AN ECONOMIC ANALYSIS OF SWEET POTATO PRODUCTION AND UTILIZATION FOR ANIMAL FEED IN NORTH VIETNAM • NGUYEN TUAN SON SUBMITTED TO THE FACULTY OF mE GRADUATE SCHOOL UNIVERSfIY OF IBE PHILIPPINES LOS BANOS IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR IBE DEGREE OF MASTER OF SCIENCE (Agricultural Economics) April 1997 The thesis attached hereto entitled "AN ECONOMIC ANALYSIS OF SWEET POTATO PRODUCTION AND UTILIZATION FOR ANIMAL FEED IN NORTH VIETNAM~, prepared and submitted by NGUYEN TUAN SON in partial fulfillment of the requirements for the degree of Master of Science (Agricultural Economics) is hereby accepted. AG~~A fkU~ A. £j~~~ FLORDElaZA A. fANTicAN • Member, Guidance committee Member, Guidance Committee ~e1J H,n 1t:t<17 Date Signed . ACHILLES C. COSTALES Member, Guidance committee Chair, Guidance committee !)/ &.) l?'J:r ftH1~ ~? Date Signed Date Signed Accepted as partial fulfillment of the requirements for the degree of Master of Science (Agricultural Economics). Q~~,J, ROBERTO F. RANOLA, JR Chair, Department of Agricultural Economics, Date Siw\ed ~j .. iJj, ANNINb~nlONELLA Dean, Graduate school University of the Philippines Los Banos BIOGRAPHICAL SKETCH The author was born on April 11, 1960 in Hatinh province, Vietnam. He is the first of five children of Nguyen My and Dang Thi San. He finished his elementary education from Thachviet Primary School, Hatinh province in 1976. He obtained his high school in 1979 at Ly Tu Trong High School, Hatinh. In September, 1979, he became a student ofHanoi Agricultural University (HAU), where he took • up an undergraduate course in Agricultural Economics at the Faculty of Agricultural Economics. He got his Bachelor of Science in October 1984. In April 1985, he joined Hanoi Agricultural University as a teaching assistant. He was appointed as an instructor in 198 7 at the Department of Agricultural Statistics and Accounting, Faculty of Economics and Rural Development. He was awarded a scholarship by the SEAMEO Regional Center for Graduate Study and Research in Agriculture (SEARCA) to pursue his M. Sc degree in Agricultural Economics at the University of the Philippines Los Banos (UPLB), College of Economics and Management, from the first semester school year 1995-1996 to the second semester 1996- 1997. He is happily married to Bui Thi Thu Huyen, with whom he has two children, Nguyen Anh Due and Nguyen Huyen Ngoc. NGUYEN TUAN SON iii ACKNOWLEDGMENT The author wishes to express his deep gratitude to the following persons who gave invaluable support, help and encouragement in the pursuit of his graduate studies: To Dr. Liborio S. Cabani11a, major adviser and chairman of the Guidance Committee, for his invaluable advice and continuous guidance throughout the study period, for the encouragement and for sharing his precious ti~e going over this work; To Dr. Agnes C. Rola, Dr. Flordeliza A. Lantican and Dr. Achilles C. Costales, members of the Guidance Committee for their guidance, encouragement and suggestions and for sharing their time for the improvement of the manuscript; To the SEAMEO Regional Center for Graduate Study and Research in Agriculture (SEARCA) for granting this scholarship to pursue his master's degree; To the Users' Perspectives with Agricultural Research and Development (UPWARD) program and Dr. Gordon D. Prain, UPWARD Coordinator for granting him a support to conduct the thesis in Vietnam and for other activities; To the teaching staff of the College of Economics and Management, University of the Philippines Los Banos (UPLB), for their guidance; To Prof Dr. Cu Xuan Dan, former Rector; Prof Dr. Nguyen Viet Tung, Rector; Prof Dr. Nguyen Nguyen Cu, Vice Rector of Hanoi Agricultural University (HAU); Prof Dr. To Dung Tien, Dean, and Prof Dr. Pham Van Dinh, Associate Dean of the Faculty of Economics IV and Rural Development~ Prof Dr. Do Thi Nga Thanh, fonner Chai~ and Dr. Pham Thi My Dung, former Chairman, Department of Agricultural Statistics and Accounting; Dr. Ngo Thi Thuan, Associate Dean and Chairman of Econometric Department; Mr. Nguyen Mong Kieu, Vice Chainnan, Department of Econometric; Dr. Ha Hung, Head, Department of International Relations of HAU, for giving him the opportunity and encouragement for further studies; His colleagues at the former Departmeht of Agricultural Statistics and Accounting, the Department of Econometric· of the Fa cuity of Economics and Rural development (HAU) for sharing his responsibilities at the Department during his absence to pursue studies; The Vietnamese Offices: General Statistical Office, General Cooperation of Agricultural Materials, National Institute of Animal Husbandry, Root Crop Research Center, Post Harvest Technology Institute and local authorities of the surveyed areas, for their cooperation in furnishing the needed information; To his friends, Tran Thanh Vmh, Pham Hong Ngan, Mai Thanh Cuc, Tran Dinh Thao, Duong Duy Dong, Thai Anh Hoa, Pham Van Hung, Hoang Van Phu, Mai Van N~ Nguyen Tien Song, Nguyen Bao Toan, Tran Thi Lan Huong, Do Anh Tai and his colleagues, fof their understanding, help and fiiendliness throughout his study period, including assistance in data collect.ion of this thesis~ Lastly, to his parents Nguyen My and Dang Thi San, my parents in-law Bui Quang Canh and Nguyen Thi Mai, to my brothers, sisters and brothers in-law, and especially to· his v beloved wife Bui Thi Thu Huyen, Nguyen Anh Due and Nguyen Huyen Ngoc, sources of his inspiration for their understanding, patience and moral encouragement, to whom this work is dedicated. To those who the author missed to mention, he thanks them 1111. VI TABLE OF CONTENT I. INTRODUCTION I . 1. Statement of the Problem 3 1.2. Objectives of the Study 5 1. 3 . Hypothesis 6 II. REVIEW OF LITERATURE 7 2. 1. Sweet Potato Production in Vietnain 7 2.2. Pig Raising and Feed Utilization 10 2.2.1. Swine Production and Consumption 10 2.2.2. Utilization of Sweet Potato for Pig Feed 13 Ill. SOCIO-ECONOMIC CONDITION IN VIETNAM 17 3 .1. Vietnam Transition Towards a Market Economy 17 3.2. Socio-Economic Condition in North Vietnam 22 3. 2.1. General Condition 22 3.2.2. Condition for Sweet Potato Production in North Vietnam 25 3. 3. National Program on Sweet Potato Production 29 IV. RESEARCH METIIODOLOGY 35 4.1. Conceptual Framework 35 4.2. Data Collection and Sampling Procedure 39 4. 3. Analysis Procedure 40 4. 3. 1. Profitability Analysis 40 4.3.2. Measuring Incentives 46 Nominal Protection Rate 46 Implicit Tariff for Input 47 4. 3. 3. Measuring Comparative Advantage 48 vii ••• Page Net Social Profitability 48 4. 3. 4. Social Valuation Methodology 49 Primary Input 50 Intermediate input 51 Shadow Exchange Rate 52 4. 4. Limitation of the Study 54 V. RESULTS AND DISCUSSION 56 5.1. Overview of Sweet Potato Production and Pig Raising m North 56 Vietnam 5. 1.1. The Trend of Sweet Potato Production in North Vietnam 56 5. 1.2. The Trend of Swine Production in North Vietnam 60 5.2. Policy Incentives on sweet Potato Production 64 5.2.1. Nominal Protection Rate 64 5.2.2. Implicit Tariff for Inputs 65 5.2.3. Profitability and Comparative Advantage 67 Net Private Profitability 68 Net Social Profitability 69 5.3. Utilization of sweet Potato for Pig Feed in North Vietnam 71 5. 3. I . Overview of Sweet Potato utilization 71 5.3.2. Sweet Potato Utilization in Farm Households 73 5.3.3. Comparative and Economic Performance 77 VI. SUMMARY AND CONCLUSION 81 VII. LITERATURE CITED 84. VIII. APPENDIX TABLE 87 viii LIST OF TABLES Table Page 1 Per Capita Consumption of Some Animal Products, 1980-1990 11 2 Monthly Consumption Per Capita in Red River Delta and Mekong River Delta 12 3 Prices of Pork Meat in Ho Chi Minh City, 1988-1993 12 4 Some Socio-Economic Conditions in Three regions of North Vietnam 24 • 5 Common Cropping and Intercropping Patterns with Sweet Potato 26 . 6 Sweet Potato Varieties and Growing seasons 27 7 Yield of New Sweet Potato Varieties (Investigated in Winter Crop, 1986) 28 8 Vietnam: Area and Total Production of Sweet Potato, 1985-1995 57 9 Area and Total Production of Sweet Potato by Region in North Vietnam, 58 1985-1995 10 Vietnam: Pigs and Piglivewieght, 1985-1995 61 11 Pigs and Piglivewieght by Region in North Vietnam, 1985-1995 62 12 Nominal Protection Rate of Sweet Potato Production in North Vietnam, 1995 64 13 Implicit Tariff on Main Production Inputs, North Vietnam, 1995 66 • 14 Net Private Profitability of Sweet Potato Production by Province, 1995 68 15 Net Social Profitability of Sweet Potato Production by Province, 1995 70 16 Sweet Potato Fresh Root Utilization, 1994 72 17 Sweet Potato Utilization in Bacthai and Thanhhoa, 1995 73 18 Sweet Potato Utilization by Hoµseholds 75 19 Total Volume and Cost of Feeds for one Pig in Bacthai, 1995 76 20 Total Volume and Cost ofFeeds for one Pig in Thanhhoa, 1995 77 21 Performance of Pigs fed by Local feeds and Commercial feeds 78 22 Cost and Return Analysis of Pig Raising in Bacthai and Thanhhoa 80 ... ix LIST OF FIGURES 1 Relationship Between farm Technical Improvement for Sweet Potato 33 • Production and Development of Pig Raising in North Vietnam 2 Effect of T atiff on Input and Output 37 3 Trend in Area Planted of sweet Potato? Maize and Cassava in North Vietnam, 59 1985-1995. 4 The Trend in Area Planted of Sweet Potato by Regions in North Vietnam, 59 1985-1995. 5 The Trend in Total Number of Pigs by Regions in North Vietnam? 1985-1995 63 6 The Trend in Total Pigliveweight by Regions in North Vietnam? 1985-1995 63 x LIST OF APPENDIX TABLES Appendix Table ~ 1 Gross Output of Agriculture (At Constant Price of 1989) 87 2 Sweet Potato Production, Area and Yield in Selected Developing Countries, 88 1992-1994 3 Area Planted of Sweet Potato, Maize, Cassava, Rice, Vegetable and Soybean by 89 • Region in North Vietnam, 1985-1995 4 Total Production of Sweet Potato, Maize, Cassava, Rice, Vegetable and Soybean 90 by region in North Vietnam, 1985-1995 5 Import and Export tariff rates for Sweet Potato Products 91 6 Main Goods and Materials Exported and Imported, 1980-1994 92 7 Cost Allocation of Urea Fertilizer, Bacthai, Vietnam, 1995 93 8 Cost Allocation of Urea Fertilizer, Hanoi, Vietnam, 1995 94 9 Cost Allocation ofUrea Fertilizer, Hatay, Vietnam, 1995 95 10 Cost Allocation of Urea Fertilizer, Thanhhoa, Vietnam, 1995 96 11 Cost Allocation of Potassium Fertilizer, Bacthai, Vietnam, 1995 97 12 Cost Allocation of Potassium Fertilizer, Hatay, Vietnam, 1995 98 13 Cost Allocation of Potassium Fertilizer, Thanhhoa, Vi~ 1995 99 14 Cost Allocation ofNPK (16-16-8) Fertilizer, Hatay, Viet~ 1995 100 15 Cost Allocation ofNPK Fertilizer, Thanhhoa, Vietnam, 1995 101 16 Major Technical Coefficients for' Sweet Potato Production, North Vi~ 1995 102 17 Cost Allocation and Production Value of Sweet Potato Production, Bacthai, 1995 103 18 Cost Allocation and Production Value of Sweet Potato Production, Hanoi, 1995 104 19 Cost AUocation and Production Value of Sweet Potato Production, Hatay, 1995 105 20 Cost Allocation and Production Value of Sweet Potato Production, Thanhhoa, 106 • XI ABSTRACT NGUYEN TUAN SON, University of the Philippines Los Banos, April 1997. An Economic Analysis of Sweet Potato Production and Utilization for Animal Feed in North Vietnam. Major Professor: Dr. Liborio S. Cabanilla • The study aimed to determine the effects of government policies on the incentive structure of the sweet potato industry. It reviewed the national program on sweet potato production and the government policies in the input and output markets of the sweet potato industry and related these to the question of whether or not the country has comparative advantage in sweet potato production. The measure of production incentive used was nominal protection rate (NPR). On the other hand, the comparative advantage study focused on the concept of net social profitability -(NSP). The analysis showed that government policies provided incentives to sweet potato growers, as indicated by the NPR values which ranged from 7 percent to 25 percent. But they also served as disincentives for sweet potato growers by imposing positive implicit tariff (IT) on major inputs (i.e., fertilizer) used for sweet potato production. The NSP values in a11 study areas were positive, showing that sweet potato production in North Vietnam had comparative advantage or sweet potato production in the study areas used domestic resources more efficiently. The largest NSP value was 3,517.5 thousartd dong xii and the smallest value was 182.8 thousand dong per hectare of sweet potato in Hatay and Hanoi, respectively. The study also evaluated the prospects of using sweet potato as animal feed in North Vietnam. The results showed that sweet potato products (roots and vines) were mainly used for swine feed. The largest proportion of roots used as feeds was 82.1 percent and the smallest was 50.2 percent in Hatay and Thanhhoa, respectively. For sweet potato vine, the highest proportion used was 80. 8 percent in Thanhhoa. and the lowest was 54. 5 percent in Hanoi. Sweet potato occupied a large part in total feed costs for swine: 16.5 - 33.6 percent in Bacthai and 29. I - 4 5. I percent in Thanhhoa. Weight gains of swine fed with sweet potato, which has good supplemental protein was at par with those given commercial feeds. The study showed that using sweet potato as the main feed ingredient for swine could bring high profit to swine raisers. The highest values of returns on labor in Bacthai and Thanhhoa were 546. 8 thousand dong and 474 .1 thousand dong per swine in one rearing cycle, respectively. The lowest values of returns on labor were I 03 .3 thousand dong and 25 5. 5 thousand dong per swine in one rearing cycle in Bacthai and Thanhhoa, respectively. In general, therefore, North Vietnam has a comparative advantage in sweet potato production and utilization as swine f~. And the swine industry can provide an important source of income generating opportunities in the rural areas and at the same time provide protein-rich foods for the growing population, particularly in the urban areas therefore, it should not be left out in the economic development process. xiii CHAPTER I INTRODUCTION Sweet potato like maize, cassava and potato is a secondary or subsidiary crop in Vietnam. Sweet potato occupied 29.1 percent of total land area planted to cereal crops other than rice during the period 1985-1995. It is important because of its many end-uses and its capacity to produce relatively good yields under poor climatic and soil conditions. World wide studies indicated that root crops, especially sweet potato, are the staple food of about four million people in the tropics. A study conducted by food technologists and nutritionists at the University of the Philippines Los Banos (UPLB) showed that sweet potato flour can replace some amount of wheat flour in making various breads~ sponge cakes:> and cookies. It is the only root crop rich in vitamin A, containing about 500 international units per 100 grams. Nutritional studies have shown that use of sweet potato can fight nutritional problems. For example, I 00 grams of sweet potato tips (leaves) can meet the daily requirements for vitamin A and about one-third of daily adult iron requirements. Sweet potato has many other uses: it can be a substitute for corn as livestock and poultry feed and it is used in the manufacture of starch, alcohol, paste and many other products including explo~ives. Sweet potato has been grown in Vietnam for a long time as a subsistent crop. It provides food insurance during times of calamities such as floods and typhoons. Moreover? many parts of this crop have different uses in the household meal. The leaves are used as vegetable and side dish and the storage roots are consumed as staple food. It is • 2 also a popular snack, especially when mixed with sugar, green beans and peanuts. Aside from food for people, it can also be used as livestock and poultry feeds. In general, sweet potato roots, tops and vines are used by Vietnamese farmers as food, animal feed, propagation materials and a commodity for trade providing cash income. In the past, sweet potato played a supporting role in food supply, especially during rice crop failure. Nowadays, sweet potato is mainly used as animal feed, • particularly for swine. Second to rice~ swine enterprises are a vital component of the livelihood support systems for farm households. Pork is the the major source of protein in the Vietnamese diet. Cash income generated by swine production is significant to farm households but inadequate. Furthermore, swine raising plays a more important role in situations when price fluctuation makes rice production less profitable. Vines and roots of sweet potato, rice bran and by-products of processing are used in the swine industry which provides meat for domestic consumption and export. There is a mutually complementary relationship between swine raising and crop production in general and sweet potato production in particular. The former provides manure - an indispensable input for sweet potato production. In tum, the latter supplies vine and roots as swine feed. The main constraint t<;> swine production is the limited availability of cheap commercial feeds which minimize household's need for cash. Given this situation, sweet potato is one of the most important feed sources for swine production and fulfilling feed 3 demand for swine raising has been one of the main objectives of the national sweet potato production policy in Vietnam. 1.1 Statement of the Problem After Vietnam's re-unification in 1975, its economy was placed under central planning system, where inputs and outputs flowed through the distribution system of the • government and were fixed at low price. In t~e mid- I 980s, the government implemented policy reforms, including those on food policy, to change the economy from a centrally planned to a market-oriented one. Starting in 1988, more advancement in policy reforms has been implemented to further liberalize the agricultural sector. The latest reforms were aimed at increasing security of tenure on land allocated to individual households; privatization of output markets; decentralization of input supplies; and allowing individual decision-making on resource allocation, crop choice and crop management. Vietnam's change to an exporter status can be partially attributed to the reform policies that have been pursued since 1981 (Pingali and Xuan, 1990). One of the major national programs m recent years has been to increase the production of food crops particularly_ rice, sweet potato, cassava and potato. Government policies have been designed to achieve the objectives of production increase, export increases and the stability of domestic price of rice, sweet potato, potato, etc. Moreover, the increase in rice exports and other agricultural product exports was expected to ease 4 the country's problems on trade balance. Since 1989, Vietnam has become the world's third largest rice-exporting country after Thailand and the United States of America. At the same time, sweet potato production has decreased because demand for sweet potato consumption had declined rapidly, while demand for its use as animal feed and processing slightly increased. Owing to the importance of root and tuber crops in agricultural production, the ·• Ministry of Agriculture and Food Industry (f\4AFI) established a Root and Tuber Research Program. This Program aimed to assemble scientists and extension staff to cooperatively work out solutions to the problems related to crop varieties, soil erosion, processing and marketing of root and tuber crops. No study has so far been conducted on the economic analysis of sweet potato production and utilization as animal feed in Vietnam. In the process of implementing the national program on root and tuber crops, some constraints, foremost of which is scarcity of resources, were noted. Increasing the production of any crop entails the use of more • resources (i.e.~ land, labor and capital), thereby reducing their availability in the production of other crops. Because of the economic problem associated with the allocation of resources, it is necessary to conduct some basic research so that policymakers could be informed on which production activi~ies are efficient in earning or saving foreign exchange for the country. This study was proposed to answer the following questions concerning sweet potato production in North Vietnam: 5 l ) What are the problems encountered by the household farmers and the semi- commercial piggeries in production and marketing? 2) What is the importance of using sweet potato for swine industry? 3) Are there good prospects in the use of sweet potato as swine feed? 4) Are there government policies that promote production and utilization of sweet potato as animal feed? 1. 2 Objectives of the Study The general objective of this study was to make an economic analysis of sweet potato production in 1995-1996 and to analyze the potential and prospects of using sweet potato as swine feed in North Vietnam. The specific objectives of this study were as follows: l ) To analyze the feed use of different scales of swine enterprises (household farmers and semi-commercial piggries). 2) To analyze the prospects of using sweet potato as swine feed. 3) To analyze the impact of government policies on production incentive and use of sweet potato as animal feeds. 4) To determine whether or not the use of sweet potato m swine ra1smg ts comparatively advantageous to the country. •• 6 1.3 Hypotheses For the purposes of this study, the following hypotheses were tested: I . Government policies in agricu~ture provide incentives to sweet potato growers and swme raisers. 2. The country is efficient .in the production and utilization of sweet potato for swine production. 3: Different scales of swine enterprises have different ·levels of use of sweet potato as swine feed . •• 7 CHAPTER II REVIEW OF LITERATURE This section introduces some of the recent studies on sweet potato production and utilization for animal feed, particularly for swine. .. 2. t Sweet Potato Production in Vietnam In 1989-1991, the Regional Coordination Center for Research and Development of Coarse Grains, Pulses, Roots and Tuber Crops in the Humid Tropics of Asia and the Pacific (CGPRT) and Vietnam's Food Crop Research Institute, Potato and Vegetable Center (National Institute of Agricultural Science) and University of Agriculture and Forestry conducted a research on sweet potato production and marketing in Vietnam. This research concluded that sweet potato played an important role in agriculture. It was grown widely and continued to be a major crop in typhoon prone areas because of its ability to survive high winds and flooding. This research also found that average incomes of sweet potato growers in the North, Central and South areas were 1. 7 mi11ion dong, 1.3 million dong and 2.5 million dong per year, respectively (US$ 1 = 3,200 dong). Yields of sweet potato in the North, Central and South Vietnam ranged between 10-24 tons per hectare more than do~ble the reported national average yield. The linkage between sweet potato production and the other sub-sectors, especially swine production, was substantial. This almost universal characteristic of root crops had already been repeatedly pointed out in various reports as basis for further development of a village level 8 processing industry. Next to the livestock sector, the starch production industry (noodle, rice paper) was also important (Bottema, 1991 ). Sweet potato ranked third after rice and maize in terms of land area given to its production. But the area planted decreased from 450,000 hectares in 1980 to 320,000 hectares in 1989. Sweet potato from the North accounted for two-thirds of the country's total production. It is planted in winter and spring. The winter sweet potato was grown ••• between wet season rice and dry season ric;e in the whole region. Sweet potato was planted in paddy fields and in backyards. In the rice fields, sweet potato was grown in October and harvested in January and after that, the land was prepared for rice or other crops. Those grown in backyards were mainly used for planting materials. The potential land for winter crops was enormous, estimated at about one million hectares. At present, only 30 percent of this land area had been used, of which 48 - 60 percent was for sweet potato. Spring sweet potato was usually grown in poor sandy soil and non-irrigated areas. Sweet potato composed 13 -19 percent of the total food production. It was the • most significant root crop in food production. In some areas, sweet potato was considered as the most important food crop. The proportion of household income from sweet potato compared to rice was 28 percent in the North Central region and 24 percent in Red River Delta and Highlands-Midlands regi9ns. Most farmers applied a substantial quantity of manure (8-12 tons per hectare). Chemical fertilizers were commonly used, nitrogen being the most widely used fertilizer, but the quantity of chemical fertilizers applied was rather small. In Highlands, labor investment was 167 man-days per hectare, while in Red River -• • 9 Delta and North Central regions, it was 219 man-days and 293 man-days per hectare, respectively. These were close to the labor requirement for rice. A comparison of sweet potato, groundnut and rice showed that groundnut had the highest gross return and sweet potato had the lowest. Returns on land and labor investment had the same trend as those of gross returns. The main constraints for sweet potato production in the North were lack of high yielding varieties~ inadequate irrigation and lack of fertilizer, technology and • facility for processing. Low economic returns were also a limiting factor (Hoanh, et al., 1991 ). Root and other non-rice crops provided over 50 percent of the local food supply in the Central Coast region. In this area, sweet potato was grown mainly on sandy and gray podzolic soils, which were considered as marginal with inadequate irrigation. On the field, sweet potato has gradually been replaced by groundnuts and multiple rice crops. Ninety­ six percent of farmers claimed that the lack of processing technology and facilities limited the development of sweet potato production, therefore, a major part of sweet potato outputs were consumed directly or prepared as dried chips, which had low economic value. Ninety percent of farmers confirmed that insufficient inputs resulted in low productivity of sweet potato. (Kim, et al., 1991 ). Sweet potato has been a c9mmercial crop m parts of the Mekong Delta and farmers have proven to be willing and capable of investing significantly in its production. These investments were considerably higher than those for rice, confirming the commercial importance of sweet potato. Primary problems in production were root • 10 diseases, input shortage and lack of irrigation systems. In the socioeconomic aspects, unsteady prices were a disincentive for sweet potato growers. In terms of marketing, the price stability of sweet potato was a big problem; prices fluctuated considerably because of seasonal production and perishability- quality loss. (Binh, et al., 1991). Sweet potato production in the Philippines was found profitable at the farm level. Higher profit rates were possible if recommended practices were adopted. This implied • that sweet potato could serve as an important source of cash income for farmers. At the processing level, the products derived from sweet potato (chips and flour) were efficient as import substitutes, enabling the conservation of foreign exchange. It must be emphasized that this was contingent on improvements at the farm level production system. Thus, it was clear that policies and programs that serve to improve farm production systems must be put in place (Cabanilla, 1996). 2.2 Swine Raising and Feed Utilization •• 2.2. t Swine Production and Consumption Vietnam is primarily an agricultural country. The livestock sector plays significant role in agriculture. The growth rate of the livestock sector was slow from 1976 to 1985 but rapidly increased when the country had food crop surplus. Rice and swine production had been two major components of agriculture for a long time. Traditionally, pork fat is used in cooking, therefore, the native breeds were • 11 adapted in the production system. These pigs are black, with small ears and big belly, put on a lot of fat, weigh 45-50 kg. They can be found in the mountainous regions. Although livestock production has been well developed in the past decade, the consumption of animal products has remained very low because the purchasing power of the people was limited (Table 1) . .. Table 1. Per Capita Consumption of Some Animal Products, 1980-1990 PRODUCT UNIT 1980 1985 1990 GROWTH RATE(%) Meat kg 4.82 7.20 9.80 7.35 a. Beef kg 0.58 0.40 0.90 4.49 b. Pork kg 2.99 5.20 6.60 8.24 C. Poultry kg 1.25 1.60 2.20 5.82 Egg piece 6.90 13.80 22.50 12.55 Milk liter 0.43 0.47 1.20 10.81 Source: Livestock enterprise development in Vietnam (Danh, 1992). • This situation led to protein malnutrition, since about 20 percent of the daily protein intake come from animal products. There was a big difference in the living standards between the urban and the rural areas, especially in food and meat consumption. The consumption levels of rice, meat and fish were also different between the North and the South (Table 2). The price of lean meat was 1 .8 0 times more expensive than pork fat in 1988 and increased to 4.42 times in 1992 (Table 3). Therefore, the farmers selected their herd for the lean meat type. Vietnam has imported many high yielding breeds such as 12 Yorkshire, Landrace, Duroc and Edel to provide boars and crossbred weaning to the farmers. The most serious constraints in swine production are the output and price of meat. Decreasing exported meat may reduce swine production in larger scale enterprises. However, it will be increased in the local market when the country is industrialized. In the socioeconomic aspect. unsteady prices of pork meat are a disincentive for swine producers. (Danh, 1992). Table 2. Monthly Consumption Per Capita iq Red River Delta and Mekong River Delta YEAR RED RIVER DELTA MEKONG RIVER DELTA Rice Meat Fish Rice Meat Fish 1981-1985 12. l 0.38 0.29 15.8 0.48 0.79 1986-1988 12.1 0.36 0.28 13.9 0.64 0.55 1989-1990 12.6 0.48 0.36 12.0 0.70 1.32 Source: Livestock enterprise development in Vietnam (Danh, 1992) . • Table 3. Prices of Pork Meat in Ho Chi Minh City, 1988-1993 (US$/ kg) TYPE OF MEAT 1988 1989 1990 1991 1992 1993 Lean meat 0.38 1.23 1.25 1.67 1.60 1.86 Pork-fat 0.21 0.78 0.47 0.52 0.63 0.42 Meat I fat price ratio 1.80 1.57 2.66 3.21 2.53 4.42 Source: Livestock enterprise development in Vietnam (Danh. 1992) 13 2.2.2 Utilization of Sweet Potato as Swine Feed Sweet potato has been used mainly for human food in Vietnam. Since 1989 when Vietnam became a rice exporter, sweet potato has been commonly used as animal feed and raw material for processing. There is a substantial linkage between the production of sweet potato and swine production, and the proportion of sweet potato roots and vines used for animal feed was 1arge and potentially increasing (Bottema, 1991 ). About 65 percent of sweet potato were used as animal feed in fresh form in some rural areas. The total green material from sweet potato is equivalent to 50 percent of root weight; it is also an important feed source for swine. About 20 percent of sweet potato vines is used for planting. The rest is used for swine and cattle as fresh feed and one part is dried and stored for later use (Nghiem, 1991). Nghi, et al. ( 1991) conducted a research on storage and utilization of potato, sweet potato and cassava for animal feed. They observed that the average protein content in sweet potato was 2.88 percent. In Vietnam, fresh sweet potato can be preserved in silage and still would have good quality. Ensilaged sweet potato can occupy 30-40 percent, even 50 percent, of the swine ration according to nutritive value. In 1994, the UPWARD (User's Perspective with Agricultural Research and Development) program collaborated with some institutes in conducting a diagnostic study of root crop utili.zation in four provinces of North and Central Vietnam. The results showed that sweet potato was mainly used as swine feed in North Vietnam and the 14 proportion of fresh root used as feed varied from 20 to 50 percent. A large proportion was used for making dried chips (from 10 to 30 percent fresh root) which was used as both human food and swine feed. Based on the results of this study, the International Potato Center (CIP) and UPWARD funded a project on sweet potato production and swine feed in Thanhhoa and Danang Provinces. The project started in January 1997 and will end in 1999. In South Korea, sweet potato has bee.n used as animal feed, silage material which has been considered to improve the meat quality of hogs. The silage mixed with crushed sweet potato root and rice bran at a ratio of 80:20 (w/w) or crushed sweet potato root, vines and leaves, and rice bran at a ratio of 60:30: IO (w/w/w) and stored for one month in silos would be a good feed for hogs. It could be fed up to 60 percent of the total feed for hog fattening (Byeong Choon Jeong, 1992). Sweet potato has been widely used as animal feed all over the world. Statistical data from the Food and Agriculture Organization (FAO) indicated that sweet potato used as animal feed was 40 percent of total output in China, 3 5 percent in Brazil, 30 percent in Madagascar and 17 percent in the Republic of Korea (Scott, 1992). Sweet potato stem and leaves are important feed sources. They can be fed raw, cooked, or ensiled. Dry stem and leayes or their meal can also be used. Sweet potato stem and leaves can be harvested 4-5 times in a production season. They can reach a total harvest of about 13 5 tons/ha of fresh material, enough annual green feed for 105 swine. Often, the fresh harvest is cut into one-inch pieces and mixed with wheat bran, com flour, 15 husk bran, and water. The suitable amount fed per kg of hog body weight is 0.1- 0.12 kg of cuttings. Sweet potato stem and leaves can be ensiled for swine feed. The suitable amount fed per kg of anima1 body weight is 0.1-0.15 kg of silage~ above this amount, diarrhoea can happen. The most suitable way of using sweet potato fresh stems and leaves or si1age is to mix it with formulated feed to save part of the more expensive product. The 3 5-60 kg swine fattening formulated feed is composed of dry sweet potato chips, 10. 5 percent~ dry sweet potato stem meal, 5 perceqt; com, 26 percent~ wheat bran, 20 percent; rice bran cake, 17 percent; rape cake, 10 percent; cotton seed cake, 8 percent; silk worm pupa ,2 percent~ limestone powder, 1 percent~ and salt, 0.5 percent (Li, et al., 1991). A research replacing 100 percent and 50 percent of the corn in the rations by raw and roasted sweet potato meal for starter, growing, growing-finishing and finishing pigs at weight group of 5-15, 15-30, 30-50, and 50-90 kg, respectively, to determine the crude protein, crnde fiber, and dry matter digestibility of rations showed that no significant differences were found in experimental and control groups (Elizabeth, 1972). A project supported by SEARCA reported that cooked sweet potato mixed with a good protein supplement resulted in weight gains in fattening pigs as did com with the same supplement. The energy values of sweet potato are similar to those of com and sorghum. The nutritive value of a kil.ogram of com is equivalent to 0.80 kg sweet potato, 0.15 kg soybean and 0.05 kg oil (SEARCA, 1993). Kartiarso (1980) conducted two experiments to evaluate the feeding value of sweet potato for early weaned pigs. In the first experiment, the energy in treatment 1 16 (control) was provided by corn; those in treatments 2, 3 and 4 were provided by cooked sweet potato, dried sweet potato and enzyme predigested sweet potato, respectively. The results of this experiment indicated no significant differences between treatments in feed efficiency, feed intake and daily gain in weight of pigs; sweet potato can replace com in the diet of early weaned pigs. The second experiment determined the effect of adding sugar and oil to sweet potato-based diet. The results showed that sugar supplementation of sweet potato diet increased feed intake of pigs by 13 .28 percent and improved daily gain and feed efficiency by 16.27 percent and 2.60 percent, respectively. Moreover, when both sugar and oil were added to the sweet potato diet, growth rate was increased by 21. 16 percent and feed efficiency by I 0. 50 percent. Oil supplementation alone failed to improve the performance of the weaning pigs. Castillo (1964) as cited by Cabanilla (1996) asserted that corn can be entirely replaced by sweet potato silage in the swine ration. Silage can be used as animal feed the whole year round. When used in the swine ration for growing and fattening, silage produced the same weight gains as corn since it had the same feed conversion efficiency as com. Montanez (1982) as cited by Cabanilla (1996) reported that sweet potato can be used as a major basal feed ingredient_ in swine rations. At a substitution level of 50-60 percent of the entire ration, no significant disturbance in growth performance of experimental animals was observed. Animals fed with sweet potato-based ration were as efficient feed converters as animals fed with a commercial ration. .if 17 CHAPTER III SOCIOECONOMIC CONDITIONS IN VIETNAM 3.1 Vietnam's Transition Toward a Market Economy In presenting primary data regarding agriculture in Vietnam, one cannot escape the task of providing a more general framework within which to place the information. The reason for this observation is simple. Vietnam has followed a socialist path. Most of the agricultural economic studies in Asia are situated in market economies; the socialist countries have hardly been studied. The classic tools used in any economic study - production systems, prices, trade structure and markets - are in practice very hard to apply. Prices for major commodities were not officially recognized until 1988, while the whole process of production, marketing and distribution is subject to state prescribed structures. It is often indicated that Vietnam has been in transition since the late 1970s. In the context of Vietnam, the use of the word "transition" could imply that it is clearly known what the starting point and the final outcome of the process will be. To a degree this may be true. As many recent newspaper reports attest, it is widely recognized that by 1991 and onward, Vietnam will have to increasingly participate in the world market. Yet, few observers have pointed out the longer-term undercurrents in the development of Vietnam toward a more market-oriented economy. These are of vital importance to Vietnamese agriculture. A sequence of recent and less recent changes have affected the factor and product markets of the agricultural sector, as follows: 18 a) Since the late 1970s, privatization in production has gradually become more important, first through the three-point contract (See Appendix 1) and later through individual land lease. After the war (1975), agriculture of Vietnam was unified, with the potential and strength of the North and South supplementing each other to jointly develop toward one direction (i.e., socialist agriculture). However, the developments were very complicated because of the impacts of collective production relations and centrally planned management model. In this productjon model, agricultural inputs and outputs flowed through the monopolized government distribution system at fixed low prices. Under this distribution system, the farmers could buy agricultural material inputs at costs lower than the real cost of producing or importing them. In turn, they had to sell their products to the government at lower prices than the market prices. The basic characteristics of this period was strong development of agricultural collectivized, centralized and specialized production model. This led to cooperative production and business had low efficiency, regular loss and consecutive decline in crop and animal yield and productivity. Vietnam agriculture during the period 1976-1980 was unstable with many aspects on downward tendency: imbalance occurred in food and foodstuff production and consumption; materials for industries were in short supplying and agriculture expot1 value declined. Asriculture and the rural economy were subject to a comprehensive crisis in both production relations, production labor force and production output. •· • 19 b) In the period 1981-1988, the Communist Party conducted a research and drew practical experience for the formulation of a new contractual mechanism in agriculture. The instruction N 100 CT/ TW was on "improvement of contractual activities and extension of product contract to labor groups and individuals in the agricultural production cooperatives" ("contract I 00" for short). "Contract I 00'' was not a new model of agricultural organization and management, but only an improved contractual form, • transforming the system from production team into farming households. This was a transition step from a centralized bureaucracy to an autonomous mechanism by each farming household. ''Contract I 00'' was simple and had more strong points than the previous form of piecework, initially restoring the farmers' autonomy in land and labor use, attaching laborers to land, thus enabling farmers to pay more attention to final output. Since 1988, internal trading in farm inputs has been liberalized. That is, both cooperatives and individuals have been allowed to distribute farm inputs. Control of farm products price was relaxed in the late 1980s. Cooperatives received export licenses, competing with State trading firms. Production and marketing of the major proportion of non-rice food crops and vegetables have been left to individual farmers and traders, resulting in undistorted price formation and individual incentives In 1986, an institutional change took place showing the sincere attempt to break through the compartmentalization of the State apparatus concerned with agriculture. The three Ministries of Agriculture, Food Industries and Food were brought together into one 20 Ministry of Agriculture and Food Industries. The aim was to facilitate better integration and coordination of decision at policy level. c) From 1989 up to now, permeating the policy on a comprehensive socioeconomic renovation set out by the 61 h Congress of the Communist Party of Vietnam, Resolution N 10 by the Politburo and then the resolution by the 6th Central Party Committee defined further the renovation of the agricultural management mechanism, under which farming household was consider~d an autonomously economic unit in rural areas. Then the Central resolution N 5 (7th Congress) on rural areas and agriculture ( 1993) improved the contractual mechanism to households and at the same time worked out important measures for developing rural economy and society, and a comprehensive and suitable agricultural production according to an advanced structure, combining agriculture with rural industries and services. A new and advanced point in Resolution NS compared with Resolution N 10 was the extended rights of land users (rights of land users: right change, transference, lease, heritage and collateral), thus ensuring farmers to invest in land reclamation, land replenishment and land improvement in order to multiply seasonal crops. Resolution N 5 also focuses on the issue of rural economic structural improvement on the basis of the development of rural industries and services, crop diversification toward the direction of efficiency and moving agricultural labor force to forestry, fishery and non­ agricultural occupations. This Resolution also affirmed the long-term existence of all economic sectors in rural areas, of which the autonomous role of household economy was ensured together with the renovation of cooperatives and state owned enterprises. -· 21 Individual and private economies were encouraged in rural areas. Resolution NS, therefore, promoted agricultural production and improved farmers' living standards. Yet, the process of recognition for this gradual move to a market economy had remained slow at policy level, although it is being accompanied by an increasing number of different opinions in the various national committees. Major policy changes are almost invariably time consuming and in Vietnam there are very substantive reasons for the extended deliberations. The decisions present~ awaiting the leaders of Vietnam, may, in the context of agricultural development, seem rather trivial in non-socialist countries, but in Vietnam these decisions have far-reaching changes. Fforde and de Vylder, in a lucid description of the Vietnamese economy, indicated their inclination to use the word "change" rather than "structural adjustmenf' in the context of Vietnam, which puts less emphasis on the consequences of intentional government intervention. There is wisdom and certainly scientific justification in such a view. Fforde and de Vylder pointed out that structural adjustments are usually prescribed by the World Bank and IMF. These include ·-•~­ steps such as a reduction of state expenditure, tax reform, reduction in subsidies, modification of the rate of exchange and overall relaxation of price control such would entail a revolution rather than mere adjustment in Vietnam. They viewed Vietnam as being engaged in a change from a socialis~ development strategy to an entirely new one. The magnitude of this change was best illustrated by their observation that in Vietnam in the late 1980s, agricultural development was not a matter of getting prices right, but making prices matter. It should be appreciated that the Vietnamese economy and state are socialist 22 in nature, which means that the state itself has to be viewed as an instrument of the Communist Party. Changes toward reduction of state intervention encounter strong ideological counterpressures. It is not surprising that similar policy decisions are faced by socialist and more market-oriented countries. namely: the reduction of government intervention and state control. This has been ongoing since the early 1980s not only in Vietnam but in many other countries, where a shift in needed P.Olicy approach from a single commodity approach based on balanced market incentives is now in motion. While the ideological aspects of the transition are important, there are a large number of practical yet basic issues involved. To mention just one, economics and social sciences, as understood in the classic sense, have only recently been recognized as such in Vietnam. 3.2 Socioeconomic Conditions in North Vietnam 3.2.1 General Conditions In Vietnam, agriculture plays a very important role in the national economy. Agriculture, forestry and fishery contributed 33.9 percent in the 1995 GDP. In agriculture, crop cultivation occupied 77. 5 percent and animal husbandry contributed 22. 5 percent of gross output during the period 1985-1995 (See Appendix Table 1) . North Vietnam includes three regions: North Mountains and Midlands, Red River Delta and North Central Coast (56.2 percent agricultural population and 52.5 percent agricultural labor). The climate also varies substantially between regions. The North has a 23 subtropical climate with low winter ( 15°C) and high summer (29°C) temperatures. Most rain falls during summer (May to September). During winter (January to March), there are many rainy days with almost constant drizzle, resulting in a low number of sunshine hours. The land available for crop cultivation is very low, varying between 0.023 ha to 0.043 ha/labor. Income per month of the majority of households ranged from 200,000 dong to 400,000 dong (US$ 1 = 10,000 dong). Income from agriculture accounted for 76.6 - 89.9 percent, of which more than 75 percent come from crop cultivation; income from livestock remained low (Table 4). ln North Vietnam, swine production is still predominantly a small holder activity and does not make intensive use of purchased feeds. Instead, it uses non-traded agricultural by-products. The climatic and socioeconomic conditions for sweet potato production are very convenient and the production potentials are enormous, especially in winter. In the North, off-farm and non-farm employment opportunities are also limited. Backyard swine raising represents a potentially profitable activity during the year, especially in the month off-farm work. A major reservation voiced by the households to swine raising was the non-availability and high cost of commercial feeds. Also, many households exhibited cash liquidity pi:oblems, which made it difficult for them to purchase feed on a timely basis. In this connection, sweet potato - like com and rice bran - is one of the important feed resources for swine production because sweet potato can grow widely in the North, especially in winter. The potential for growing sweet potato is enormous and 24 the cost of sweet potato production is very low. Sweet potato vines and roots with good protein supplementation are comparable in nutritional value to commercial feeds and are cheaply available in a large volume in North Vietnam. Table 4. Some Socioeconomic Indicators in Three Regions of North Vietnam. NORTH RED RIVER NORTH MOUNTAINS DELTA CENTRAL INDICATOR ~ AND MIDLANDS COAST Population density (person I km2 ) 82 - 420 784 167 Agr.land available COOO m2 /labor) 2.7 - 4.3 2.3 3.4 Per capita food availability (kg) 216 - 244 294 226 Number of persons I household 6.4 4.9 5.3 Per capita income I year COOO dong) 113.93 276.84 210.08 Per household monthly income (%) < 200,000 d 67.8 36.7 45.4 200,000 - 400,000 d 30.2 49.6 40.5 400,000 - 600,000 d 2.0 7.7 13.0 600,000 - 800,000 d 3.4 1.1 > 800,000 d 2.6 Source of income (%) 1. Agriculture 76.6 89.3 83.1 - Crop 77.9 70.l 83.2 - Livestock 22.1 29.9 16.8 2. Forestry 12.0 3. Handicraft 6.6 4.6 4. Other 11.4 4.1 12.3 Source: Cassava in Vietnam: An over view (Thang. 1992) 25 3.2.2 Conditions for Sweet Potato Production in North Vietnam Sweet potato is produced on paddy fields in the dry season in the North (winter season) and all year round in the uplands. Sweet potato is grown widely and continues to be a major important crop in typhoon prone areas because of its ability to survive high winds and flooding. Soil type. Soil types used for sweet potato production in North Vietnam were sandy loam, light loamy soil and sandy loam soils. In the Red River Delta, sandy loam and light loam soils were widely used. In the North Central Coast, sandy and sandy loam soils were the major soil types for sweet potato production. Variety and crop rotation. Before the 1970s when new rice varieties with short growth duration had not been introduced, long duration sweet potato varieties were grown throughout the country. In the North, farmers grew the locals maturing in 5-6 months in uplands for subsidy crops or in areas where only one rice crop was grown. The "Green Revolution" of rice varieties, which meant short growth duration and higher yield rice, resulted in great changes in food crop systems. The long duration sweet potato varieties were gradually discarded and replaced by new ones maturing in just 3-4 months. In the North, where sweet potato is considered as an important food crop, it was put into different cropping system (Table 5). The sweet potato germplasm collection is maintained at the Food Crops Research Institute (FCRI) and Vietnam Agricultural Science of Institute (VASI). There has been a great change in variety patterns of sweet potato. Some good local varieties are grown with new ones. Sweet potato is considered easy to grow, as •· 26 it can be planted all year round in diversified cropping systems. It is grown mainly between two rice crops in the plain and river beach where water is abundant. After that, it is planted together with maize and bean in the highland or sandy soil regions (Table 5) Sweet potato varieties are abundant in North Vietnam. The released varieties Hoanglong and clone 59 are grown as a winter season crop, while Batluanxuan, Red skin and No.8 are grown in spring (Table 6). In the North Central Coast, clones were identified as •· Chiemdau, which is the most popular variety l>ecause of its wide adaptability. In the Red River Delta Hoanglong, Chiemdau, clone 59 and No.8 are popular (Table 7). Table 5. Common Cropping and Intercropping Patterns with Sweet Potato SPRING SUMMER WINTER I. Cropping Pattern Sweet potato Rice Potato 2 Rice Rice Sweet potato 3 Later spring rice Rice Later sweet potato winter 4 Sweet potato Rice Vegetables 5 Rice Sweet potato Azolla 6 Sweet potato Soybean Vegetables 7 Rice Soybean Sweet potato II. lntercropping 1 Sweet potato + Soybean 2 Maize+ Sweet potato 3 Sweet potato+ Hot pepper+ Cassava :.it 27 The other objective of the National Sweet Potato Program was to breed new varieties with early maturity; good tolerance to adverse conditions, insects and diseases; high yield; high starch content and good taste. Another objective was to improve protein content in tubers. Table 6. Sweet Potato Variety and Growing Season • HJGHLAND AND RED RIVER NORTH CENTRAL MIDLAND DELTA COAST Variety Crop • Variety Planting Crop Variety Planting Crop Crop .. season time season time duration season Hoanglong Wi Chiemdau 9-10 Wi Chiemdau All year 3-4 All year Chiemdau Hoanglong Hoanglong 1-2 4-5 Sp Batluanxuan Sp 59 9-12 Wi Sat 12 5-6 Wi-Sp Hoabac Wi-Sp 8 1-2 Sp Xop 11-12 5-6 Wi-Sp Nghe Sp 251 4-5 Su-Au Chiemluong 9-11 4-5 Wi • Lim Wi-Sp Hoangthan 8-10 5-6 Wi-Sp Red skin Sp Re 9-10 4-5 Wi-Sp Clone 59 Wi-Sp 59 8-9 3-4 Wi Source: Hoanh. et al., 1991 , *Crop duration is 3-4 months for all; Spring - Sp, Summer - Su, Winter - Wi, Autumn - Au. 28 Table 7. Yield of new Sweet Potato Varieties (winter crop, 1986) LOCAL VARrETY YIELD (ton/ha) CROP DURATION Average Maximum (day) Nghe-Tinh Chiemdau 3-4 No. 59 7-8 13 - 15 105 • Thanhhoa Chiemdau 6-7 No. 59 and No. 251 13 - 14 19 - 20 105 - 110 Hai-Hung Chiemdau 7-8 No. 59 12 - 13 15 - 16 90 - 110 Thaibinh Chiemdau 13 - 14 No. 59; No. 8 and No. 251 18 - 22 24- 30 90 - llO Source: Hoang, et al., 1988 3.3 National Program on Sweet Potato Production Vietnamese agriculture in recent years has made a lot of efforts to solve food production problems. Many positive results have been obtained in this quest. In the past, Vietnam was a food deficit country, but nowadays Vietnam has produced not only enough food for domestic demand but also for export. This showed that the Vietnamese government has made the right policies on agriculture in general and food production, in particular. Apart from rice production, its emphasis has been on the development of maize, 29 sweet potato and cassava. Sweet potato is considered as a very important crop for the development of rain-fed agriculture in low input areas such as the Highlands-Midlands region, the Central Coast region. It could contribute a great deal in attaining the nutritional target in the national food security strategy. The transition of the economy from a centrally planned economy to a more market oriented one has received limited empirical attention. Policy determinants regarding the • supply of agricultural inputs and the channeling of farm products have received attention in relation to rice (Hoa, 1993). No recent empirical work, however, has been conducted to analyze the existing market systems linking rural areas and cities in Vietnam. During the formulation of the national root crop research and development program, discussions took place in 19 89 and provided an excellent opportunity to include the important and neglected socioeconomic component in agricultural research and development itself At the same time, it provided an opportunity for market research of agricultural commodities. The International Potato Center (CIP) has been conducting collaborative research with several Vietnamese Institutes focusing on sweet potato production problems. In 1988-1989, CIP with several Vietnamese collaborators and assisted by the CGPRT Center (in Bogor, Indonesia) conducted a diagnostic study on sweet potato production and marketing aspects in selected areas 9f Vietnam. Up to 1989, potato, sweet potato and cassava research had been conducted separately, but in most cases by the same institutes. In addition, both CIP and CIAT (Centro Internacional de Agricultura Tropical) worked on • 30 their respective mandate crops with several institutions, but without much relevant collaboration. With the importance given to root and tuber crops in agricultural production, the Ministry of Agriculture and Food Industry (MAFI) in 1990 took a significant decision to coordinate all Vietnamese research on cassava, potato and sweet potato through a newly founded Vietnamese Root Crops Research Program, with headquarters at the former Potato Research Center in Vandien, Thanhtri, Hanoi. The CGPRT Centre was requested to assist in the formulation of the activities under this Progr~ specifically in the socioeconomic aspects. This Program assembled the scientists and extension staff to work in cooperation in order to solve problems concerning varieties, soil erosion, processing and marketing of these root and tuber crops. This decision was the first step toward a strategic reorganization of root and tuber crops research in Vietnam. The main objectives of the national sweet potato program are to: 1. Breed sweet potato varieties suitable to ecological regions. 2. Study and test cropping systems and cropping increases between sweet potato with rice and/or with other subsidy crops. 3. Study and apply improved techniques of sweet potato production and storage and processing. 4. Improve the training program on sweet potato in colleges, professional institutes and universities; issue and distribute documents, publications, papers on sweet potato. 31 5. Cooperate and collaborate with other countries and CIP in exchange of breeding materials, documentation, publications and training. 6. Apply technological development into production. Since sweet potato products (roots and vines) are mainly used as animal feed, especially for swine, the use of sweet potato for swine has increased rapidly during recent years and has become a major component in the daily swine diet in rural areas. Using • sweet potato for farm household's swine rajsing has many advantages because sweet potato is easy to plant, fast-growing, highly productive and requires less input. Its yield can be rapidly increased if farmers follow the recommendation practices. The relationship between improvement of sweet potato production technique and farm yield as well as total volume of swine liveweight is shown in Figure I. Despite the importance of sweet potato, few efforts have been done to improve root yield and to study utilizable value of all plant parts. It is, therefore, necessary to study crop management practices to improve crop productivity and efficient use as swine feed . • 32 Improve sweet potato production technique l_ Increase farm yield of sweet potato • Decrease the price of sweet potato -- - ------- -- ·····----------- ·-----------·-------------·-··------ [ - . . -- !-.. . Increase the use of sweet potato for swine feed - 1 • Increase production of swine raising 1 .. Figure 1. Relationship between farm techniCal improvement for sweet potato production and development of swine raising in North Vietnam. 33 In 1997, CIP and UPWARD funded a project on sweet potato production and swine feed. This project was an outcome of the earlier diagnostic study of root crop utilization in four areas of North and Central Vietnam (See Appendix for project details). The project started in January 1997 and will end in 1999 at Thanhhoa and Danang provinces (Central Coast region). The general objective of this project is to improve sweet potato productivity and their effective use for pig. The specific objectives of the project • are: 1) To increase root yield and dry matter content in order to increase income for sweet potato growers and help ensure food security. 2) To minimize the loss due to sweet potato pests and diseases, both in the field and storage. 3) To improve the nutritional value of all sweet potato plant parts for pig feed. 34 CHAPTER IV RESEARCH METHODOLOGY 4. t Conceptual Framework Government intervention can affect the operation of the market, producing a set of prices that may differ from the free market price. Consequently, relative output and input prices within and across industries are altttred, affecting the pattern of production incentives. In the short run (sometimes known as static), effects of price changes resulting from intervention are usually analyzed within the framework of a partial equilibrium model (Fig. 2). This model shows the effect of the tariff rate on sweet potato from a country, with assumption that the country' policies cannot affect the world price of sweet potato. It also shows the effect of production incentives through tariff on sweet potato import. In Figure 2, the horizontal axis indicates the quantity of sweet potato, while the curves S and D are the supply and demand curves, respectively. In a closed economy without the possibility of international trade, domestic price Pc. will be determined by domestic demand and supply conditions. On the other hand, in a small country engaging in internatioJ?al trade, the domestic price will necessarily be the same as the world (border) price Pb. Domestic production will be at Q1 and because demand at price Pb is 02, imports will be 01Q2. 35 p S' s g Q Figure 2. Effect of tariff on input and output 36 Government intervention (e.g., tariff) raises the domestic price of the output to Pd leaving the world supply price unaltered. Since producers now face a higher price, domestic production will expand to Q3 and imports decrease to Q3Q4 although total consumption declines to Q4_ Using the concepts of consumer's and producer's surplus, the welfare implications of intervention as shown in Figure 2 can be analyzed. The shaded area (t) is the increase in producer's surplus which is transfered from copsumers to producers. Area (t) is thus what Ellsworth and Leith as cited by Cabanilla ( 1983) call the transfer effect, while area {p) is what is called the protective effect - the sum of the additional costs due to inefficiency in the production of the additional quantity of sweet potato. It is the value of the excess resources used in producing the additional quantity of sweet potato. It would have cost the society an amount indicated by the hatched area (g) to acquire the same quantity (Q3 - Q1) of sweet potato from the border, while if produced domestically, the total value of resources used in producing this quantity would be (g) + (p ). Area (r), on the other hand, is the revenue effect and equivalent to the value of duties collected by the government from consumers. In short, the type of intervention considered above results in the loss of consumer's surplus by a magnitude indicated by t~e area (t + p + r + e ). Part of this loss is transferred to producers (t), part is paid to resources needed to increase production (p), while part is paid to the government (r). Area (e) is not transferred to anybody in the society and is called the death weight loss to the society.The net loss to the society is the area of (p + e) . • 37 The geometric model used above can also show the effect of inteivention in the input market. For example, a tariff on an intermediate inputs (e.g., fertilizer) will raise its domestic price and shift the supply curve of sweet potato to S'. The net effect is that production would only be expanded to Q3', a level less than when only a tariff on sweet potato was imposed. As a result, the combined protective and transfer effects are diminished, the magnitude of the change depending on the proportion of the value of fertilizer to the total value of intermediate inp11ts. 4.2 Data Collection and Sampling Procedure The study used both primary data and secondary data. Owing to time and financial constraints, the survey focused on only four major sweet potato producing provinces: Bacthai, Hanoi, Hatay and Thanhhoa. Bacthai is one of the provinces in the Highlands­ Midlands region. Hanoi and Hatay are two provinces of Red River Delta. Thanhhoa is in the North Central Coast region. One major sweet potato producing district was chosen in each province. These were Donghy in Bacthai, Donganh in Hanoi, Hoaiduc in Hatay and Tinhgia in Thanhhoa. Five villages, two from Donghy and one from each of the other districts, were covered in the study. The criteria used for selecting five villages were: sweet potato production rate and swine raising must be comparable to the regional average yield. In each village, selection of farm households was done by symmetric random sampling; two households having the 38 largest scale of swine raising were chosen. For each village, 30 household farmers in 3 hamlets were selected and interviewed using the same criteria mentioned above. Information related to sweet potato and swine raising in winter 1995 in Bacthai and Hatay, spring in Thanhhoa and winter-spring in Hanoi was collected. Besides the primary data, secondary data were also collected from different state enterprises and agencies. Data on composition and nutritive value of root crop for swine feed were collected from the National Institute of Animal Husbandry. Data on fertilizer (cost, insurance, freight - CIF - prices and other fees, volume imported) were colle~ted from Vietnam General Corporation of Agricultural Materials (VIGECAM). Data on sweet potato production (area, total production) and swine raising (number of head, liveweight) were collected from various statistical yearbooks. Secondary data were also collected from the results of the first phase of an UPWARD funded project on sweet potato production in Vietnam, from the root crop research center and some other publications. •· 4.3 Analytical Procedure 4.3.1 Profitability Analysis Cost and return analysis is widely used as a first approach to economic assessment of technology performance. This type of cost analysis includes only the variable costs incurred. Fixed costs such as land cost are not included in the analysis because they are not likely to change or they remain constant regardless of the type of crop planted. or • 39 animal raised. Furthermore, farmers are concerned primarily with the net return above variable costs because these costs vary with the quantity of products. To assess the profitability of sweet potato farming, various measures of profit were employed. Among the most useful measures considered in this study were the returns above variable costs and the benefit-cost ratio. The net returns were defined as total output value or gross return (GR) minus total variable cost (TVC), including material costs, hired and family labor costs. All the itt;ms of costs and returns were expressed in averages on a per hectare basis. The gross returns on the farm activities, including all the relevant economic products at their correct levels valued at the prevailing prices when sold and at opportunity prices when products were used at home or as payments for services, were rendered in kind. In this study, the costs and returns were computed as follows: GR= ~P-J Q·J NR = GR-TVC where: TVC = total variable costs. NR = net return wi = price of variable input i, xi = quantity of variable input i, P_; = price of product j, Qi = total output j . • 40 GR = gross return (gross value of products). This is defined as the value of the total output of sweet potato over some accounting periods, whether that output is sold or not. Components of outputs that are not sold should be valued at estimated market prices, net of selling costs. Value added. This is defined as the gross value of product (sweet potato or swine production) during the year minus the cost of current inputs (raw materials or intermediate consumption) consumed in the production process, i.e., seed, fertilizer, pesticide, fuel, hired labor, etc., (for sweet potato) or feed, hired labor, water, electricity, medicines (for swine). This is a component of national income as it is contributed by the primary factors of production - land, labor, and capital. Farm income. This is defined as the gross value of production minus the paid costs, which include the cost of current inputs, the wage payments to hired labor, and the land tax paid to the government. In economics where there is no guarantee of full employment of family-owned resources, farmers may use this criterion for choosing particular crop or livestock enterprises. Farm operating surplus. This is defined as the gross value of production minus the total cost of production. This is a measure of profits from farm operation. The total cost includes imputed value of fam~ly labor used in the crop or livestock production activities, the imputed rent of capital supplied by the household, and the imputed interest charges on working capital. Market wage rates and rental charges were used as the opportunity cost of family supplied labor and capital. The paid-out cost was taken as a -· • 41 measure of the working capital, and a percent rate of interest per month, which was found a common practice in the information credit markets, was used to impute the interest charges. A capitalist enterprise may use this criterion for selecting the most profitable system. Unit cost of production. Estimated as the total cost per ton of output, it is a measure of the efficiency in resource use. In market economics, the total cost should include the opportunity cost of land, which is a real cost to a tenant farmer who has to pay the stipulated rent to the landowner. In Vietnam, especially in the North, most household farmers produce on their own lands; very few farmers rent land for sweet potato production. Hence, the cost of land to the farmers is the tax paid to the government. This makes the unit cost of sweet potato production very low in Vietnam. Employment and labor productivity. In labor surplus economies, the scope of employment of family labor can be taken as an important indicator of economic progress. Since the surplus labor will be wasted while the peasant household has the obligation of maintaining the family worker, the household will take up an economic activity which generates more employment even when marginal productivity of labor is lower than the market wage rate. Although costs and return~ analysis m sweet potato production and swme production are very widely used, it is still important to stress its limitations. The limitations of costs and returns approach include the following: •• 42 1 . Realistic prices are often not assumed for the major input of land, labor and cash. Thus, land is ignored as an overhead cost and family labor is imputed by market wage, when farmer may not find alternative employment at that wage rate. 2. Interconnection of sweet potato with swine and with other activities in the farm business is largely ignored. 3. The effects of a farmer's decision on various outcomes are not taken into account. In an economic study., efficient prices should be used in budget analysis. The efficient prices reflect resource use or consumption satisfaction and these are adjusted to eliminate direct and indirect transfers (Gittinger., 1982). These values become market prices when these prices are good estimates of economic value or they will be shadow prices when market prices had to be adjusted for distortions. For some inputs such as family labor, market prices are used as the shadow price or "opportunity costs'' to value family labor costs. For home consumption products, the farm-gate price is generally the best price of the true opportunity cost. In this study, market prices were used when computing the value of marketed inputs and outputs. The market prices were also used to compute the value of home consumed products since it was very difficult to distinguish the f~rm-gate prices from market prices in the study area. 4.3.2 Measuring Incentives • • 43 Nominal protection rate (NPR).. NPR measures the rate by which the domestic price of a final output faced by the producer deviates from the world or border price. In the case of products that compete with imports, comparison is made with the CIF (cost, insurance, freight) import price of equivalent products, which represents the cost of alternative sources of supply. In turn, for export products, the FOB (free on board) price of exports serves as a standard of comparison. NPR is computed using the foHowing fprmula: Pi d NP Ri = [ · - 1 ] * I0 0 Pib where: NPRi = Nominal protection rate for the i th commodity. Pi d = Domestic price of commodity i. Pi b = Border price ( CIF for importable and FOB for exportable) of commodity i, expressed in domestic currency. That is, CIF in US$ multiplied by the official exchange rate (OER). If NPR > 0, domestic producers are receiving a higher price after intervention than they would without intervention. This is called positive protection. If NPR < 0, then domestic producers are receiving a lower price after intervention than they would without intervention. In this case, protection is negative (or penalty) for producers. If NPR = 0, the structure of protection is neutral. • 44 In this study, the tariff rates on imported sweet potato products (sweet potato fresh roots, dried chips and sweet potato flour) were used as indicators to quantify the effect of government policies on sweet po~ato production. Implicit tariff (IT) for inputs. The output of one industry can be an input to another. Since policies may differ when a product is an input as when it is an output, it is necessary to disting.Jish the effect of price intervention on inputs. The estimating equations are the same as in the product price intervent\on analysis above but the definition of terms for this study's purpose is different. The effect of input price intervention is measured by price, the method of price comparison being: Pjd Tj = [ - 1 ] • 100 Pjh where: Tj = implicit tariff rate for input j Pj d = domestic price of input j Pj h = border price of input j 4.3.3 Measures of Comparative Advantage Nd social profitability (NSP). The definition of comparative advantage is b 1sed on the concept of social opportunity costs and, hence~ on the distinction between s >cial and private profitability. Net private profitability values resources at market pricn for •• 45 inputs and outputs. From the view point of "society", net social profitability values these resources at shadow prices or social opportunity costs. Net social profit (NSP) can be defined as the net gain (or loss) associated with the particular economic activity when all commodity outputs produced and material inputs and factors of production employed are evaluated at their social opportunity costs. Net Social Profitability Social value of output Social value of inputs Or: Net Social Border price Sum of traded input Profitability of outputs at border prices Sum of domestic resources and inputs valued at domestic shadow prices The relationship between net social profitability and comparative advantage is straight forward. A country has .a comparative advantage in producing a commodity if the net social profitability of the activity is positive, hence the activity is judged to be efficient in using domestic production factors. Otherwise, the activity has comparative disadvantage and therefore, domestic factors of production could be employed more profitably elsewhere. 4.3.4 Social Valuation Methodology This section discusses the shadow prices used in this study. It also presents the allocation of inputs between domestic and foreign sources . • 46 Shadow pnces may differ from pnces observed in the market because of noncompetitive behavior, extemality and distortions introduced by government policy. The estimation of shadow prices used in this study is based on the concept of the maximization of economic efficiency. Shadow prices of tradable inputs equal their prices in the world market. For domestic factors of production, shadow prices are measured as the value in the world prices of national output foregone by shifting these factors out of their alternative uses. There was, however, nQ border prices for sweet potato fresh roots, therefore border values of sweet potato fresh roots were derived by deflating the domestic values with corresponding nominal protection rate (NPR). For sweet potato vines, a non­ tradable output, a standard conversion factor (SCF) of 0.833 was used to convert to border values. Primary inputs. Primary inputs are defined as goods that are not normally traded internationally. They are also referred to as domestic resources and include land, labor and capital. 1. Land. Land is a major component of the production inputs in agriculture. With land being a factor of production, several crops compete for its use, hence, when land is used for certain activities it becomes unavailable for other activities. Herdt and Lacsina (1976) _as cited in Hoa (1993) presented three possible alternatives in valuing the service of land . • 47 The first way is to assume that land has no other alternative use during that season when it is used in the production of the commodity in question. This assumption implies that the price of land in question has a zero opportunity cost. The second way is to use the rental price of land as an approximation of the marginal value product of land. The third way is to use the return on land of other competing crops. This could be calculated as a residual rent after deducting th~ cost of inputs, including management from the total return. In North Vietnam, sweet potato is grown in winter, therefore, it is planted with other crops such as maize, soybean, green bean, potato. Thus, in this study the return on land of other competitive crops was used as the shadow price of land. Soybean is the alternative crop in winter in Tienphong and Trungthanh villages (Bacthai province). For Ye nso village (Hatay province), maize is the alternative. In Hainhan village (Thanhhoa province), sweet potato is grown in spring, so the best alternative crop is green bean. In Tamxa village (Hanoi City), sweet potato is intercropped with maize from October to June (from July to September the cultivated area is under water). In this case, the yield interaction between these two crops can be ignored, therefore, the opportunity cost of land is zero. 2. Labor. There are two sources of labor employed in sweet potato production: hired and family labor. Studies on labor market of rural areas in the Philippines, Thailand, and Indonesia showed labor cost at market price as a good estimation of its opportunity • 48 cost. This is also true in North Vietnam, where the labor market is so competitive that the opportunity cost of labor is represented by the market wage rate. 3. Capital. Capital includes fixed inputs that could be used for several production periods. These are working animal, tools and equipment. The cost of capital service of fixed assets consisted of depreciation cost, interest cost and cost of repair and maintenance. The depreciation cost of local capital assets is considered as purely domestic cost. To determine the social cost of capital, there is a need to select a social rate of discount at which to value the services of capital goods. Also, to determine the social rate of the agricultural sector, credit information was collected from Vietnam Agricultural Bank (VAB) activities. VAB applied an average interest rate of2 percent per month with a four month cycle. Survey data showed that 40 percent of farm households received loans from the bank and 60 percent of household farmers used their own capital. This study used the interest rate of 2 percent per month as the shadow interest rate for the household own capital. Intermediate input. Intermediate inputs in sweet potato production consist mainly of vines, fertilizers, pesticide. These inputs may be classified as tradable or nontradable. Cost of tradable inputs such as fertilizers (e.g., nitrogen, potassium, NPK) which are imported, are considered as foreign cost and valued in terms of their border prices, adjusted for the costs of internal transport and handling. Pesticide is domestically processed from imported materials. Therefore, imported materials were considered as purely foreign costs; the other costs such as processing cost, transport and handling costs, 49 marketing costs were divided into domestic and foreign cost components according to the sources of costs. Nontradable inputs such as phosphorus, manure and vmes were domestically produced. The social opportunity costs of these material inputs were assumed to be their respective border values. These were derived by deflating the domestic values of these inputs by using a standard conversion factor (SCF) of 0.833. Shadow exchange rate. In an economy where there are price distortions as found in most developing countries, an appropriate foreign exchange rate is needed to estimate the comparative advantage of a production activity as measured by net social profitability. The official exchange rate (OER) or the shadow exchange rate (SER) can be used to convert domestic price of traded goods into border prices and vice versa. The official exchange rate may not reflect the shadow price of foreign exchange due to market distortions. The major factors causing distortions in the OER are export taxes, import tariffs and subsidies. The difference between shadow exchange rate and official exchange rate is called foreign exchange premium (FX Premium). SER = OER * (1 + FX Premium) There has been no study on SER in Vietnam so far. The World Bank suggests tw~ approaches to adjusting price distortions in traded and nontraded items (both outputs and inputs). 1. Conversion factor aooroach. This method decreases value of nontraded items to allow for foreign exchange premium. I _J • 50 Standard Conversion Factor = I I (1 + FX Premium) For traded item: Economic value = Border price • Official exchange rate For nontraded item: Economic value= Opportunity cost• Standard conversion factor (usually market price) This approach is now used exclusively in the World Bank. 2. Shadow foreign exchange approach. This method increases value of traded items • by the foreign exchange premium. Shadow Exchange Rate = OER • (1 + FX Premium) For traded item: Economic value = Border price • Shadow exchange rate For nontraded item: Economic value = Opportunity cost (usually market price) This approach was formerly widespread, but now not used by the World Bank. From the above analysis and using the conversion factor approach in the study, the official exchange rate of l L,000 Vietnamese dong to I US Dollar was used in 1995. The •• World Bank also suggests that, for most developing countries, the foreign exchange premium is 20 percent. Therefore, this study used 20 percent as foreign exchange premium to calculate the standard conversion factor of 0. 83 3. 4.4 Limitations of the Study The limitations related to the construction and analysis of this study have a bearing on the reliability and applicability of the results as follows: 51 I . The study aimed to evaluate the comparative advantage of sweet potato production in North Vietnam, but owing to financial and time constraints, the study focused only on four provinces of the region. Also because there was no international market prices for sweet potato roots (in fresh, dried chips and flour form), it was very difficult to determine the border price of sweet potato products. However, the results showed that the study area had a comparative advantage, so it could be expected that the whole North Vietnam has a comparative apvantage in sweet potato production. 2. The study tried to evaluate the prospects of using sweet potato as swine feeds in North Vietnam, but owing to financial and the constraints, the study focused only on utilizing sweet potato as feed for growing and fattening swine. The results of this study pointed out that using sweet potato with good supplementary ingredients led to weight gains equivalent to commercial feeds but provided more benefits (for local/or crossbreed' s swine). Therefore, the prospects of using sweet potato as swine feeds is good, especially in rural areas where the household farmers have limited cash sources •• to purchase commercial feeds and they still raise local/crossbreed's swine . 3. As mentioned earlier, this was the first study of its kind conducted in Vietnam. Therefore, further studies related to this topic are necessary. 52 CHAPTERV RESULTS AND DISCUSSIONS 5.1. Overview of Sweet Potato Production and Swine Raising in North Vietnam This section provides an overview of sweet potato production, pig raising and sweet potato utilization for pig feed in the North Vietnam from 1985 to 1995. 5.1.1 Sweet Potato Production Trend in North Vietnam Scott (1992) as cited in Cabanilla (1996) showed that from 1961 to 1988, there had been an uneven trend world-wide in area planted to sweet potato and its production. A number of countries producing large amounts of sweet potato had experienced a decline in production starting in the early 1970s (Appendix Table 2). Cabanilla (1996) attributed this to a weakening demand for sweet potato. It could also be interpreted as an indication of the lack of appropriate policies and programs to promote sweet potato production and use. In Vietnam, sweet potato is widely grown in all provinces all year round in diversified cropping systems. During the period 1985 to 1995, the average area planted sweet potato was 342 thousand hec!ares and total production was 2,036.9 thousand tons of fresh roots. Both area plante Feed Price Cost Feed Price Cost Feed Price Cost (kg) ( d/kg) ('000 d) (kg) ( d/kg) ('000 d) (kg) ( d/kg) ('000 d) Fresh cassava roots 400 400 160.0 71 400 28.4 200 400 80.0 Fresh S.P roots 104 300 31.2 74 300 22.2 42 300 12.6 Fresh S. P vines 450 300 135.0 180 300 54.0 360 300 108.0 Rice bran 60 1000 60.0 1000 120 1000 120.0 Rice 60 1800 I 08.0 90 1800 162.0 60 1800 108.0 Maize 1500 90 1500 135.0 1500 .. Other 61.6 Total feed costs 494.2 463.2 428.6 In which S.P (%) 33.6 16.5 28.1 (*): For one pig in one rearing cycle. (**): Based on average daily gain. Data from Thanhhoa confirmed that experienced farmers always used more sweet potato as swine feed than the others. Normally, these farmers produced a large volume of sweet potato and they also raised more pigs than other households. In the rural areas of 72 North Vietnam~ incomes of rich farmers equally came from cultivation and swine raising. For these households, the remaining cultivation products (i.e., sweet potato, rice, maize) after the family consumption were mainly used as swine feed, therefore, they can get higher income from their own products and become richer and richer. They also used good supplemental proteins in combination with sweet potato in swine diet therefore, the swine weight gains were very good. The proportions of sweet potato in feed costs of high, medium and low intensity swine raising levels were 45. l percent, 29.1 percent and 36.7 percent, respectively (Table 20). Table 20. Total Volume and Cost of Feed for one Swine in Thanhhoa, 1995 c•> INGREDIENT ("°") HIGH LEVEL MEDIUM LEVEL <''"") LOW LEVEL <. .> Feed Price Cost Feed Price Cost Feed Price Cost (kg) ( d/kg) (000 d) (kg) ( d/kg) ('000 d) (kg) ( d/kg) ('000 d) Fresh S.P roots 540 350 189.0 305 350 106.8 390 350 136.S Fresh S.P vines 300 250 75.0 210 250 52.5 248 250 62.0 .. Sweet potato residue 200 200 200 Rice bran 78 2300 179.4 115 2300 264.S 95 2300 218.5 Maize flour 45 2700 121.5 35 2700 94.5 2700 Other 21.0 30.0 123.S Total feed costs 585.9 548.3 540.5 In which S. P (~'o) 45.1 29.1 36.7 (*): For one pig in one raising cycle. (**): Based on average daily gain. 73 From the above analysis, it was found that sweet potato was widely used as swine feeds in farm households in North Vietnam. Sweet potato became a main local feed source for swine and had a significant role in solving the increasing swine feed demand. 5.3.3 Compan1tivf' and Economic Performanre A comparison of weight gains from different feed sources by region showed that swine raising in J Janoi and I lat High level <"'> 8.5 125 300 0.39 Medium level <•> 8 67 180 0.33 • Low level <*> 10 58 240 0.20 Average 8.8 83.3 240 0.31 2. Thanhhoa (a) High level <4'> 10 100 180 0.50 Medium level<*> 19 100 180 0.45 Low level <·> IO 76 300 0.22 Avera~e 13 92 220 0.36 3. Hanoi High level <*> 20 115 135 0.71 Medium level <*> 17 96 150 0.53 .. Low level <*> 15 85 150 0.47 Average 17.3 98.7 145 0.56 4. Hatay (a) High level <*> 20 125 150 0.70 Medium level <"'> 15 93 150 0.52 Low level <*> 15 76 165 0.37 Average 16.7 98 155 0.53 (*) Based on average daily gains (a) Used local feeds only (b) Combination between local feeds and commercial feeds in the last raising cycle. 75 levels were very different. For example, the returns on labor of high, medium and low levels in Bacthai were 546.8 thousand dong; 103.3 thousand dong and 343.9 thousand dong, respectively (for one swine per rearing cycle). The differences among swine raisers in Thanhhoa, however, were not so much. The returns on labor of high, medium and lowswine raising levels in Thanhhoa were 474. l thousand dong, 385.7 thousand dong and 255.5 thousand dong (for one swine per rearing cycle), respectively (Table 22). These data implied that the more one used sweet potato for feeds, the higher the benefits because households with high swine rais,ng levels were also the households using more sweet potato for feeds. Table 22. Cost and Return Analysis of Swine Raising in Bacthai and Thanhhoa, 1995 ITEM BACTHAI THANHHOA High Medium Low High Medium Low level("') level(*) level<*> level(*) level <*> level<*> Initial weight (kg) 8.5 8 10 10 19 10 • Final weight (kg) 125 67 58 100 100 76 Cost of weaning ('000 d) 93.5 88.0 110.0 140.0 266.0 140.0 Cost of feed ('000 d) 494.2 463.2 428.6 585.9 548.3 540.5 Total cost ('000 d) 587.7 551.5 538.6 725.9 814.3 680.5 Revenue a. Meat ('000 d) 1034.5 554.5 482.5 1100.0 1100.0 836.0 b. By-product'++> ('000 d) 100 100 100 100 100 100 · Return on labor ('000 d) 546.8 103.3 343.9 474. I 385.7 255.5 (*)Based on average daily gains Assumption: (**)One swine produced 500 kg manure: the price of manure is 200 d/kg 76 The above analyses provided sufficient evidence that sweet potato was a good local feed source for swine raising. Using sweet potato as swine feed not only minimized cash expenses for farmers but also increased income from swine raising. There were good prospects ·in sweet potato utilization as swine feeds in North Vietnam. There was, therefore, sufficient basis for promoting sweet potato production and utilization as swine feeds in North Vietnam . • 77 CHAPTER VI SUMMARY AND CONCLUSION The major objectives of Vietnam's national program on sweet potato production were to maintain the land area planted to sweet potato, create new suitable varieties for ecological regions, apply the results of technological developments to production, and ... study and practice new and efficient method~ of preservation and utilization of sweet potato. Policy reforms in agriculture were implemented to achieve the objectives of agriculture in general and of sweet potato production in particular. With regard to sweet potato production and utilization as swine feed, this study specially addressed itself to two issues: the effects and implications of government policies on the incentive structure of sweet potato production and the prospects of using sweet potato as swine feed in North Vietnam. The following measures of production incentives were used: I) nominal protection rate, expressed as the ratio of the domestic producer price to the border price, measured using tariff rates on imported sweet potato products (because there is no international market prices of sweet potato products)~ and 2) implicit tariff rates, expressed as the ratio of the imported input prices actually raid by the producers to the border prices measured in the same input quality and at a comparable point in the marketing chain. These indicated the magnitude of incentives or disincentives generated by price policy on imported sweet potato inputs . • 78 On the other hand, the assessment of the comparative advantage of sweet potato production in North Vietnam was centered on the concept of net profitability, which included both private and social profitability. It measured the net gain (or loss) associated with sweet potato production activity when both inputs and outputs were valued at their social opportunity costs. The results of the study showed that all the NPR values of sweet potato •· production in the study areas were positive .. These indicated that government policies provided incentives to sweet potato production. In other words, current government policies generated positive protection to sweet potato growers. The results of the net social profitability analysis confirmed that sweet potato production in North Vietnam had a fair comparative advantage in all study areas (i.e., Bacthai, Hanoi, Hatay and Thanhhoa provinces) and it was efficient in using domestic resources. Sweet potato production in all study areas had positive economic profitability~ the largest NSP value was 3,517.5 thousand dong and the lowest value was 182.8 thousand dong per hectare of sweet potato. A comparison between net social profitability and net private profitability of sweet potato production in the study areas showed a small ~ifference between these two measures of profitability. The study. also showed that s. weet potato roots were mainly used as swine feed. The highest proportion of fresh sweet potato roots used as swine feed was in Hatay and the lowest was in Thanhhoa (82.1 percent and 50.2 percent, respectively). In Hanoi and Thanhhoa, sweet potato roots were processed as dried chips for latter use. The • 79 proportions of dried chips used as swine feed in Hanoi and Thanhhoa were I 00 percent and 62.1 percent, respectively. Sweet potato vines were used as feed in fresh form, except in Hanoi. This was because Hanoi had a large vine volume and difficulty of having green material from June to August (when the land is under flood water from Red River). Therefore, the farmers had to dry sweet potato vines and store them for latter use. The highest proportion of fresh vines used as swine feed was in Thanhhoa and the lowest was • in Hanoi (80.8 percent and 54.5 percent, respeptively). Households that had a good experience usually used more sweet potato as swine feeds than the others. The data from Bacthai showed that sweet potato accounted for 33.6 percent of feed costs in households with high swine raising level~ the rates in medium and low swine raising levels were 16. 5 percent and 28. 1 percent, respectively. The data from Thanhhoa confirmed this finding, the rates in households with high, medium and low swine raising level were 45.1 percent, 29.1 percent and 36.7 percent, respectively. This study also showed that using sweet potato with good supplemental protein • resulted in weight gains as well as when commercial feeds was used. Moreover, the costs were much lower than commercial feeds enabling swine raisers to minimize cash expenses. Therefore, using sweet potato as swine feed was more profitable than commercial feed. It could also be a good way of achi~ving the objective of developing the swine raising industry in North Vietnam. Based on the analysis, it was concluded that sweet potato production and utilization as swine feed have good potentials and prospects for in North Vietnam . • •• 80 LITERATURE CITED 1995. Users' Perspectives with Agricultural Research and Development (UPWARD) unpublished data and reports. 1995. Statistical Data of Agriculture, Forestry and Fishery, 1985-1995. Statistical Publishing House. Hanoi. 412 p. 1978. Farm management research manual for small farmer development. Agricultural Services Division. F AO, Rome. · 1990. Animal feed resources in Asia and the Pacific. Asian productivity organization, Tokyo, Japan. 431 p. ABAD, A. G., 1982. The tobacco industry: comparative advantage and the impact of economic policies. Unpublished MS Thesis. University of the Philippines Los Banos (UPLB). BALISACAN, A. M. 1982. Economic incentives and comparative advantage in Philippines agriculture: The case of the national cotton development program. Unpublished MS Thesis. University of the Philippines Los Banos (UPLB). BINH, P. T. and BOTTEMA, J. W. T. 1991. Sweet potato in South Vietnam: Productivity, labor and market channels. Sweet potato in Vietnam, Production and Markets. The CGPRT Centre. Indonesia. p: 25-40. BOTTEMA, J. W. T. 1991. Vietnam: Transition toward a market economy. Sweet potato in Vietnam, Production and Markets. The CGPRT Centre. Indonesia. p: xv-xxii. BOTTEMA, J. W. T. HA, D. T and BINH, P. T. 1991. CoUective and individual production: Sweet potato in North and Central Vietnam. Sweet potato in Vietnam, Production and Markets. The CGPRT Centre. Indonesia. p: 59-94. BYEONG-CHOON JEONG. 1991. Sweet potato Processing, Marketing and Utilization in Korea. Product Development/or Root and Tuber Crops. Vol I-Asia (Scott, G., S. Wiersema and P. I.. Ferglison). Proceedings of the International Workshop, held at VISCA, Baybay, Lyete, Philippines, sponsored by the International Potato Center (CIP), the Centro International de Agricultura Tropical (CIAT) and the International Institute for Tropical agriculture (UTA ). CIP, Lima, Peru. p: 79-86. CABANILLA, L. S. 1983. Economic incentives and comparative advantage in the livestock industry. Unpublished Ph. D Dissertation. University of the Philippines Los Banos (UPLB) . • 81 CABANILLA, L. S., 1996. ~\'wee/ potato in the Philippines: Production, Processing and Future Prospects. A co-publication of the International Potato Center (CIP), Lim~ Peru and University of the Philippines Los Banos (UPLB). Philippines. p: 22-5 I. CUC, N. S. 1995. Agriculture COUNTRY<") Product. Area Yield Production Area Yield ('000 t) ('000 ha) (t/ha) 2 3 2 3 2 3 China 105,004 6,328 16.6 55.7 -14.3 33.4 -11.6 -30.8 -33.8 76.0 23.8 117.9 .. Vietnam 2,525 392 6.4 41.5 54.8 119.0 30 8 26.6 65.6 8.1 22.3 32.2 Indonesia 2,038 217 9.4 -24.9 -I J.7 -33.7 -33.4 -29.8 -53.3 12.9 25.9 42.1 Uganda 2,011 460 4.4 224.2 12.8 265.7 220.0 -8.4 193.0 1.3 23.2 24.8 India 1,155 138 8.4 66.9 -30.1 16.7 66.6 -42.6 -4.4 0.2 21.9 22.1 Rwanda 1,021 161 6.3 41.8 41.2 100.2 24.7 73.7 116.6 13.7 -18.7 -7.6 Philippines 690 145 4.7 26.4 -25.0 -5.2 48.8 -33.8 -1.6 -15.0 13.4 -3.7 Burundi 629 103 6.1 21.8 36.0 65.6 18.9 44.9 72.2 2.4 -6.1 -3.8 Kenya 627 64 9.8 82.9 128.4 317.8 39.0 78.5 148.1 31.6 28.0 68.4 Brazil 619 60 10.4 -23.4 -44.1 -57.3 -18. 7 -49.3 -58.8 -5.8 9.8 3.5 Madagasca 504 90 5.6 28.4 27.6 63.8 28.3 22.1 56.6 0.0 4.5 4.6 Korea DPR 501 35 14.2 55.4 40.7 118.6 53.1 41.3 116.3 1.5 -0.5 1.1 Papua New 480 106 4.5 42.8 13.6 62.2 26.1 13.6 43.2 13.3 0.0 13.3 • Guinea Bangladesh 444 46 9.6 121.9 -42.9 26.8 83.8 -35.3 18.8 20.8 -11.6 6.7 Zaire 384 82 4.7 2.9 26.6 30.3 24.0 31. 7 63.3 -17.0 -3.9 -20.2 All Dev. 122J 53 9,092 13.4 51.2 -13.5 30.9 -3.5 -25.1 -27.8 56.7 15.6 81.2 Countries Source: FAO. Faostat-PC. unpublished statistics. 1995 as cited by Cabanilla (1996). (R ~] = (1976-78 VS 1961-61): 2 -- (1992-94 VS 1976-78): 1-,.,. (1992-94 VS 1961-61). 97.70 % economic cost 100.00 3.07 96.93 Source: General Corporation of Agricultural Materials (VIGECAM) (II) Transport cost: Assume 20% is labor cost. the rest is allocated as foreign cost with 30% IT Economic cost (b) Percentage of economic cost in comparision with financial cost. that is ·---···-------- Financial cost Domestic (foreign} cost fo) Percentage of domestic (foreign) cost in comparision with economic cost. that is ----·----·-·-----------· Economic cost 96 Appendix Table 8. Cost Allocation of Urea Fertilizer, Hanoi, Vietnam, 1995 FINANCIAL ECONOMIC DOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 250 US$ I ton OER 11 ,000 dong I US$ 2,750 2,750 0 2,750 •· 1 . Landing and port charge 35 35 35 0 Ex-port cost 2. Transport 120 91 24 67 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 28 Total cost (dong I kg) 2,954 2,897 80 2,817 % financial cost fh> 98.07 % economic cost 100.00 2.76 97.24 -~ Source: General Corporation of Agricultural Materials (VIGECAM) (a) Transport cost: Assume 20% is labor cost. the rest is allocated as foreign cost with 30% IT Economic cost it.> Percentage of economic cost in comparision with financial cost, that is Financial cost Domestic (foreign) cost tct Percentage of domestic (foreign) cost in comparision with economic cost that is - - ------------- -- Economic cost 97 Appendix Table 9. Cost Allocation of Urea Fertilizer, Hatay, Vietnam, 1995 FINANCIAL ECONOMIC OOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 250 US$ I ton OER I I ,000 dong I US$ 2,750 2,750 0 2,750 1. Landing and port charge JS JS 35 0 ·- Ex-port cost 2. Transport 150 114 30 84 3_ Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 28 Total cost (dong I kg) 2,984 2,920 86 2,834 % financial cost 97.86 % economic cost cc> 100.00 2.95 97.05 -~ Source: General Corporation of Agricultural Materials (VIGECAM) (a) Transport cost: Assume.20'!/o is labor cost, the rest is allocated as foreign cost with 30% IT Economic cost thi Percentage of economic cost in comparision with financial cost. that is Financial cost Domestic (foreign) cost (c> Percentage of domestic (foreign) cost in comparis1on with economic cost. that is ·· -· --·-·-·- · -·· · Economic cost 98 Appendix Table I 0. Cost Allocation of Urea Fertilizer, Thanhhoa, Vietnam, 1995 FINANCIAL ECONOMIC DOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 250 US$ I ton OER 11,000 dong I US$ 2,750 2,750 0 2,750 1. Landing and port charge 35 35 35 • 0 Ex-port cost 2. Transport 97.35 ·- % economic cost (c) 100.00 3.36 96.64 Source: General Corporation of Agricultural Materials (VIGECAM) (a) Transport cost: Assume 20% is labor cost. the rest is al1ocatcd as foreign cost with 30% IT Economic cost 1 '" Percentage of economic cost in comparision with financial cost. that is Financial cost Domestic (foreign) cost tci Percentage or domestic (foreign) cost in comparision with economic cost. that is -- ·-· ·- ------·· --- Economic cost • 99 Appendix Table 11. Cost Allocation of Potassium Fertilizer, Bacthai, Vietnam, 1995 FINANCIAL ECONOMIC OOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 156 US$ I ton OER 11,000 dong I US$ 1,716 1,716 0 1,716 1 . Landing and port charge 35 35 35 0 • Ex-port cost 2. Transport (a) 170 129 34 95 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 17 Total cost (dong I kg) 1,959 1,901 90 1,811 % financial cost (h) 97.04 .. % economic cost (c) 100.00 4.73 95.27 Source: General Corporation of Agricultural Materials (VIGECAM) (a) Transport cost: Assume 20% is labor cost, the rest is allocated as foreign cost with 30% IT Economic cost tbJ Percentage of economic cost in comparision with financial cost, that is -··--- Financial cost Domestic cost (foreign) (cJ Percentage of domestic (foreign) cost in comparision with economic cost, that is ---------- Economic cost 100 Appendix Table 12. Cost Allocation of Potassium Fertilizer, Hatay, Vietnam, 1995 FINANCIAL ECONOMIC DOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 156 US$ I ton OER 11,000 dong I US$ 1,716 1,716 0 1,716 1. Landing and port charge 35 35 JS 0 • Ex-port cost 2. Transport (a) 150 114 30 84 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 17 Total cost (dong I kg) 1,939 1,886 86 1,800 % financial cost 97.27 % economic cost 100.00 4.56 95.44 Source: General Corporation of Agricultural Materials (VIGECAM) (a) Transport cost: Assume 20% is lahor cost, the rest is allocated as foreign cost with 30% IT Economic cost (hi Percentage of economic cost in comparision with financial cost, that is ·· - ··· ----· ---­ Financial cost Domestic (foreign) cost 1 1 " Percentage of domestic (foreign) cost in comparision with economic cost, that is - ··----------­ Economic cost • 101 Appendix Table 13. Cost Allocation of Potassium Fertilizer, Thanhhoa, Vietnam, 1995 FINANCIAL ECONOMIC OOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 156 US$ I ton OER 11,000 dong I US$ 1, 716 1,716 0 1,716 1. Landing and port charge 35 35 35 0 • Ex-port cost 2. Transport (a) 220 167 44 123 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 17 Total cost (dong I kg) 2,009 1,939 100 1,839 % financial cost 96.52 • % economic cost (c) 100.00 5.16 94.84 Source: General Corp)fation of Agricultural Materials (VIGECAM) . (a) Transport cost: Assume 20% is labor cost. the rest is allocated as foreign cost with 30% IT Economic cost (ti,1 Percentage of economic cost in comparision with financial cost, that is ·-·---·-·­ Financial cost Domestic (foreign) cost (ci Percentage of domestic (foreign) cost in comparision with economic cost, that is ------------­ Economic cost • 102 Appendix Table 14. Cost Allocation of NPK ( 16-16-8) Fertilizer, Hatay, Vietnam, 1995 FINANCIAL ECONOMIC DOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 207 US$ I ton OER 11,000 dong I US$ 2,277 2,277 0 2,277 • I . Landing and port charge 35 35 35 0 Ex-port cost 2. Transport (a) 150 114 30 84 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 23 Total cost (dong I kg) 2,506 2,447 86 2,361 % financial cost (b> 97.65 .. % economic cost (c> 100.00 3.51 96.49 Source: General Corporation of Agricultural Materials (VIGECAM) (a> Transport cost: Assume 20% is labor cost, the rest is allocated as foreign cost with 30% IT Economic cost lbJ Percentage of economic cost in comparision with financial cost. that is Financial cost Domestic (foreign) cost lcJ Percentage of domestic (foreign) cost in comparision with economic cost, that is -----· Economic cost 103 Appendix Table I 5. Cost Allocation of NPK (16-16-8) Fertilizer, Thanhhoa Vietnam, 1995 FINANCIAL ECONOMIC OOMESTIC FOREIGN ITEM COST COST COST COST (dong/kg) (dong/kg) (dong/kg) (dong/kg) CIF 207 l JS$ I ton OER 11 ,000 dong I US$ 2~277 2,277 0 2,277 • 1. Landing and port charge J5 JS JS 0 Ex-port cost 2 . T ransport 220 167 44 123 3. Handling 6 6 6 0 4. Storage, administrative 15 15 15 0 and selling 5. Sales tax 23 Total cost (dong I kg) 2576 2.,500 100 2,400 .. % financial cost ,.,, 97.05 0/o economic cost le) 100.00 4.00 96.00 Source: General Corporation of Agricullural Materials (VI GEC AM) fa) Transport cost: Assume 20% is labor cost. the rest is allocated as foreign cost with 30% IT Economic cost 1 1 ..,. Percentage of economic cost in comparision with financial cost. that is Financial cost Domestic (foreign) cost r~ign ~ost: For lradahlc inputs only Foreign cost of each input Foreign cost/ha ·· Total economic cost/ha * (See Appendix Tables 7-15) (each input) Economic cost of that input (I) Potn~~~~~-~Qs\: For both tradablc and non-tradable inputs a) For non-tradahlc input: Domestic cost/ha = Economic cost/ha Domestic cost of each input b) For tradahlc input: Domestic cost/ha -- Total economic cost/ha * (each input) Economic cost of that input 109 Appendix Table 21. Cost and Return Analysis for Rice Production in Dry Season (Thousand Vietnamese dong per hectare) COST AND RETURN FJF PJF DIFFERENCE 1. Yield 4608.6 kg 3,257.6 1 351 .0 ... ~ 2. Value of production 6.685.53 4,722 6 1,962.93 •• 3. Expenses 3,]40.48 2.409.8 930.68. a. Variable cost 2J68.4 L704.9 481.5. - Seed 230 180.7 49.3 ns - Fertilizer 1,292.2 976.9 315.3 •• - Pesticide 209.5 90.0 119.5 ••• - Gas. oil 15.0 0 15.0. - Machinery repairs 18.1 0 18.1 • - Hired labor 0 0 0 ns - Working animal care 392.0 458.0 - 66 ns - Other expenses 29.6 0 29.6. b. Fixed cost 1J 54.08 704.9 449.18 •• - Depreciation 118 .. 18 170.9 - 52.6 ns I ' - Land rent 242.0 166.3 75.7. - Irrigation fee 330.7 153.5 177.2 ••• - Cooperation fee 463.0 214.2 248.8 ... 4. Net farm income 3.345.05 2,312.8 I ' 032 . 25 •• Source: Thao. 1995 Note: FJF Fu11y irrigated farm PTF partially irrigated farm *** Significant at I'% ** Significant at 5'Yo * Significant at IO% ns Not significant 110 Appendix Table 22. Cost and Return Analysis for Rice Production in Wet Season (Thousand Vietnamese dong per hectare) COST AND RETURN FJF PTF DIFFERENCE 1. Yield 4608.6 kg 4,730 3,213 I , 577 ••• 2. Value of production 6,149.0 4,176.9 1,972.1 •• 3. Expenses 3,033.7 2,428.8 604.9 ns a. Variable cost 1,934.4 1,643.7 290.7 ns - Seed 141.8 114.2 27.6 ns - Fertilizer 1,151.3 908.6 242.7 •• - Pesticide 165.5 74.5 91.0 ••• - Gas, oil 17.3 10.0 7.3 • - Machinery repairs 405.0 484.4 - 79.4 ns - Hired labor 21.0 16.5 4.5 ns - Working animal care 32.5 35.5 - 3.0 ns - Other expenses 1,099.3 785.1 314.2. b_ Fixed cost 113.8 121.8 - 8.0 tl8 - Depreciation 242.0 194.5 67.5. ' - Land rent 309.8 194.0 115.8 •• - Irrigation fee 433.7 261.6 152.1 •• - Cooperation fee 0 13.2 - 13.2 + 4. Net farm income 3,115.3 1,748.1 1,367.2 •• Source: Thao. 1995 Note: FJF Fully irrigated farm PJF partially irrigated farm *** Significant at I% ** Significant at Y% * Significant at 10(% ns Not significant