.

This program resulted in the development of the Blue Mountains branded range of goat cheeses, which

are marketed to, and used by, high end restaurants and hotels in Hanoi.

In addition to the above mentioned project, MARD and its foreign partners are also running projects to

develop intensive and semi intense goat farming operations linked to nucleus breeding farms, better

quality feeding systems, which use local materials, and animal health systems/extension services.

In the north of Vietnam, the Goat and Rabbit Research Centre reports that these intensification projects

have shifted the structure of the goat farming industry from domination by informal extensive goat

farms to more viable mix of intensive and semi intensive farms over the past 10 years. Today, the bulk of

farms (around 60%) are now semi intensive operations, whereas in these areas in 2000, over 80% of the

farms would have operated as extensive systems.

10.8 The government’s strategic viewpoint about the goat farming industry and its future

development

The Vietnam government generally has a realistic strategic view about the goat farming and its future

development prospects. The high level of practical experience derived from the Goat Industry

Development Program has provided it with a good understanding about the positive and negative

aspects of the industry (see table below)



Strategic Viewpoints About Vietnam’s Goat Farming Industry Today

Positives Negatives

Goat farming has significant opportunities based on past development efforts since 1998, if it:

o is well organised from an operational

standpoint; o uses appropriate breeds (crossbreeds)

that match market demands; o is well supported by extension services,

especially animal health and farmer advice;

o has good feeding resources; and, o has a viable commercial market for

smallholder farmers to target and service, which is near to their farms.

MARD’s Goat Industry Development Program, which is supported by the expertise in the Goat and Rabbit Research Centre. This Centre has low cost / smallholder appropriate systems and technologies in place to assist industry development into the long term.

The government is fully supportive of increasing the size of the national goat (and sheep) herd. Outwardly, there are also foreign donors that are also interested in facilitating this policy.

Past projects have also benefited farmers because goat manure is a good source of fertiliser for goat‐crop integrated farms and also a potential for mini biogas projects that assist farmers with their energy needs.

The government has insufficient funds and expertise for all of its goat industry development plans. This undermines wide ranging extension services coverage.

The animal health situation in Vietnam is very risky for goats and sheep because there are many diseases and infections (parasites are a major problem) that have a negative impact on these animals, especially when they are used in extensive farming systems.

Goat products do not have good broad based demand in Vietnam, and are generally not part of the local food culture.

Goat slaughtering is still an on‐the‐ground activity across Vietnam, which is problematic when trying to build more viable markets in the modernising urban areas.

Although there have been improvements, the knowledge of many goat farmers outside the various industry development projects is very weak. The techniques and technologies are also reported to be region‐specific and not fully transmittable to other areas of Vietnam, due to climate/environment differences.

Smallholder goat and sheep farms generally have shortages in funding to increase the size of their operations.



A prize winning goat cheese project in northern Vietnam has provided evidence that innovative farming projects close to urban areas can broaden the business scope of groups of farmers where there is a food service and retail market for such product can be successful for goat farmers.

Many of Vietnam’s goat farms are extensive system farms that are not very profitable for their operators.

Local fodder is of poor quality for use with crossbred goats, so farmers with crossbred goats need good extension support, which is not always available to them.

Sheep farming is one of the weakest farming sectors in operation in Vietnam today.

Source: Goat and Rabbit Research Centre, MARD

10.9 The challenges for sheep farming in Vietnam

According to the National Institute of Veterinary Research, goats are significantly more adaptable to the

conditions in Vietnam than sheep, and this explains the much larger goat herd and more widespread

goat farming activities

Sheep have proven highly problematic in most areas outside Ninh Thuan (Phan Rang) Province, where

they have adapted to local conditions over a long period of time. According to sources at Hue University,

even Ninh Thuan (Phan Rang) Province is problematic for sheep because a lack of available green

feedstuffs in this dry region significantly undermines the potential to expand sheep production in this

area of Vietnam in future.

In addition to this, all efforts taken over the past 20 years to expand sheep outside Ninh Thuan province,

and some small pockets of viable land in other parts of the country, have failed due to losses arising

from a wide range of bacterial, viral and parasitic diseases. Internal parasites are reported to be a major

problem for sheep in Vietnam. The OIE lists Vietnam has having a large number of diseases that can

affect sheep, with local studies confirming this situation and, even, adding other diseases to the OIE list.

The lack of disease resistance in sheep is a major strategic issue in developing a viable sheep farming

industry, whether at the level of a smallholder structure or commercial farms. For this reason, sheep

have become more of an academic focus (i.e. show cases) than a commercial focus for the authorities.

Shifting away from this situation would require significant funds, which is something that is not available

for niche industry development in Vietnam. Additionally, as time would be needed to breed disease

resistant sheep, this is also a major constraint to future development.

Strategically, sheep products do not have high inherent demand in Vietnam, unlike pigs and cattle, so

this is another factor that marginalises them within government livestock industry development

strategy.



11. Meat exports from Vietnam

Vietnam exports of meat were valued at about C$ 52 million in 2009. Although exports are higher than

in 2000, the trends in the value of exports have been highly erratic over the past 10 years, As can be

seen from the chart below, exports of processed meats are minimal, even though they have long had

high profile focus from state‐owned enterprises involved in the industry.

Vietnam’s Exports of Meat, Poultry and Processed Meats – 2000 to 2009

Source: Vietnam’s External Trade Statistics

The main destination for Vietnam’s exported meat in 2009 was Hong Kong SAR (see chart below).

Vietnam’s Exports of Meat and Poultry by Destination in 2009 – C$ 52 Million




Vietnam’s main exports of pork are suckling pigs. In 2009, it exported close 14,000 tonnes of these

products valued at about C$ 33 million (see chart below).

Vietnam’s Meat and Poultry Exports by Key Product Type in 2009 – C$ 52 Million


While government policy stresses the development of Vietnam as a major exporter of meat, there are

two factors that undermine this strategic focus:

the massive weaknesses that exist in the country’s livestock and meat bio‐security environment. This

is a viewpoint of the regulatory authorities in Hong Kong and Singapore, and has been further

stressed to them by recent livestock animal outbreaks in Vietnam; and,

the very strong phytosanitary and sanitary environments that are necessarily in place to protect

consumers in Vietnam’s key actual and potential target export markets, e.g. Hong Kong SAR,

Singapore, Taiwan, Malaysia, Japan and South Korea.

With Vietnam now a party to AFTA (and the now developing ASEAN Economic Community), the ASEAN‐

Australia‐New Zealand Free Trade Areas, the ASEAN‐China Free Trade Area, and also an associate

member of an expanding TPP (Trans‐Pacific Strategic Economic Partnership Agreement), very urgent

attention will be needed over the next 5 to 10 years to strength Vietnam’s bio‐security environment so

its livestock/meat industry is in a much better position to deal with both the opportunities and

challenges that are now arising from these FTAs.

The evident opportunities and challenges foreseen by trade sources today for meat producers and

processors in a much better quality bio‐security environment in future are:



amongst Vietnamese middle income and younger consumers, who are now starting to prefer

supermarket shopping, have growing demand for clean and disease free agri‐foods, and are already

generating massive new demand for imported products because of their growing use of food service

outlets;

in the Vietnam government’s increasing difficulties in dealing with meat imports. This will evolve

further as the free trade areas that it is involved in become solidified in terms of 0% duties and non‐

tariff barriers (NTM) eliminated in the medium term; and,

the very clear opportunity in exports, because demand is very big in neighbouring meat and poultry

“supply deficient” markets, such as Singapore and Hong Kong SAR.

In view of this, the Vietnamese government needs to pay very urgent strategic attention to working with

its major trade partners in key target markets, other donor governments, aid agencies and other

agencies of relevant to implement its strategic plan for meat exports.

12. Imports of breeding genetics

12.1 Imports of breeding animals

Government officials report that there are large numbers of breeding animals being imported to

Vietnam. In addition to this, there are press releases and newspaper articles that report quite high

numbers of dairy cattle being imported from New Zealand and, prior to North America’s BSE outbreak,

goats from the USA.

This information is not, however, reflected in official trade statistics for imports recorded in Vietnam, or

exports to Vietnam, except in the area of breeding pigs (see Table below).



Exports of Pure Bred Breeding Animals to Vietnam – 2000 to 2009

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Pigs:

Head 1,742 178 330 689 279 2,037 1,396 581 1,506 1,419

Value in US$ ‘000

493

39

203 478 162 958 800

349

898 1,208

Cattle:

Head ‐ 304 ‐ 4,319 765 ‐ ‐ ‐ ‐ 5,269

Value in US$ ‘000

‐

442

‐ 3,253 592 ‐ ‐

‐

‐ 1,556

Goats:

Head ‐ ‐ 120 ‐ 500 175 128 ‐ ‐ ‐

Value in US$ ‘000

‐

‐

136 ‐ 190 25 33

‐

‐ ‐

Sheep:

Head ‐ ‐ ‐ ‐ 30 ‐ ‐ ‐ ‐ ‐

Value in US$ ‘000

‐

‐

‐ ‐ 8 ‐ ‐

‐

‐ ‐

Total:

Head 1,742 482 450 5,008 1,574 2,212 1,524 581 1,506 6,688

Value in US$ ‘000

493

481

339 3,731 952 983 833

349

898 2,764

Note: There is no distinction in the trade data between the import of dairy cattle or beef breeding cattle. Source: External trade statistics

As highlighted in the table above, Vietnam’s imports of live breeding animals has increased in an erratic

manner over the past 10 years.



Discussions with a number of exporters in Australia indicate that Vietnamese importers may be placing

orders for breeding animals that are not pure bred or the best quality, because of their budgetary

constraints. This characteristic is thought to be most prevalent in the live goat market, but also has some

impacts (in some years) in the live beef cattle market.

While this is the case, it is evident that some of Vietnam’s imports of live breeding animals, especially

cattle, are not being fully reported in its official statistics, although there is no information readily

available on why this situation is happening.

According to government and trade sources, and the trade data that is available, the main sources of

breeding animals are the following countries:

Australia – Cattle and goats; and sheep, which are rarely imported by Vietnam;

Canada – Pigs;

New Zealand – Cattle;

Thailand – Pigs and some cattle; and,

USA – Cattle (only prior to its BSE infection) and goats.

Other countries have also been involved in supplying breeding livestock on a less frequent basis,

including South Africa (pigs), France (pigs), Denmark (pigs), South Korea (pigs), UK (pigs), Belgium (pigs)

and India (goats).

Based on the available trade data and other information available from government, trade and aid

agency sources:

Australia appears to be the market leader, because of its strong position in the breeding cattle and

goat markets;

the USA and Canada are the leaders in supplying breeding pigs. Interestingly, the USA is reported to

be the major supplier of breeding goats, although this is not evidenced by any recent trade data,

whether import or export data; and,

the EU has a much weaker presence as a supplier, with Denmark being the main EU exporter of

breeding pigs.

12.2 Imports of semen

Data on Vietnam’s trade in semen is only available for bovine semen. Government, aid agency and trade

sources comment that there has been active import of swine semen on an annual basis, although there

is no segregated trade data readily available on such imports.

Imports of bovine semen have been variable over the period between 2000 and 2009 (see Chart below).



Exports of Bovine Semen to Vietnam – 2000 to 2009

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Kilograms 219 313 183 221 89 10 13 NA NA NA

Value in US$ ‘000

52

164

110 156 191 27 48

101

142 96

NA: Data not available. Source: External trade statistics (Delivered weight)

A review of the trade data indicates that the main suppliers are based in Canada and the USA. Other

supply countries with lower market shares, but some consistency in their trade with Vietnam, include

Australia, New Zealand, Netherlands and France.

12.3 The regulatory environment for imported genetics

The regulation of imported genetics, whether live breeding animals, embryos or semen, is confusing

from both the documentary and transparency standpoints. From the documentary standpoint, there are

strict broad based regulations over such imports, with reference being made to:

information available from the OIE, and the animal health authorities in exporting countries; and,

local interpretation of bio‐security issues that could have a negative impact on Vietnam’s livestock

herds, its production industry and the end markets.

A review of available documentation indicates that it is highly fragmentary at the level of exporting

countries covered and animal / product types. The documentation also varies in terms of age, with some

protocols dated in the 1980s, and others being more up‐to‐date documents, i.e. protocols finalised since

2000. Most of the protocols in place cover pig, beef cattle and dairy cattle genetics. There are also some

for goat genetics, but none were detected for sheep genetics.

The primary concern is the prevention of new diseases and conditions, e.g. BSE and Scrapie, from

entering Vietnam’s already highly risky livestock production and product marketing scenarios. In

addition to this, the government also wants to prevent animals with any form of existing disease in

Vietnam (multi‐species or species‐specific) from entering the supply chain, and so causing additional

disease outbreaks.

The National Agro‐Forestry‐Fisheries Quality Assurance Department (NAFIQAD), an agency within the

Ministry of Agriculture and Rural Development (MARD) and MARD’s Department of Livestock oversees

compliance with the regulations. The basic regulations include:



imports have to come from a country that is approved as a supplier of breeding genetics to Vietnam.

This is determined by the authorities following on from a review of export country regulations,

practices, procedures and risks, and discussions with the exporting country’s animal health

authorities about its exporters’ capabilities and their capacity to supply disease free breeding

products;

imports can only come from a country where there is an active import‐export protocol in place for

the specific livestock genetic products, e.g. live animals, embryos or semen. Canada and its main

competitors, namely the USA, Australia, Denmark and New Zealand, have some product‐specific

protocols in place, although some of these appear to be old, and so may not be currently in force;

the provision to the Vietnamese authorities at the port of import of an agreed health certification

from the animal health authorities in the exporting country for all shipments of livestock genetics.

This is in a form prescribed in the import‐export protocol between Vietnam and the exporting

country for the specific product;

compliance with exporting country‐specific and product‐specific requirements on feeding, disease

testing, vaccinations, transportation type and method, pre‐export quarantine place and time in the

exporting country, and other special conditions to be complied with before export to Vietnam, as set

out in the agreed import‐export protocol for the specific product;

the right of the Vietnamese authorities to inspect all facilities that are involved in the production of

livestock genetics in the exporting country as part of the import‐export approval process; and,

a requirement for the animal health authority in the exporting country to provide the Vietnamese

authorities with up‐to‐date advisories on the disease‐free state, or otherwise, of their country and

its impacts on any import‐export protocols that have been negotiated with Vietnam.

In practice, imports of genetic materials have entered the country from a sizeable number of countries,

including the USA, Canada, many EU countries, Australia and New Zealand and, even, South Africa, India,

Taiwan and Thailand. Live animals (mainly for slaughter) are also entering Vietnam from Cambodia,

China and Laos.

While there appears to be no clear “Developed World style” definition on what the practical regulatory

and quarantine requirements are, except for specific bans that would be determined by the activities of

the OIE, imports appear to be approved either on an existing import‐export protocol base, or on a case‐

by‐case basis. The case‐by‐case basis approval appears to be done with reference to:

any livestock development programs, projects or activities that are perceived by the authorities as a

valuable contribution to MARD’s 2020 Livestock Industry Development Strategy, as well as its

component plans and activated or proposed programs covering pigs, beef cattle, dairy cattle, goats

and sheep; and,

the disease status and risk posed by the exporting country, its production facilities, supply chain and

the exporter.



The initial reference point for such activities appears to be the institutions, state‐owned enterprises (and

related provincial and local governments), larger commercial farming businesses, and any aid agency

partners / foreign donors that are involved in such programs in Vietnam, as well as the livestock

development and veterinary departments within the Ministry of Agriculture and Rural Development

(MARD).

Canadian exporters that need assistance in developing “protocols” to support their exports of genetic

materials and related supporting services to Vietnam should contact the Embassy of Canada in Hanoi to

ensure that their export strategy, plans and genetic material quarantine approvals are appropriate to the

requirements of the demand circumstances existing in Vietnam.

13. Future strategic directions and opportunities for Vietnam’s livestock industry

The Vietnam economy grew at an average of 7.3% per annum over the 5 years ending 2009. Economic commentators forecast future growth at similar rates over the period to 2015, barring any unforeseen circumstances, which may negatively impact on Vietnam’s economy in the future (see table below).

Vietnam Economic Growth Forecasts – 2010 to 2015

2010 2011 2012 2013 to 2015

% % % % Per Annum

Range of forecasts 6.5 to 6.8 Around 7 6.5 to 7.5 6.0 to 8.0

Source: ADB, World Bank, Vietnam government and independent economic analysts.

Vietnam’s population is forecast to grow to 126 million people by 2050, thus increasing the pool of future consumers for pork, beef, goat and sheep meat, and milk and dairy products.

Trade sources now believe that Vietnam has entered a new phase in consumer market development,

and there are forecasts that a younger middle income group of up to 20 million persons will exist in

2020. This group is now rapidly developing on the back of the higher disposable incomes that are coming

from rapid economic growth.

While there are now very significant concerns that inflation could damage this forecast, most trade

sources believe that there is now a “coming boom” in new meat and poultry consumption in Vietnam.

This boom is likely to drive new import growth at rates of between 8% and 10% per annum over the 5

years to 2016.

It should be noted that this rate of import growth is much faster than the growth rates being forecast for

local production of meat and poultry in Vietnam over this period. Growth of local production is forecast

at between 2.5% and 4% per annum, depending on animal type.



The reader should note that the situation relating to meat price inflation in Vietnam is highly complex,

because inflation can arise from a number of factors, or a combination of them, including:

the weak state of the Vietnamese Dong (local currency) on the global market, This has impacts on

animal feed prices in Vietnam because of high demand for imported feed ingredients and inputs.

This is also complicated by the dollarization of the Vietnamese economy, whereby some of a

producer’s domestic operating costs could be denominated in US$, whereas its income is usually in

Dong;

animal disease outbreaks, which can lead to both current and future meat shortages, i.e. due to

culling of slaughter‐age animals (short term inventories) and also breeding stocks (medium term

inventories). This can also involve rumours in the consumer and wholesale markets about disease‐

related issues (tainted meat) and shortages, or impending shortages;

the high level tendency by traders in Vietnam to become involved in speculation when there are

shortages of products that are in high and consistent demand. The government attempts to control

such speculation, but is not always successful; and,

inherent protectionism, e.g. controls over meat imports, inclusive of “macro management” of meat

supplies by the government, and especially the speed at which change in meat import policy occurs.

Trade sources comment that this has, in some cases, worsened rather than improved meat price

inflation scenarios in Vietnam at times of known disease outbreaks and increasing domestic meat

shortages.

Another very important factor that exists in the future development scenario for Vietnam’s meat and

dairy industries is the government’s various strategic plans and the very high level commitment that

exists towards their implementation.

As pointed out earlier in this report, the government has the following key development targets for the

livestock industry over the period to 2020:

the livestock industry’s share of total agricultural industry output rising to 42% in 2020, up from less

than 30% today;

meat and poultry production increasing to 5.5 million tonnes, under circumstances where 40% of

output will come from commercial farms;

increasing raw liquid milk production to 1 million tonnes in 2020; and,

establishing the following standing populations of livestock in 2020:

o pigs at 35 million head, when compared to around 28 million head in 2009;

o beef cattle at 12.5 million head, when compared to 6.1 million head in 2009; and,



o 500,000 dairy cattle, when compared to a herd of about 170,000 head of milking cows,

immature animals and males today.

All of the indicators being reported in Vietnam today are very positive for Canadian livestock genetic

exporters with Vietnam in their strategic business and export development and marketing plans. The

reader should acknowledge that all of these indicators are trade and government estimates and

government targets.

From the Vietnamese government standpoint, there should be a strategic focus on making future

breeding programs, and the supply of breeding stock, more accessible to farmers in a much more

effective bio‐security environment, which produces meat that meets the demands of:

Vietnam’s growing middle and upper income groups;

the supermarket chains that are slowly starting to take market share from the wet markets;

the food service industry, as its grows and expands into new areas, e.g. mid range and higher end

restaurants, including fast food chains; and,

potential export markets, e.g. Hong Kong SAR and Singapore.

This would necessarily involve major improvements in the extension systems across Vietnam, and also

the strengthening of farming businesses so that they can profit from new breeding programs and the

animals that come from them.

Without a “breeding program + strong bio‐security environment” scenario in the industry development

equation, it is highly unlikely that Vietnam’s evident potential as a quality producer of meat will be

achieved over the next 10 years.

14. Opportunities for Canadian exporters of livestock genetics

14.1 The downsides to future industry development scenarios in Vietnam

There are a number of significant downside factors in Vietnam’s livestock industry development

scenarios that can have very real negative spin‐offs for genetic materials imported from any country

across the world. These factors include:

the very weak bio‐security environment, which has highly complex impacts both on the smallholder

and commercial farming sectors:

o this is an area in which significant failures have occurred over the past 15 years, and one in

which the continuing threats are huge and very dangerous for Vietnam’s agricultural economy

and related businesses; and,

o smallholder and backyard farms operate in an inherently weak bio‐security environment, with

farmers, who often know the risks, but do not have a real capability or capacity to maintain the



high standards of hygiene that can prevent disease outbreaks. This situation also overwhelms

the extension and veterinary services in Vietnam;

major weaknesses in extension service coverage:

o most livestock farms that are involved with extension services are larger operations. According

to MARD, only about 35% of livestock farmers across Vietnam are recipients of extension

services. This percentage has increased over the past 10 years. A formal survey conducted in

1999 resulted in a finding that only 28% of farmers were extension service recipients; and,

o on a regional basis across Vietnam, extension service coverage ranges from high coverage of

between 40% and 50% of farms in the north central coast and Mekong Delta area, to low level

coverage of less than 20% of farms in the central highlands and north east;

there is a high degree of theory in some of Vietnam’s agricultural industry development strategies,

and it is possible to get caught up in the local enthusiasm for high profile projects, without proper

due diligence or risk analysis being performed to test project viability;

weaknesses in funding of local research efforts and their effectiveness. According to an ADB study

into its Asian agriculture support programs published in 2001, Vietnam has a tendency to underfund

its agricultural research and development programs, relative to its agricultural GDP output. The

percentage of government agricultural GDP invested in related R&D as cited by the ADB study was

only 0.19% in Vietnam, versus 0.54% in China, 0.57 in Malaysia and 1.1% in Thailand;

weak transmission research findings in Vietnam to farmers and weak collaboration with extension

services across the whole of the country; and,

weaknesses in the uptake of improved breeding and feeding practices by smallholder farmers.

Added to the above factors are two traits in the market that are also specific risks for genetic material

exporters:

imported breeding animals from the Developed World being generally regarded as too expensive by

government officials. (Note: Unfortunately, no one in Vietnam seems to understand that this is more

a function of poor local currency [Dong] management by the Vietnamese government and the

dollarized nature of the Vietnamese market, rather than problems with foreign currencies); and,

locally, there can be apparent disappointment about imported exotic genetic materials when they

fail, as they do under Vietnamese conditions. (Note: Unfortunately it is often the imported product

that is blamed for the failure of imported breeding stocks and genetic materials, not the real reasons,

which can be highly complex and arise from issues such as bio‐security failings, feed and water



problems, animal management problems, and the lack of understanding of environment and climate

impact on exotics and crossbred animals.

These two traits in the market mean that there is a serious reputational risk in selling breeding animals

and semen to Vietnam, if sold solely as a product, and not as a package of product and “after product

sales” services. This risk becomes a reality in the form of frequent switching of suppliers and

unwarranted rumours spreading about suppliers and their products.

14.2 The opportunities and market development strategies to consider in future

This study has found that Vietnam is a market that has significant opportunities for Canadian exporters

of livestock genetics to develop over the 5 years to 2016 and, under the Vietnam’s 2020 livestock

industry development plans, into the longer term.

Developing this market will not be easy because of the complications that exist in macro control of the

development plans and activities (i.e. the complex state linked powerbase), the industry structure and,

importantly, all of the downside risks highlighted in the previous section of this report.

For this reason, it would be best for Canadian exporters to actively cooperate with the Canadian

government to develop a well thought out and focused “Genetics Canada” marketing strategy that can

“open doors” to viable government, state owned enterprise and private sector demand in Vietnam.

This new marketing strategy should include the following components:

B2B (business‐to‐business/government agency) marketing campaigns that focus on dealing with the

practical realities that exist in Vietnam, i.e. that the sale of breeding stock and genetics is not just a

product sale, it must be a “product and services” sale; and,

developing long term “business focused” relationships with the following entities in order to take advantage of the potential opportunities that might be available from them:

o key breeding and relevant industry development centres that are controlled by the government

across the whole of Vietnam. It should be noted that these tend to operate with varying levels of autonomy and, in practice, may not be wholly centrally controlled; and,

o the major breeding companies, which operate as state‐owned enterprises, other forms of government linked / influenced corporations, and fully private sector owned companies.

Strategically, this would also mean developing a long term business strategy for Vietnam, that should include developing some form of tangible presence in Vietnam to facilitate face‐to‐face marketing to commercial entities, nurturing technical links with major institutions involved with animal genetics, and, very importantly, to undertaken localised troubleshooting activities. This would probably mean having to work with an agency in the Canadian government to facilitate such activities, especially market access and regulatory, because most of the key contacts, outside the foreign invested companies, are government linked, influenced or controlled organisations.



In view of the past challenges in the successful implementation of livestock breeding projects and businesses in Vietnam (highlighted earlier in this report), Canadian exporters with an interest in developing a market for their products and services should conduct in‐depth market research and, importantly, feasibility studies on the viability of any project involvement in Vietnam. This is important as it would be prudent to review the standing of partner organisations and their ability to contract and meet all of contractual obligations before entering into any agreements with them.

In view of the highly fragmented nature and weak dissemination of livestock breeding information

within Vietnam, AAFC, may wish to consider assisting the Vietnamese government to develop a

comprehensive and centralised web based library of such information for use by the whole of the

Vietnamese livestock industry into the long term. There is currently a Canadian funded CIDA food safety

project on‐going in Vietnam that may provide one avenue to assist the Vietnamese govt to deal with this

issue.

Canadian producers with other products related to opportunities in the markets profiled in this

report, and who would like more market information or contacts, may contact the Agri‐Food Trade

Commissioner at the Embassy of Canada in Vietnam at: vietnam‐[email protected].

vietnam livestock genetics -...

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