ECONOMIC ASPECT CURRENT SITUATION OF DAIRY COW INDUSTRY IN VIETNAM

ECONOMIC ASPECT & CURRENT SITUATION OF DAIRY COW INDUSTRY IN VIETNAM IAS , 24 September 2014 Presented by Ho Cao Viet (PhD) Introduction  Dairy industry of Vietnam are under favorable context for development because of rapid economic growth, large market and an increasingly investment environment  Vietnam dairy industry is facing many risks and challenges: quality of milk, food safety, dairy cow feeding technique, distribution and supply chain, costs of production at farm gate, micropolicies and incentives of Government Supply & Demand of milk in Vietnam DEMAND  Milk consumption (2013) 34 35 25 litre/person 30 25 20 14.8 15 10 Vietnam   Thailand China Around billion litres/year Increase demand by 61% from 500 million litres (2010) to 805 million litres (2015) (VMA)  Milk consumption increased quickly in Vietnam Rate of consumption/year: increased by 15% Liquid Dairy Product increased by 22%/year Source: VMA, 2012  Milk production vs consumption Source: NIAH, 2011; GSO, 2011; Nancy, 2008 in Vietnam SUPPLY Import & domestic sources  Import source: 1.2 million tons of milk products per year (milk and cream) Around 70% raw milk domestic demand  In 2013, expenditure on $1 billion for milk import  Domestic source: in 2013, supply around 420,000 tons of fresh milk, meet only 30% demand of milk production in domestic  Herd of dairy cow: around 200,000 heads  Average fresh milk: 550,000 tons per year Source: TetraPak 2014  Milk import Source: FAOSTAT, 2011 in Vietnam  Milk production in Vietnam Concentrated technical and financial efforts in theà dai yàp io ityàzo es Decision No 22 Master plan on development of milk industry in Viet Nam towards 2020 Source: NIAH, 2011; FAO, 2009; Nancy, 2008   95% of dairy cows in the country have been raised by small and unskillful households In 2013: Place HCM city Đồ gàNai Long An Nghệàá H àNội “ơ àLa Tuyê àQua g Bì hàĐị h Heads (1,000) 82,000 600 6,300 9,920 9,330 3,000 2,350 1,148 Source: www.vnreview.vn, 2014 Households 88,000 2,000 270 2,583 - Milk (kg) 984,000 28,500 170,900 76,837 45,000 24,800 17,220 Advantages of small-scale household Opi io :à p ote t àa dà tai às all-scale households models  Dairy cow is a major source of income of rural people (economics aspect)  Alleviation poverty and rural economics development (social aspect)  Milk enterprises still depend on farmers (in term of raw milk) Advantages of coordination between small farmers and enterprises Opi io :ài està Capital à&à ádaptedàte h ology àfo às allà farmers  Enterprises invested capital on cow species, techniques, input materials, supply equipments for small farmers  Enterprise ensures: harvest & collect freshmilk, processing & distribution  s a tài est e t ,à apital-sa edài est e t o pa edàtoà modernize international standard and high-technology farms (care, management, feedstuff, veterinary, milking, milk reservation ) Advantages of large-scale farm Opi io :à“ it hàtoà I dust ializatio àa dà Mode te h ology  Control quality of raw milk  High yield (30-40 litres/d/h) (farmer: 13.5 litres/d/h) (Israel: 42.6 litres/d/h)  Efficient management (by chip): health, milk productivity, veterinary, reproduction, diseases, etc  Cost and benefit analysis Characteristics of Vietnam Milk Industry   Scale of production at the household level is increasing Dairy companies depend on imported milk powder rather than domestic fresh milk production  Smallholder dairy farmers can only enter the sector with financial support  Economic of scale helped exclude small dairy farmers Dairy Farmers Milk factory Collectors Production stage Dealers, distributors Retailers, processing units Marketing stage Product line Fresh Milk Fresh Milk Fresh milk & milk products Fresh milk & milk products Major supply chain of fresh milk Milk flow and dairy price charts in period 2000-2006 in Vietnam Source: FAO, 2007 Milk flow in Son La, 2007-2010 Formal sectors (90%) 9000-12000đ/kg Collecting centre (89%) 9000-12000đ/kg Informal sectors (10%) 8500-11500đ/kg Milk from dairy farmers 8000-11500đ/kg 1% share Retailer (1%) Middle men (9%) 16000-23000đ/kg Milk companies Retailer/Distributor 37500-40800đ/kg 42000-45000đ/kg End-consumers 28000-35000đ/kg 17000-22000đ/kg Milk flow and dairy price charts in period 2012-2013 in HCMC Source: Survey, 2013 Characteristics of dairy supply chain in Vietnam  Import dairy ingredient accounted for around 70% of domestic market  Milk ingredients are processed into UHT milk, yogurt, condensed milk and other formula  Domestic raw milk production is expected to self-supply by 35-40% by 2020  Milk companies/processors are dominant in the entire dairy supply chain; occupies of most profitable business in the value chain In their long-term strategy, they might control the domestic raw milk by investment on large-scale dairy farming How to improve ? - s all dairy far ers’ situatio - balance supply & demand milk - milk industry Prerequisites of a successful food system Source: CAPI, 2012 Solutions for Vietnam Milk Industry  A quality-based payment system should be implemented, si ila àtồthềF ied a Ca i ầsyste :à thềhighe àthề uality,àthềhighe àthềp i e  More incentives for small dairy farmers, a new pricing system should be set up, based on a basic milk quality (fat, protein, total solid, bacterial count and absence of antibiotics)  Encourage small farmers to form interest groups or clubs for buying feed, industrial by-products (brewery waste) and crop residues (rice straw) in bulk to short-cut several layers of middlemen Solutions for Vietnam Milk Industry  Proper guidelines on contract dairy farming conditions must be issued and under controlled by national authorities &create a general framework  Reduce the initial investment costs by the way of produce cross-bred progenies by farmers  Elaborate master plan for priority fodder-growing areas in region with large-scale dairy production  Improve knowledge, veterinary condition as well as technical aspect for reducing costs of production and small-scale farmer can get higher profit Thanks for your attention ! ...Introduction  Dairy industry of Vietnam are under favorable context for development because of rapid economic growth, large market and an increasingly investment environment  Vietnam dairy. .. Total heads of dairy cow 166,989 (2012), 184,000 (2013)  98.372 cows are milking  120 thousand heads feeding by small-houseolds   47 thousand heads in dairy farms of enterprises In Vietnam Milk... Cost of milk in Vietnam: most expensive in global milk market Average cost of milk per litre  Vietnam: $1.40  $1.30 in New Zealand & Philippines  $1.10-1.20 in Australia and China  $0.90 in