BACKGROUND STUDY FOR GLOBAL VALUE CHAIN ANALYSIS FOR

BACKGROUND STUDY FOR GLOBAL VALUE CHAIN ANALYSIS FOR STRIPED CATFISH Nguyen Minh Duc Department of Fisheries Management and Development Nong Lam University, Thuduc, Hochiminh City Email: nguyenminhducts@gmail. com nmduc@hcmuaf. edu. vn Presentation at the FAO Workshop University of Tokyo, Japan, 09 -11 Dec, 2010 1

Brief on Vietnam fishery export fishery product exports have increased considerably since 2000 to become a major income earner and one of Vietnam’s major export commodities. Aquatic exports earned over $1 billion in 2000, $ 2. 2 billion in 2003 and $3. 36 billion in 2006. Catfish and shrimp are by far the largest share of aquatic exports, accounting for over 22% and 44%, respectively, of total export earnings in 2006. Currently Vietnamese fishery products have reached more than 120 countries and territories on five continents. Japan and the United States are the two largest export destinations, by country, while European Union nations, as a group, had the largest share of exports by volume and the second largest share by value in 2006. 2

Vietnam's Primary Fishery Export Products in 2006 (value basis) 3

Vietnam's Fishery Products Export Market, 2006 (value basis) 4

Mekong Delta most dynamic aquaculture region of Vietnam The Mekong delta has 641, 350 ha of freshwater area, which comprises of 67. 2% total water surface most diversified aquatic farming activities and great potential for increasing aquaculture production. There a few species, which have been commercially produced in the Delta, such as pangasiid catfishes and black tiger shrimp (Penaeus monodon) 5

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Vietnamese stripped catfish is similar to US catfish Vietnamese catfish - are Ictaluridae family, are Pangasius family - • channel catfish (Ictalurus punctatus) basa (Pangasius bocourti) + • blue catfish (Ictalurus furcatus) tra (Pangasianodon hypophthamus) + farmed in closed ponds farmed mostly in pens and deep ponds along in southern states the Mekong River, southern provinces Prepared by Nguyen Minh Duc 2010 7

Catfish production Catfish production reached 1, 500, 000 tons with only 6000 ha Farm price of catfish was decreasing during 2005 -2009, around 15, 000 – 17, 000 Vietnam dong (~ $0. 78 -0. 84) per kg while the price of exported catfish fillets is 2. 3 USD/kg. 12% of farmers get financial loss since 2008. However, farm price is increasing in the last months of 2010 (~$1/kg) and also exported price ( $2. 6/kg) due to lack of harvested fish. the farming and processing sectors of catfish industry has created 800, 000 jobs for farmers in Mekong Delta and many more in inputs supplying sectors. 8

Pond culture 9

Catfish processing The striped catfish is processed mostly in frozen fillets form for exports. The annual export value is 1. 4 billion USD fresh catfish is also exported but the fresh products mostly for domestic use. The processing sector including 280 enterprises. Following quality standards and improved to meet global standards on quality, food safety, and environmental conservation. 10

Rapid growth in catish industry Prepared by Nguyen Minh Duc 2010 11

More commercial scales Total 4, 696 7, 558 5, 459 1 0. 9 Proportion of farms 0. 8 0. 7 >0. 5 ha 7. 2 21. 4 17. 7 > 2. 0 ha 17. 3 1. 0 - 2. 0 ha 0. 5 – 1 ha 0. 6 0. 5 20. 9 23. 5 28 ≤ 0. 5 ha 0. 4 0. 2 to 0. 3 ha 0. 1 – 0. 2 ha 0. 3 0. 2 0. 3 – 0. 5 ha 24. 9 <0. 1 ha 38. 4 0. 1 0. 05 – 0. 1 ha 17. 3 16. 8 16. 7 2007 < 0. 05 ha 2008 0 2006 Year 12

Supply chain in catfish industry 13

Market structure in 2008 Farmers Inputs supplier Collectors Processors Traders 2. 2% Production Input suppliers -Seed 8. 9% Consumers Wholesalers Brokers Catfish farmers 6. 7% Retailers Local consumers 4. 5% -Food 1. 9% 91. 1% -Medical chemicals Processors 91. 4% Export markets Associations Provincial extension system Research institutions/Universities Trade promotion Centers VASEP NAFIQUAD Banks Source: Loc, 2009 Prepared by Nguyen Minh Duc 2010 14

Market structure in 2009 Inputs supplier Collectors/ Farmers Brokers Processors Traders Wholesalers 4, 6% Production Input suppliers -Seed 13, 8% Consumers 4, 6% Brokers Catfish farmers Retailers 9, 2% Local consumers 9, 2% 8, 6% -Food 86, 2% -Medical chemicals Processors 77, 6% Export markets Associations Provincial extension system Research institutions/Universities Trade promotion Centers VASEP NAFIQUAD Banks Source: N. Khiem and Bush, 2010 Prepared by Nguyen Minh Duc 2010 15

Vietnamese catfish industry globalization Vietnamese catfish industry has considerably developed since the country joined into globalization and adopted free trade principles employed almost a million Vietnamese people Vietnamese producers successfully created low-cost breeding techniques of catfish in 1998 and developed a catfish breeding industry involving 15, 000 families VN catfish farmers have opted to buy imported pellet feed and also adopted advanced feeding technologies to improve fish meat quality, meeting the quality and taste requirements of US consumers. VN catfish processors have learned catfish fillet techniques from an Australian importer and used processing equipments purchased from the US for their production, following the quality control protocols of HACCP, SQF and Global GAP 16

Increase in catfish exports Prior to 1998, the time Vietnam join into APEC, export volume of tra and basa to US market was 200 metric tons In 2002, after the US and Vietnam signed the Bilateral Trade Agreement (BTA), the export volume increased to more than 8. 000 metric tons Prepared by Nguyen Minh Duc 2010 17

Increase in catfish exports Although exporting catfish even before 1995, the tremendous spurt in exports to US came in 1999 when raw seafood tariffs dropped to zero reached a volume of 18. 3 million kilograms of catfish to the US, which is valued at $55. 1 million in 2002 after the bilateral trade agreement between US and Vietnam was signed in December 2001. Prepared by Nguyen Minh Duc 2010 18

Involving into trade protection policy from the US US labeling US antidumping 19

Price effect of the US barriers Labeling law US fillets production increased but its price still decreased, in contrast to Vietnamese products Unit 1999 2000 2001 2002 2003 2004 2005 Vietnam fillets price $/lb. 2. 04 1. 52 1. 26 1. 29 1. 21 1. 15 0. 93 US fillets price $/lb. 2. 76 2. 83 2. 61 2. 39 2. 41 2. 62 2. 67 Antidumping tariffs $/lb. -- -- 0. 64 0. 61 0. 49 US farm price $/lb. 74 75 65 57 58 70 72 US imports from VN Mil. Lbs 2 7 17 10 4 7 17 US fillets production Mil. lbs. 120 115 131 125 122 124 US farm production Mil. lbs. 597 594 597 631 661 630 601 Prepared by Nguyen Minh Duc 2010 20

Trade effects Antidumping measures Since 1980, US producers have been continuously seeking a trade protection Byrd Amendment 2000 (cancelled since 2008) allowed the petitioners in AD suits get disbursement from tariff revenue From 1980 to 2004, the US investigated 1092 antidumping cases of which 461 lead to a tariff Prepared by Nguyen Minh Duc 2010 21

Effect of the US catfish antidumping with linear regression for an equation system US price VN price PRELIM 0. 002 -0. 004 0. 012 0. 004 (0. 657) 0. 006 (-0. 106) -0. 029 (0. 582) 0. 031 (0. 643) 0. 006 (2. 531) (-0. 963) (1. 824) (1. 167) FINAL * : US US farm demand price Absolute value of t- ratio is in parenthesis More info at Duc, NM (2007) 22

Effects of AD measures on fish market shares in US market Imported Salmon Antidumping measures * : Imported Tilapia Imported Catfish US Domestic Catfish 0. 036 (2. 37) 0. 053 (3. 83) -0. 038 (3. 82) -0. 032 (2. 93) Absolute value of t- ratio is in parenthesis More info at: Hong, TTK, Duc, NM and H. Kinnucan (2008) 23

Other non-tariff barriers from the US Oct 2005, “Sales Ban” order in Alabama, Mississippi, Georgia and Louisiana May 2008, US Farm Bill 2008, catfish quality must be strictly controlled before imported to the US 24

Diversification of export market Vietnamese Catfish Exports (Unit: metric ton) Total exports EU Japan US 1997 425 54 0 55 1998 2263 188 22 261 1999 1715 192 91 903 2000 3, 689 19 28 3, 191 2001 10, 955 140 9 7, 765 2002 27, 980 2, 979 632 4, 361 US antidumping 2003 measures issued 33, 304 7, 388 464 1, 929 2004 82, 962 23, 637 932 3, 010 2005 140, 707 55, 172 579 8, 623 APEC join US-VN BTA signed 25

Diversification of export market 26

Regulation There are now more strictly regulations related to environment protection, quality control and health/sanitary guarantees. more and more non-tariff barriers to international trade, such as anti-dumping measures and sanitary requirements. WWF in European countries put the fish in a ‘red list’, recommend consumers not to buy for environmental natural conservation. => New regulation and policy expected released in 2011 27

Data availability Data for domestic value chain is not available Although out-up-date, may use the dataset on VN catfish exports to study 28

THANK YOU! 29