A stone’s throw away from the buzzing metropolis of Ho Chi Minh City, south Vietnam’s array of small dairy farms sit tucked away among muddy dirt paths and lush fields of elephant grass – clinging to cultivation practices from decades ago.
But with milk yield and quality lagging far below accepted standards, one Israeli-owned company hopes to revolutionize the sector.
“In Vietnam, more than 60 percent of the dairy industry is small household farmers – somewhere between four cows and 70 cows,” Ronen Zexer, a co-founder of a new enterprise called Smart Feed Solutions, told The Jerusalem Post on a Skype call last week.
“These farms are utilizing technology and know-how that is equivalent to Israel back in the 1940s and 1950s,” Zexer said. “These farmers do not have access to technology and to know-how and to the progress that was made in the dairy industry. At the same time, they need to compete in the market.”
Zexer, who in the past served as CEO of the dairy technology leader Afimilk and has consulted for the Israeli-Vietnamese TH Milk mega project, is heading a co-investment between Israeli and Dutch entrepreneurs in a new approach to the challenges of the dairy industry in developing countries.
With so many Vietnamese workers dependent on the sector, yet continuing to rely on methods that date back 80 years, Zexer said that he intends to bring technologies and services to the farmers.
“The rural way of life is under great pressure. Farmers who cannot make a living are deserting the farms and moving to the city,” he said. “The young generation does not want to come and take over.”
Zexer and his Israeli and Dutch investment partners established Smart Feed Solutions about a year ago, aiming to offer small household dairy farmers a total mix ration (TMR) forage – a balanced and nutritious cattle feed unavailable to the herds today. With construction now complete on a factory in Long An province, about two hours from Ho Chi Minh City (population more than 8 million), the company is ready to begin selling its product to local farms.
Coupled with the feeding solution, Zexer said SFS will be offering a set of services to cope with the region’s most pressing issues, such as data management, fertility problems, lameness- related illnesses, somatic cell counts (an indicator of milk’s likeliness to contain harmful bacteria, and thus its food safety) and general husbandry needs.
“Almost all foreign companies who are involved in the dairy industry focus on the mega-project,” Zexer said.
“Smart Feed Solutions is taking a new approach. We are focusing on the market sector of small household farms that is seen as less interesting because the challenge of introducing technology is more difficult.”
More and more, big dairy companies such as Vinamilk, which purchase milk from local farmers, are demanding products of higher quality, Zexer explained. The price the farmer gets from Vinamilk and other firms depends on several factors, such as the presence of solids like proteins, fats and lactose in the milk, as well as the quantity of somatic cells – which can indicate infection in the cow, he added.
As far as data administration is concerned, SFS will be using Afimilk’s AfiFarm herd management software to analyze data collected by farmers and submitted to the firm, Zexer explained. While such data collection typically is automated in a modern farming setting, SFS will enable farmers to manually submit their data and then receive an analytical report generated on the company’s server.
For the time being, the company’s focus will be the approximately 100,000 dairy cows in the vicinity of Ho Chi Minh City, Zexer said. The hope is that SFS can then replicate its services to other areas of Vietnam and to neighboring countries with similar needs.
“We believe that one year down the road, the farmers will see a significant change in the way they do farming and the results they see on the farms,” he continued.
Acknowledging that the solution will not bring the dairy farmers up to the level of their Israeli colleagues, Zexer said that their productivity could improve by 40-50 percent.
Statistics aside, Zexer recognized the difficulties he will likely face in convincing local farmers, who often have meager funds and methods that have been ingrained for generations, that they will benefit from buying the SFS feed and service package. The idea of paying more for feed and services in the short-term and reaping the benefits in the long-term could present an obstacle to some customers, as “farmers by nature are conservative people,” he explained.
Nonetheless, Zexer expressed confidence that the company would find the “early adapters” that it is seeking.
“The biggest challenge we have is the cultural difference,” he said. “As you can expect, some of the farmers are reluctant and say, ‘No we cannot not.’ Some say that we want to see who else is doing it and make a decision. Some are saying, ‘This is a huge issue, we are glad you guys came along to help us do better.’ “You have people who have aspirations to improve their farm,” he added. “The others will follow once they see the benefits and the pressure from the market.”
While focusing on the local dairy industry, Zexer said that SFS is simultaneously working on a project to export its forage to nearby countries like Korea and Japan. These countries and others in the region have highly developed dairy industries but import their forage products at a high cost across the Pacific Ocean, from the United States, Canada, Brazil, Argentina and others, he explained.
Although unique in its emphasis on small farms, SFS is not the first Israeli venture to enter the Vietnamese dairy sector.
The $200 million TH Milk facility, which houses some 20,000 cows in central Vietnam, is the result of an agreement signed between Afimilk and the Vietnamese firm TH Milk in 2009. This enormous undertaking, which includes 12 milking parlors, is the largest Israeli dairy farming project in the world.
Meanwhile, on a government- to-government level, an Israeli Dairy Demonstration and Experimental Farm has been operating just outside Ho Chi Minh City since August 2013. The farm, overseen by the Foreign Ministry’s Mashav Agency for International Development Cooperation and the Agriculture Ministry’s Center for International Agricultural Development Cooperation, houses 230 cows and provides a place for local farmers to learn about increasing milking efficiency and quality.
Dagan Sadrinas, the Israeli manager of the demonstration farm, said SFS is choosing the “right way” by offering the forage and services package to farmers. He stressed, however, that the company will “need to educate the market.”
“It’s a difficult thing but it can be accomplished,” Sadrinas told the Post. “When they will do it, they will prove the high value of these kinds of things – of foods and service and management.”
Education will be critical, as Vietnamese farmers are not accustomed to paying for such services and therefore must be able to accept that the high quality product will not lead to instant results, according to Sadrinas.
“The result will be in the long term,” he said. “The farmers there don’t know how to look in the long term. They care about today.”
While the company will need to demonstrate to the customers that the product is worthwhile, and may reduce profits when starting out, Sadrinas maintained his support for the idea and expressed his hopes that the vision succeeds.
“This is the beginning – they need to learn the market and the market needs to learn their product,” Sadrinas said.
“I think this is the right way for Vietnam... it’s also a good name for Israel.”
Zexer is confident that in this market, the early adapters will boost the concept’s popularity, leading more and more farmers to sign up for the services.
“We believe it can be done, it can be profitable for the farmers and for the investors in SFS and it will support important social values such as enhancing the rural way of life to reduce migration of farmers to the metropolitan areas and agriculture sustainability,” he said. “These issues are critical for developing countries. We will improve the livelihood of many people involved in the dairy production chain.”