News and updates on research on livestock value chains by the International Livestock Research Institute and partners

Tuesday, December 07, 2010

Informal contract arrangements are an economic boost for Vietnam’s small-scale pig farmers

Smallholder pig production in northern Viet Nam
Farmer Ma Thi Puong feeds her pigs on her farm near the northern town of Meo Vac, Viet Nam. (Photo credit: ILRI/Mann)

The rapid growth in demand for pork in Vietnam presents an opportunity for rural pig-keeping households to improve their incomes. This project on contract farming for equitable market-oriented smallholder swine production in northern Vietnam sought to characterize the ‘true’ costs and benefits of contract farming of swine in northern Vietnam.

The ultimate objective was to understand the barriers to participation of smallholders in contract farming and other market arrangements and to identify a set of policy and intervention options that would facilitate profitable market-oriented livestock farming partnerships.

The project was carried out in four provinces of northern Vietnam that supply slaughter pigs to the Hanoi market: Bac Giang, Ha Tay, Thai Binh and Thanh Hoa. Selected case studies assessed a variety of institutional arrangements and provided information on marketing arrangements for pigs and pig products under different institutional forms, and on contractor strategies for targeting and selecting producers in Northern Vietnam.

Below are a few key highlights of the project findings.

Scale of production is a barrier to smallholder participation
Smallholder farmers keeping only a few pigs tended to be locked out of participating in formal contract arrangements primarily because contractors preferred to engage farmers with more than 50 sows and large-scale farms that generated outputs of more than 5 tonnes live weight per year.

Informal contract arrangements benefit smallholders
Informal contracts with co-operative societies can help small-scale farmers generate better returns in short-duration pig production systems such as production of crossbreeds under farrow-to-wean and grow-to-finish systems. However, for longer production cycles (farrow-to-finish), independent producers had higher returns to labour. The benefits of contract farming arrangements included lower transaction costs, protection from production and market risks, and access to quality inputs, services, financing, information and markets for outputs.

Informal contract arrangements are effective
Based on the comparison of returns to labour between farmers with and without contracts, informal contract arrangements were effective in facilitating economic returns from pig production by providing farmers with a number of benefits and services such as price discounts, technical assistance, market information, delivery of inputs to farm and collection of outputs from farm.

The project was supported by the Food and Agriculture Organization Pro-Poor Livestock Policy Initiative (FAO-PPLPI) and administered by the Market Opportunities theme of the International Livestock Research Institute (ILRI) in collaboration with staff from Hanoi Agricultural University and the International Food Policy Research Institute (IFPRI).

For more information, please contact Dr Lucy Lapar of ILRI (l.lapar [at]

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