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International Food and Agribusiness Management Review Vol. 2/No. 3/4/2001
anisms, imperfect market for credit, and unclear property rights (Fforde and de
Vylder, 1996).
Previous research in the field identified the institutional structure of hog
transactions taking place between producer and consumer levels in the North and
South of Vietnam (Le Goulven, 2000). The objective of this article is to evaluate
the degree of price transmission along the marketing channel in both regions.
When supply shocks are not efficiently conveyed to consumers, market interme-
diaries are benefiting from market imperfections and are reducing market
transparency. That hurts consumers’ welfare and producers’ incentives to increase
their production. We show that the market is efficient at conveying accurate
information, provided public and formal support institutions are present.
Background
Market Structure
In Vietnam, agriculture represents one-third of the GDP and employs 73% of the
economically active population. The livestock sector is a key sector to “accelerate
agricultural growth, contribute to the development of those regions where most of
the poor live, and exploit the potential for high-valued exports” (Goletti and Rich,
1998).
The hog market is still mainly backyard, small-scale production— 80% of the
households are fattening one to two hogs per year (Le Ba Lich, 1996). Hog
production is a form of precautionary savings and often the only way for peasants
to get cash income (Le Goulven, 2000). Yet many small units add up—the sector
has an annual growth of 3.8%, and hog production generated 71% of the animal
husbandry gross output in 1995 (General Statistical Office, 1996).
Because of the liberalization of the Vietnamese economy in the early 1990s and
as a result of rising average income, pork consumption increased from 8.5
kg/capita/year in 1992 (General Statistical Office, 1994) to 10.1 kg in 1996 (Le
Goulven, 2000). Yet that figure is still low compared to neighboring Asian
countries where it stands around 30 kg/capita/year. However, the demand in the
countryside remains oriented toward fat pork, whereas the trend is for lean meat
in big cities such as Ha Noi in the North or Ho Chi Minh City in the South. On
average, pork consumption per capita per year is 77% higher in those two main
cities than in the countryside. Our analysis focuses on the supply of pork to Ha
Noi and Ho Chi Minh City, the two major cities. The growing demand in these
cities should be stimulating production via market signals. If the market allows
such information to be transmitted efficiently via prices, then producers can take
advantage of the opportunities to increase their production, thereby diversifying
their farm income away from rice and thus the fluctuations of the international rice
market.1