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Ministry of Agriculture & Rural Development Collaboration for Agriculture & Rural Development

Project 030/06VIE
Developing a strategy for enhancing the competitiveness of rural
small and medium enterprises in the agro-food chain: the case of
animal feed Milestone 4
A. Report on the key issues identified from consultation with major
industry stakeholders
B. Detailed questionnaires developed for data collection from firms in
the livestock feed sector

May 2008


sector. Are there policies that could be implemented to improve the
competitiveness of SMEs in the animal feed sector? Domestic companies are
perceived as weaker than foreign ones in terms of three factors which decide
competitiveness: management of quality and technology, after sale service and
material purchasing strategy.
• The high level of material inputs that are imported raise animal feed
production costs. Should material inputs be liberalized? For example, import
materials are subject to 3 kinds of tax (import, VAT and revenue income tax).
There is a need to understand exactly what taxes are paid by the livestock feed
sector on inputs and outputs.
• Linked to the issue of imports, should there be a local materials policy? For
example, how can agricultural and industrial by-products be better used? It
was suggested that if by-products could be used, about 4-5 million more cattle
could be fed, and problems of environment pollution and job opportunities for
rural people addressed.
• Both foreign and domestic mills do not operate to capacity because of unstable
livestock production. More research on producers’ incomes and production
strategies is needed. The strategy of developing networks of producers and
small animal feed mills need to be investigated.

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• Land for livestock, and credit for both feed production and livestock
production are limiting.
• There are issues with data. It was argued that GSO data underestimates
production from the livestock feed sector, and livestock production from the
household sector because the GSO gets reports on numbers of animals at Aug
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, so they have no idea on how numbers change during the year. Real data is
2 ½ times higher than GSO data for animals (and milled feed?).

production). On the other hand, smallholder livestock production is 90% of
production.
• Production is not matched with mill location – there is oversupply of feed in
some provinces – the spatial location of raw material production, feed
production, and livestock production seems important. Some experts think
there should be a strategy for organising production, others disagree.
• Need to understand if the supply/value chain of the SMEs is different to larger
mills. It was suggested that many small mills only produce concentrate and
sell to remote locations. Is there a niche market for SMEs? Need to look at

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comparative advantage in the whole value chains (e.g. for large and smaller
mills) and consider social and environmental issues as well.
• Poor and out-dated technology used in small mills. Lack of credit to make
improvements.
• Potential role of the feedmill association to provide feed recipes, training and
laboratories to the SME sector.
• Seasonality in livestock production (particularly pigs).
• Aspects of feed quality that need to be considered:
o Input quality and storage (links to maize harvest month)
o Cleaning of equipment (rats, contamination)
o Accuracy of mix/quality of pellet
o Storage of feed products (antioxidants – fats go rancid and spoil the feed)
o Raw materials should be tested especially if they come from lots of
different locations
o Mycotoxins – cause low feed intake (palatability) – use of mycotoxin
binders (antifungals)
• Technical issues that need to be considered:
o Key technical areas are infrastructure and equipment, throughput capacity
and storage (e.g. a reasonable threshold capacity for a mill would be

avoids payment risk with farmers as the agents pay the company directly.
• Large companies say that small companies can’t compete: they have no
capital, can’t buy raw materials to store for 6 months, have no advanced
technology, and have to employ too much labour
• Small companies say that their biggest issues are availability of capital and
land, increasing production costs, and the cost of credit from VBARD (1.03%
mth). Often they need to mortgage private assets.
• Small companies say it is difficult to compete with larger companies –
especially in import procurement. Bigger companies can also give agents a
bigger bonus. Some perceive that only competition from large companies is an
issue – competition from other SMEs is not a problem.
• Feed recipe costs are too high for small firms – should the GoV provide
support, especially technical support and training, for small firms? The
software for calculating least cost rations is cheap – but there is insufficient
technical/ management capability to use this in small firms.
• Some small feedmills are not actually mills – they are really just mixing
facilities (producing concentrate)
• There is a perception in large foreign-owned mills that Vietnamese farmers
lack knowledge about correct feeding of livestock (from a nutritional and
growth perspective).

4. Key issues identified from field visits to livestock producers
• Ad hoc use of antibiotics and additives in livestock production
• Odour/water pollution and noise issues for business located in close proximity
to village housing and water supplies
• Producers perceive price of feed to be high
• Perceived (good) quality of feed is a major reason for brand choice, along with
price. Producers judge feed quality on results and company reputation.
• Small holder producers often use complete feed as a concentrate – mixing
complete feed with home grown feed.