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A Living from Livestock Pro-Poor Livestock Policy Initiative The Role of Livestock in Sustainable Rural Development, Poverty Reduction, and Food Security International Symposium on ‘Sustainable Land Use and Rural Development in Mountainous Regions of Southeast Asia’ Hanoi, 23 July 2010 J. Otte, D. Roland-Holst & Nguyen Do Anh Tuan

The Role of Livestock in Sustainable Rural Development, Poverty Reduction, and Food Security

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A Living from LivestockPro-Poor Livestock Policy Initiative

The Role of Livestock in Sustainable Rural Development,

Poverty Reduction, and Food Security

International Symposium on ‘Sustainable Land Use and Rural Development in Mountainous Regions of Southeast Asia’

Hanoi, 23 July 2010

J. Otte, D. Roland-Holst & Nguyen Do Anh Tuan

A Living from LivestockPro-Poor Livestock Policy Initiative

Overview

• Context: Global poverty and food insecurity

• Viet Nam: Development trends 1996 – 2005

• Rural Viet Nam: Agriculture and livestock

• Research and policy implications

• Conclusions

A Living from LivestockPro-Poor Livestock Policy Initiative

The Two ‘Worlds’

'Developing' 'Developed'

Human Population, 2005

1.1 bn

5.5 billion

'Developing' 'Developed'

GDP, 2005

US$ 35 trillion

US$ 10trillion

US$ 32.000per person

US$ 1.800per person

A Living from LivestockPro-Poor Livestock Policy Initiative

Income & Agricultural Populations

100

Annual per capita income in USD ppp

Proportion of economic population in agriculture (%)

ChinaIndia

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

0 20 40 60 80

Indust

LAC

MENA

S.Asia

EA&P

SSA

EE&CA

A Living from LivestockPro-Poor Livestock Policy Initiative

Developing Country Incomes (2005)

1.40

1.16

2.66

0.25

0

1

2

3

4

5

6

Source: Chen & Ravaillon, 2008

Billion people

$2-$13(49%)

$1.25-$2(21%)

< $1.25(26%)

US Poverty Line

Intl Poverty Line

‘Extreme’ Poverty

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

>$13

$2 - $13

$1.25 - $2

<$1.25

Source: PovNet, 2010

22%

1%

27%

50%

Viet Nam Incomes, 2006

A Living from LivestockPro-Poor Livestock Policy Initiative

Heterogeneity Prevails !!

0%

20%

40%

60%

80%

100%

SSA

S Asi

a

EA&P

MEN

A

LAC

Rural Urban

Location of ‘Extreme’ Poor

0

200

400

600

800

1,000

1,200

SSA

S-Asi

a

EA&P

MEN

A

LAC

EE&C

A<$1.25 $1.25-$2 $2-$13 >$13

Income Distribution by Region

Million people

75

%

75

%

40

%

20

%

20

%

10

%

Source: Chen & Ravaillon, 2008

A Living from LivestockPro-Poor Livestock Policy Initiative

Food is the Poor’s Main Concern

50%

of

World P

opula

tion

80%

App. 75% of the Food Insecurelive in rural areas, 50% are

smallholder farmers !!

A Living from LivestockPro-Poor Livestock Policy Initiative

Bottom 3 Quintile Markets

Water ICT Health

Transport Housing Energy

Food

$2.9trillion

1

2

3

Asia & ME Latin America

Africa East Europe

$2.24

Food Market Size($ trillion)

$0.20

$0.25

$0.21

Source: WRI 2007

A Living from LivestockPro-Poor Livestock Policy Initiative

Allocation of One Additional $

0

5

10

15

20

25

30

35

40

45

50

SSA

S Asi

a

EA&P

MEN

A

LAC

EE&C

ACereals Meat&Milk F&Vs Other

USD cents for food groups

A Living from LivestockPro-Poor Livestock Policy Initiative

Summary 1

• The ‘developing world’ is poorer than we often realize (‘paved road bias’).

• Heterogeneity prevails –one size will not fit all (e.g. emerging ‘middle class’ in EA&P).

• The poor predominantly live in rural areas and food and agriculture are central to their livelihoods.

A Living from LivestockPro-Poor Livestock Policy Initiative

Viet Nam: Demography & Incomes

0

10

20

30

40

50

60

70

80

90

1994 1996 1998 2000 2002 2004 2006

<$1.25 $1.25 - $2 $2 - $13 >$13

Million

Incomes

0

10

20

30

40

50

60

70

80

90

1994 1996 1998 2000 2002 2004 2006

Rural Urban

Million

Demography

22% 27%

A Living from LivestockPro-Poor Livestock Policy Initiative

Per Capita Consumption of Meats

0

5

10

15

20

25

30

Pork Poultry Beef

1995

2005

kg / capita

Viet Nam, consumption bymeat type

0

10

20

30

40

50

60

70

80

90

Viet Nam China D'ped

kg meat / capita

Viet Nam, meat consumptionvs. China and developed world

A Living from LivestockPro-Poor Livestock Policy Initiative

Viet Nam: Livestock Production

Growth in domestic production has been remarkable:

• Pork 120%

• Poultry 133%

• Beef 25%

• Milk 220%

over a decade!!!0

500

1,000

1,500

2,000

2,500

Pork Poultry Beef Milk

1993-1995

2003-2005

‘000 MT

A Living from LivestockPro-Poor Livestock Policy Initiative

-600

-500

-400

-300

-200

-100

0

100

200

2000 2001 2002 2003 2004 2005 2006 2007

Poultry Meat

Pigmeat

Ovine Meat

Milk

Viet Nam: Livestock Trade Balance

Yet trade balance in livestock products has deteriorated!!!

Million US$

A Living from LivestockPro-Poor Livestock Policy Initiative

Sources of Domestic Demand Growth for Livestock Products, 1995-2005

• Population growth: 16%• From 73.3M to 85.0M

• Per capita demand growth:• Milk = 180%

• Poultry meat = 104%

• Pork = 97%

• Beef = 16%

A Living from LivestockPro-Poor Livestock Policy Initiative

Summary 2

• Over the past decade, Viet Nam has made terrific economic progress.

• With respect to provision of livestock products, Viet Nam is victim of its own success.

• Major growth potential in domestic (rather than export) market.

A Living from LivestockPro-Poor Livestock Policy Initiative

Income Sources in Rural Viet Nam

9%

18%

11%

62%

Agriculture Wages

Self-employm Other

Source: Maltsoglou 2004

A Living from LivestockPro-Poor Livestock Policy Initiative

Livestock Ownership in Viet Nam

0

20

40

60

80

100

Ma

jor

Urb

an

Mid

dle

Urb

an

Sm

all U

rba

n

No

rth

ern

Mo

un

tain

Re

d R

ive

r

De

lta

No

rth

Ce

ntr

al

Co

ast

So

uth

Ce

ntr

al

Co

ast

Ce

ntr

al

Hig

hla

nd

s

So

uth

ea

st

Me

ko

ng

Riv

er

De

lta

% Households Owning Livestock

Source: 1998 VLSS

Urban Rural

A Living from LivestockPro-Poor Livestock Policy Initiative

Livestock Ownership in Viet Nam

0

20

40

60

80

Ma

jor U

rban

Mid

dle

Urb

an

Sm

all U

rba

n

No

rth

ern

Mou

nta

in

Re

d R

ive

r

De

lta

No

rth

Ce

ntr

al

Co

ast

So

uth

Ce

ntr

al

Co

ast

Ce

ntr

al

Hig

hla

nd

s

So

uth

ea

st

Me

ko

ng

Riv

er

De

lta

Ducks/Geese

Chicken

Pigs

Cattle

Herd / Flock Composition

Urban Rural

Source: 1998 VLSS

Nu

mb

ers

A Living from LivestockPro-Poor Livestock Policy Initiative

<1 ha 1 - 2 ha >2 ha

< 1TLU 1 -2 TLU > 2 TLU

Viet Nam’s SmallholdersSource of Livestock Production

by farmsize

by flocksize

96%

40%

30%30%

A Living from LivestockPro-Poor Livestock Policy Initiative

Livestock: The Economic Perspective

• More income from natural resourcesthrough:• Access to common land

resources

• Utilization of ‘waste land’ not suitable for crops

• Utilization of crop by-products

• Increase in output of crop production by nutrient cycling (and pest control)

• More income from family labour through:• Better use of

heterogeneous labourresources

• Balance seasonal labourdemand for crop farming

• Use of labour for processing of primary products (value addition)

• Free labour for more productive purposes (draught animals)

Diversification and stabilization of household incomes = reduced vulnerability

A Living from LivestockPro-Poor Livestock Policy Initiative

Rural Household Typology

Rural household ‘types’

‘Diversified’ (<25% ag inc)1. with market-oriented

agriculture

2. with agriculture for home consumption

‘Agriculture’,

3. market-oriented

4. semi-market-oriented

5. subsistence0

200

400

600

800

1,000

1,200

1,400

1,600

Typ

e 1

Typ

e 2

Typ

e 3

Typ

e 4

Typ

e 5

Other

Wages

Self-empl

Livestock

Crops +

An

nu

al

ho

us

eh

old

in

co

me

in

US

D

35%

10%

17%

33%

6%

Source: Maltsoglou 2004

A Living from LivestockPro-Poor Livestock Policy Initiative

Spatial Heterogeneity

1

2

3

4

5

A Living from LivestockPro-Poor Livestock Policy Initiative

Reasons for Improved Standard of Living

0 10 20 30 40 50 60 70

More income from wages

More income from fisheries

More enterprise income

More income from forestry

Higher cropping intensity

More farm land

More profitable crops

More income from livestock

Higher crop yields

Source: IFPRI 2002Percent of respondents

A Living from LivestockPro-Poor Livestock Policy Initiative

Viet Nam Household Multipliers

0.0 0.5 1.0 1.5 2.0 2.5

Services

Manuf.

Textiles

Crops

Fr & Veg

Lstk Proc

Lstk Primary

A Living from LivestockPro-Poor Livestock Policy Initiative

Summary 3

• Most rural households in Viet Nam keep livestock and livestock play a complex role in the rural economy.

• Smallholders are the backbone of Viet Nam’s livestock sector.

• Livestock development potentially has large primary and secondary household income effects.

A Living from LivestockPro-Poor Livestock Policy Initiative

Research & Policy Implications

Ways to help poor farmers:

1. Increase output –demand and productivity promotion

2. Increase price – value creation and quality

3. Reduce costs – market access, information

A Living from LivestockPro-Poor Livestock Policy Initiative

Scope for Productivity Increase

0

25

50

75

100

125

150

175

200

Type 1 Type 2 Type 3 Type 4 Type 5

Viet Nam: USD/Livestock Unitper year

Agricultural households

• Type 3: Commercial (17% of rural households)

• Type 4: Semi-commercial (33% of rural households)

• Type 5: Subsistence (6% of rural house-holds)

A Living from LivestockPro-Poor Livestock Policy Initiative

Ha Noi Consumer Preferences

0

10

20

30

40

50

60

70

80

Local Chicken Crossbred

Chicken

Industrial Chicken

Regular Price

High Price

Price by Chicken Type(VND ‘000)

0

1

2

3

4

5

Price Taste Disease risk Regular

Supply

Ranking of ChickenAttributes

Source: Ifft et al., 2008

A Living from LivestockPro-Poor Livestock Policy Initiative

Willingness to Pay for Safety

52%69%74%93%Industrial

66%70%87%92%Cross

Bred

74%89%91%99%Local

12,500

VND

10,000

VND

5,700

VND

5,000

VND

TYPE

Approximately 10%of current price

Source: Ifft et al., 2008

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Market AccessPhysical Market Access

A Living from LivestockPro-Poor Livestock Policy Initiative

North Viet Nam Poultry Flows

Poultry Farmers

Itinerant Village Traders

(farmgate)

Retailers

Wholesalers

Local/Community Market

Neighbors/Villagers

(farmgate)

47% 15%38%

(64%)

CONSUMERS

(18%)(18%)

73% 27%

(19%)

(54%)

(27%)

Other

intermediaries

93%

7%

Source: Tung & Costales 2007

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Poultry Market Imperfections

High Mortality

Low Input Quality

Low SPS Standards

Low Bargaining

Power

Moral Hazard

Distrust,

Adverse Selection

A Living from LivestockPro-Poor Livestock Policy Initiative

Summary 4

• Significant scope for productivity increase in most smallholder households.

• Urban households exhibit high willingness to pay for local, traditionally raised poultry / livestock varieties and safety certification.

• Market participation by smallholders is plagued by high access costs and information failures

A Living from LivestockPro-Poor Livestock Policy Initiative

Conclusions 1

• Because of its high value (-added) livestock can make a substantial contribution to poverty reduction and economic growth.

• Heterogeneity prevails and ‘pro-poor’ livestock development policies need careful targeting.

• In a dynamic export-oriented economy, an essential way to promote rural livelihoods is by improving the terms of domestic urban market access for small farmers.

A Living from LivestockPro-Poor Livestock Policy Initiative

Conclusions 2

• Governments need to realize that smallholders are resource efficient and resilient, and that they currently constitute the backbone of the agriculture sector (rather than regarding them as ‘unproductive and backward’)

• Policy suggestion: twin-track approach to livestock sector development:• support ‘industrial’ sector for volume & import

substitution

• support ‘smallholder’ sector for value, resource use optimization, & rural development / poverty alleviation

A Living from LivestockPro-Poor Livestock Policy Initiative