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Pigs suggested to be used for loan collateral

Pigs suggested to be used for loan collateral

Friday, July 27, 2012, 12:00 GMT+7

Many farmers in the southern province Dong Nai Province have suggested using their pigs as collateral for bank loans to buy feed for their pigs.

The farmers’ proposal has been sent to the municipal livestock association, stating that they can no longer afford to buy bran for the pigs and support the survival of their ranches.

But the proposition has been refused by the local branch of the Bank for Agriculture and Rural Development of Vietnam on the grounds that the bank cannot control people's pigs, said Nguyen Tri Cong, chairman of the municipal livestock association.

According to the Vietnam Livestock Association, with the current pork prices of about VND34,000-38,000 a kilogram, local farmers are suffering a loss of VND7,000-10,000 for each kilogram of pork sold.

Estimated monthly financial losses suffered by farmers nationwide due to lower pork prices is VND2-2.5 trillion ($95.88-119.85 million).

The rate will be doubled, possibly to as high as VND5 trillion a month, if low pork prices last until September, said the association.

Earlier this month the association said the national livestock industry is running a VND5 trillion loss due to price drops, rising inventories and declining demand.

Prof. Dr. Nguyen Dang Vang, chairman of the association, said: "From March to August last year, pork prices were very high, close to VND70,000 a kilogram, while the costs to raise pigs was about VND44,000-46,000 a kilogram.”

“The big profit rate then spurred production, leading to over-capacity and surplus supply as is happening now.”

The local livestock sector has seen a record drop in the prices of livestock products year-on-year with poultry eggs taking the lead with 38-45 percent, followed by poultry (20-25 percent) and pork (17-20 percent).

Meanwhile, input prices are increasing for the livestock industry with a 15- 20 percent and 20 percent rise in breeds and feed respectively.

Lifebuoy, is it there yet?

The Animal Husbandry Department under the Ministry of Agriculture and Rural Development is drafting a report to the government to seek for a VND9 trillion credit package to aid the livestock sector, Tien Phong newspaper quoted Nguyen Thanh Son, Deputy Director of the agency, as saying.

According to Son, though as a general rule the interest rate ceiling for the agricultural sector is 15 percent, local ranch owners, farmers, and small businesses are finding it hard to access bank capital at that incentive rate.

"This credit package will support approximately 3,000 ranches in rescheduling old loans, supporting loan interest rates, and delaying debt repayment. It also brings fresh capital for livestock farming for one year from June 2012 to June 2013.”

“It will also help subsidize the loans so that local farmers can borrow at 10 percent a year to restart their raising activities. Together, the Department also proposes the reduction and exemption of fees for quarantine within one year from June 2012.”

According to Son, the most difficult problem now is farm produce consumption.

According to a survey of the Department of Livestock, the next hurdle is the accessibility to credit, as the previous loans were charged at high interest rates of 18 percent to 20 percent or more.

On the other hand, banks are afraid to offer lending to farmers as they think this is a very risky industry.

Moreover, local farmers could not use their assets, such as land, farm, and animals, to make collateral, so they can only borrow in small quantities.

Very few farmers can access loans worth billions of dong, while their initial investments were worth some tens of billions of dong. 

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