World Food Policy
unable to exert power or negotiate the
milk prices and other concerns. Dairy
farmer groups are established in only
three out of seventeen dairy farming
communes. Except for technical train-
ing classes and visits to farmers, these
groups don’t have any collective activ-
ities (as bulk purchase of inputs) or
action plan to dialogue and negotiate
with the processors.
nies, or price fluctuations are passed to
farmers by collectors. Milk collectors
are obliged to invest their time and re-
sources in building such networks, but
they themselves benefit from relational
governance in two ways: (i) it enables
them to expand their input business
(feed, animal medication); (ii) they are
able to obtain necessary information to
reduce risks connected with milk qual-
ity at farm level. The above-mentioned
legal and social mechanism facilitates
the symmetric relationship between
dairy producers and collectors.
IDP drives the technological ad-
vances in local industry by investing in
UHT technology. This investment al-
lows IDP to produce pasteurized long-
life milk, which helps balance supply
and demand in winter, and target larger
markets outside the district (i.e. Hanoi
city and even Central and Southern
provinces). Moreover, IDP has built
up professional teams for the different
stages (collection, processing and sale)
to provide technical assistance to their
farmers and collectors. Besides, IDP
commits short-term and medium-term
credit to the farmers linked to their net-
work. While formal bank loans usually
require collateral, informal loans and
microfinance enable dairy farmers to
purchase cows or make other invest-
ments.
Captive governance: outstanding role
of IDP as lead firm
Different from the informal link be-
tween farmers and cottage industry,
mixed connection between farmers
and semi-industrial processors, the re-
lationship between farmers and IDP is
formal. Facilitated by the MOU with
the district authority (2009), IDP has
a quasi-monopoly in purchasing local
milk as IDP collects 85% of the milk
locally produced and imposes pur-
chase prices and the quality norms
(dry matter content, fat content, an-
tibiotics, etc.) that are a reference for
the whole district. Semi-industrial
processors organize their collection
and price their purchases based on
the price range defined by IDP. Both
the pricing and the payment system
(penalty, bonus, and quality standard)
are decided by IDP without formal
discussions with the farmers, who are
in a weak position in the chain. Dairy
farmers are not organized to benefit
from collective actions, and are thus
ID P officializes its operations
by contractual relationships with pro-
ducers and private collectors aiming at
securing supplies and reducing risks.
The written contract system has been
in use since IDP’s debut in the region.
Today, most local producers have a
contractual link with a processor (large
or small, industrial or semi-industrial),
although a small number of producers
supply their milk to cottage industry
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