1. External Shocks, Producer Risk, and Adjustment in Smallholder Livestock Production: The case of HPAI in Viet Nam
David Roland-Holst, UC Berkeley
with Joachim Otte and Michael Epprecht, FAO
Inception Workshop on
Research Activities on Avian Influenza and Other Transboundary Animal Diseases in South-East Asia
Bangkok, Thailand, January 21-22, 2008

2. Motivation
HPAI control programs can threaten the economic viability of smallholder poultry producers.
As long as extensive poverty exists in the region, backyard chicken will remain a fixture of the landscape.
The question for policy makers is, will these chickens be merely an emblem of poverty, or a catalyst for poverty reduction.
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 2

3. Livestock: The Economic Perspective
More income from natural resources through:
Access to common land resources
Utilization of ‘waste land’ not suitable for crops
Utilization of crop by-products
Increase in output of crop production
More income from family labour through:
Better use of heterogeneous labour resources
Balance seasonal labour demand for crop farming
Use of labour for processing of primary products (value added capture)
Release labour for more productive purposes (draught animals)
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 3

4. Rural Income Sources in Viet Nam
Average: USD750/household/year
Poverty line: app USD650/hh/year
Source: PPLPI 2005
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 4

5. Livestock Ownership in Viet Nam
% Households owning livestock
Urban
Rural
Source: VLSS
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 5

6. Livestock Ownership in Viet Nam
Herd / Flock Composition
Urban
Rural
Source: VLSS
Numbers
Pigs and poultry dominate (>90% of income producing livestock). Chickens are widely held, but less marketed than pigs.
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 6

7. Rural Livestock Income
Regional heterogeneity in livestock income
North-South decline in the share of livestock-derived income in total income
Dominance of pig-derived income in all regions, but less so in poorest regions
Cattle relatively important in Central Highlands and South Central Coast
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 7

8. Poultry Sector Composition
Flocks by Size Class
Poultry by Flock Size Class
>118 million
birds
7.9 million
flocks
Flock size class
Flock size class
birds
birds
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 8

9. Poultry Income by Poverty Status
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 9

10. Market Access - a Basic Policy Challenge: How to Help the Poor?
Market access is the gateway out of long tern poverty for most of the world’s poor.
The poultry-dependent are more likely to be poor, and poultry income thus offers a strong catalyst for poverty reduction.
How then can we best facilitate improvements in this source of income?
Answer: Promote self-directed poverty alleviation though improved market access.
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 10

11. Where are the poor?
Poverty Incidence
Poverty Density
The majority of Viet Nam’s poor are well within reach of markets, and diversification toward livestock and other marketable agriculture can facilitate their exit from poverty.
Generally, these are also more likely to be “median poor,” those with the at least the minimal productive assets needed for household enterprise development.
Source: IFPRI
Source: IFPRI
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 11

12. Poverty and Related Variables
Favorable
Unfavorable
Poverty is very highly correlated with market distance and adverse terms of trade (output/input price ratios).
Farmers are in the ice business – the value of their output (and their bargaining power) declines sharply with distance.
Poverty
Specialization
Mkt. Distance
Ag TOT
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 12

13. HPAI as an External Shock
In Vietnam and elsewhere in SE Asia, smallholder poultry production has been disrupted by the advent of HPAI.
Current risk reduction strategies have direct costs and adverse incentive effects that undermine the livelihood benefits of poultry.
Rather than being seen as contributors to a global commons of disease prevention, smallholders are seen as part of the problem.
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 13

14. Coping Strategies for Smallholders
Exogenous
Compensation
partial (20% of value of culled bird)
late (several months delay is not uncommon)
none for revenue foregone
Restocking assistance
delayed
inappropriate
Product certification, traceability, and other quality incentives
Endogenous
Gains through price increases of substitute products
Intensification of other farming activities (e.g. pig production)
Engagement in ‘new’ farming activities (e.g. fruit)
‘Release’ family labor for off-farm employment or migration
Draw in savings and social networks
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 14

15. Disease Risk versus Product Quality
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 15

16. Improving Farm Balance Sheets
Three ways:
Increase output – traditional (Green Revolution) productivity policy, extension services, etc.
Reduce costs – local varieties are already low cost
Increase prices – quality improvement
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 16

17. Household Income from Poultry
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 17

18. Conclusions
Livestock plays a complex role in the rural economy, but it can be an important catalyst for smallholder poverty reduction
In emerging economies like Viet Nam, an essential way to promote rural livelihoods is by improving the terms of urban market access for small farmers.
A multi-level approach to (rural) development and self-directed poverty reduction may be desirable, e.g.
Macro – infrastructure investment and good governance
‘Median’ poor – livestock development targeted at households above a critical level of resource and financial capacity, focusing on extension services, standards, and product quality certification
Poorest – labor market facilitation
Controlling Avian Flu and Protecting People’s Livelihoods | Mekong Region 18