Costs and value added calculation in livestock
value chains—A technically robust process
Jean-Joseph Cadilhon (ILRI)
REVALTER Project Seminar
Hanoi, 7 January 2015

Outline
• Oversimplification of comparing sales prices
• Value chain approach to identify market intermediaries and
their value addition
• Complexity of technical processes in livestock chains
• Production costs per stakeholder
• Comparable costs and value added per unit of final
consumer product across the value chain
• Conclusions
2

Comparing sales prices
3
Sale prices (000 VND) Producer … … Retailer
Hybrid pig in Mai Son
(Son La)
45 / kg 89 / kg
Exotic lean pig in
Thong Nhat
(Dong Nai)
50 / kg 85 / kg
Milk in Ba Vi (Hanoi) 13 / L 35 / L
Evil
middlemen!
Source: REVALTER field research
Unequitable
value chain!

Comparing sales prices
4
Sale prices (000 VND) Producer … … Retailer
Hybrid pig in Mai Son
(Son La)
45 / kg 89 / kg
Exotic lean pig in
Thong Nhat
(Dong Nai)
50 / kg 85 / kg
Milk in Ba Vi (Hanoi) 13 / L 35 / L
Different products
so cannot compare
prices directly
Live pig Loin meat
Other stakeholders (including
women) add value to and
process primary produce into
consumer product

Value chain approach
5
Identify stakeholders and the value they are adding
to transform primary produce into consumer product
Source: Adapted from Lundy, M. and others. 2012. LINK Methodology. A Participatory
Guide to Business Models that link Smallholders to Markets. Cali, Colombia: CIAT.

Process of dairy products production
in Ba Vi (Hanoi)
6
UHT Milk
Pasteurizing
technology
Low temperature
pasteurizing
technology
ProcessingTransport
Collection systems
Materials
(milk, additional products)
Pasteurized fresh
milk products
Yoghurt
(Sugar/no sugar)
Milk fermenting
technology
UHT milk
products
Milk condensing
technology
Other
methods
Milk cakes
Caramel,
Yoghurt
Source: Pham Van Dung and Nguyen Mai Huong, REVALTER Project
Identify the detailed production and processing steps
to calculate conversion factors between raw, intermediary
and final consumer products

Structure of production costs for chain actors
7
Raw materials
Variable costs
Fixed costs
Other inputs and
services
Hired labour
Depreciation (capital)
Taxes and financial costs
Long-term loans
ProfitProfit*
Value Added
Gross
revenue
Need to choose one common unit of product to compare
costs and value added across value chain actors
* Family labour involved in the enterprise is likely to be remunerated from profits rather than through
fixed costs

Value added along the chain
8
Varia.
costs
Fixed
costs
Profit
Retailer
Varia.
costs
Fixed
costs
Profit
Processor
Varia.
costs
Fixed
costs
Profit
Collector
Variab. costs
Fixed costs
Profit
Producer
Raw
materials
Added
value
Added
value
Added
value
Added
value
Raw
materials
Raw
materialsRaw
materials
Retail
price
Wholesal
price
Collectors
price
Producers
price

Conclusions
• Only comparing sales prices is too simple to capture the complexity of
livestock value chains
• Using a value chain approach identifies the value added along the chain
• Detailed calculation of costs materializes the value added along the value
chain
• This complex exercise requires economic expertise and reliable
information from all stakeholders
• Results provide more robust evidence to qualify equity and effiency of the
value chain
• Results are useful to prompt discussions among industry partners and
policy makers on interventions to improve the value chain
9

Further reading
Philippe Boyer, Jean-Joseph Cadilhon, Jean-Noël
Depeyrot, Myriam Ennifar, Louis-Georges Soler, 2013,
Le suivi des prix et des marges pour l’analyse de la
formation des prix au détail des produits alimentaires,
NESE 37 (Janvier-Juin 2013): 87-125.
Philippe Boyer, Jo Cadilhon, Louis-Georges Soler,
The French Observatory on formation of food products’
prices and margins, a presentation given to the OECD
Food Chain Network on 13 September 2011,
FranceAgriMer, Paris.
10

Thanks to Guillaume Duteurtre (CIRAD) for digitalizing the costs and
value addition charts and to other Malica consortium partners for
discussions to improve and adapt these charts to local context.
This research was undertaken as part of the REVALTER project on
future prospects for livestock in Vietnam and co-funded by Institut de
Recherche pour le Développement (IRD) and the CGIAR Research
Program on Livestock and Fish.
Acknowledgements

The presentation has a Creative Commons licence. You are free to re-use or distribute this work, provided credit is given to ILRI.
better lives through livestock
ilri.org