Japfa policy change irks chicken farmers
Japfa policy change irks chicken farmers
Indonesian-backed Japfa Comfeed’s contract-based farming cooperation model in Vietnam seems to be on the rocks financially, as numerous farmer partners in the Central Highlands region are crying out for help to overcome bankruptcy.
At the end of April, some affiliated farms in Buon Ma Thuot city in Dak Lak province were quietly closed, and a lot of equipment for livestock has now become useless. Some of them have even had to sell their homes or suffer billions of VND in losses with chicken breeding.
Hoang Thi Cuc, a farmer in Hoa Thang ward, poured in over $108,000 into lodging and began to work with Japfa in 2019 to feed 15,000 chickens, but he has now abandoned the farm.
“At the time, Japfa said that we could recoup capital within the next three years. So we decided to borrow money and rent land to build the farm. However, after the first year and gaining some profit, we have suffered losses since then. To cut the losses, we stopped receiving chickens from the company for the last six months and have decided to abandon the farm,” said Cuc.
Cuc said the farm was losing $8,700 and land rent for every farrow of chicken. While Japfa said that chickens should be fed for 90 days only, she said it usually takes around 130 days, so costs of livestock were getting too high. Cuc claimed this and other rules meant the farm has lost over $130,000. The farmer added that she called eight friends and family members who are also involved in contract-based farming, and six of them have already stopped breeding. The other two are getting scaled down.
In the same situation, Duong Thi Yen in Hoa Thang ward is also stuck in losses, offering to sell her house to pay the debts. “Losses got serious after the company changed its policy,” said Yen. “We hope that Japfa could adjust its policies to give us some breathing space, but the current methods are pushing us into bankruptcy.”
According to a collective letter from Japfa’s contract-based farmers, in the past, the company confirmed to breed chickens during 75-90 days to sell. For chickens raised longer than that, the company promised to buy them by putting them into the frozen warehouse. But last August, the company reversed the decision.
In the Central Highland provinces such as Dak Lak, Gia Lai, and others, there are about 150 contract-based partnerships with Japfa Comfeed Vietnam, and many have reported serious losses.
Along with the breeding time, the accepted mortality rate of chickens set by the company was changed from 5-7 per cent of the total to only 3.5 per cent, so farmers have been penalised for chicken mortality. In particular, if chickens over 60 days old get sick, farmers have to pay all veterinary fees and drugs themselves.
In these partnership contracts, said the farmers, Japfa has the right to sell chickens at any time and has the right to unilaterally terminate the contract if the other side causes any violation.
At a meeting at the end of April between a representative of Japfa Comfeed Vietnam, Dak Lak Department of Animal Health, and contract-based chicken farmers, the latter’s director Thuy Le Vu said, “During the breeding, shareholders should share both profits and risks. It is impossible for one party to make a profit and let the other party lose. If there are some risks, they should listen to each other to find out solutions that do not cause losses to one side only.”
In response earlier this month, Arif Widjaja, CEO of Japfa Comfeed Vietnam, said, “In early cooperation, many farmers did not have experience in husbandry, so the company set a mortality rate at 7 per cent to support them. After one year of training and technical guidance, the company reduced this ratio to 3-3.5 per cent, which is applied to most outsourcing cooperation in the market today.”
Explaining the prolonged breeding time policy, he said that the pandemic has hit the husbandry supply chain and poor market demand, difficulties in transportation, and excess supply caused heavy losses to Japfa.
“However, between October 2021 and February this year, we provided flexible policies such as increasing the budget, supporting partner farmers, giving technical advice on long-term husbandry, and non-penalty support in cases of low productivity,” Widjaja said, adding that the company has spent about $391,000 supporting the market in the Central Highlands.
Against the woes that hundreds of farmers are struggling with, the company has committed to applying breeding chickens within 85-90 days and more technical assistance to improve the performance of breeding.
However, farmers are still wondering about this commitment and livestock performance in general, because “the quality of Japfa’s chicken is not very good, and the mortality ratio is still too low for farmers to overcome current challenges,” one farmer told VIR.
Contract-based partnerships are a popular model in Vietnam with other big husbandry companies like C.P. Vietnam, CJ Agri Vina, De Heus, and Mavin linking up with farming households.
