DEVELOPING AGRICULTURAL POLICIES FOR RICE-BASED

FARMING SYSTEMS IN LAO PDR AND CAMBODIA

Theng Vuthy, CDRI, Cambodia

Rice-based Systems Research: Regional Technical Workshop

Australian Centre for International Agricultural Research (ACIAR)

13-15 June 2012, Vientiane, Laos

Project partners

University of Queensland National University of Laos Cambodian Development Resources

Institute Chiang Mai University (Thailand) Centre for Agrarian Systems Research

and Development (Vietnam)

Project Aim

Contribute to improved agricultural policies for rice-based farming systems in Laos and Cambodia, taking into account trends in Thailand and Vietnam, in line with ACIAR's food security initiative for the Mekong region.

Objective 1

To analyse current agricultural strategies, policy processes, and policy settings in Laos and Cambodia in the context of regional social, economic and environmental constraints and trends. Review agricultural constraints, trends, and

strategies in the region through interviews with key informants, review of policy documents, and analysis of secondary data.

Prepare a comparative analysis and synthesis of these constraints, trends, and strategies.

Objective 2

To demonstrate the benefits of evidence-based policy development in Laos and Cambodia through feedback from selected case studies. Use locally grounded case studies to explore

the implementation and impacts of selected policies.

Conduct project workshops to review, compare, and analyse case studies in relation to constraints, trends, strategies, and processes.

Feedback to policy actors through Project Advisory Group, reports, and policy briefs.

Objective 3

To examine agricultural policy trends in other countries in the region, especially Thailand and Vietnam, and the implications of cross-border trade and investment for policies in Laos and Cambodia Identify key policies and trends in Thailand and

Vietnam of relevance to Laos and Cambodia e.g., agricultural commercialisation, crop

diversification, rural credit, mechanisation, contract farming.

Conduct case studies of direct impacts of traders and investors from Thailand and Vietnam on agricultural development in Laos and Cambodia.

Objective 4

To collaborate with agricultural policy agencies in Laos and Cambodia to identify improved policy options and strengthen policy development processes Involve policy staff in training workshops, field

studies, analysis of data, and preparation of policy options.

Organise in-house reviews and policy forums in Laos and Cambodia in conjunction with collaborating policy agencies.

Prepare a manual on evidence-based policy analysis.

Timeline

Workshop 1 - Inception Meeting (August 2011)

Workshop 2 - July 2012 Outputs of Year 1 - Dec 2012 Workshop 3 - July 2013 Outputs of Year 2 - Dec 2013 Interim Project Report - March 2014 Forums in Laos and Cambodia - May 2014

Phases of Research

Year 1 – Rice policies in Cambodia and Laos (in context of Thailand and Vietnam)

Year 2 Policies regarding agribusiness investment

and contract farming for non-rice crops (maize, sugarcane, rubber, …);

Policies regarding livestock production and trade (cattle, buffaloes, …)

Components of Year 1 theme

Regional overview and comparison of rice policies Specification of rice farming systems (mainly

lowland) Production and input constraints (farm size, land,

seed, fertiliser, water, extension, credit, risk) Output constraints (post-harvest, marketing,

trade barriers) Diversification (alternatives to producing rice on

the same land) Contract farming, farmer organisations Rice value chains (esp. cross-border studies)

Case studies underway in Laos

Irrigated and rainfed rice-based farming systems in southern Laos (Savannakhet) techniques of rice production production cost and returns diversification of farm activities

Supply of inputs and services to rice farmers seeds, fertilizer, water, credit government and private-sector

Rice value chain and cross-border trade Laos-Vietnam Laos-Thailand

Case studies underway in Cambodia

Fertiliser supply chain: a case study in Takeo Province

Policy options for improving credit supply to rice producers: a case study of in Takeo Province

Rice value chain: a case study in Takeo and Southern Vietnam

Rice contract farming in Cambodia: a case study in Takeo and Kampong Speu provinces

Research problems and rationale

Rice is main crop, contributes to economic growth

In 2010-11, production is 8.4 m tons, surplus 4 m tons

But there are constraints … Farm inputs – poor quality fertilizers, pesticides,

seeds Credit – limited access to working and investment

capital Rice marketing – high potential, but many issues

surrounding post-harvest operations and cross-border trade

Issues of agribusiness – rice contract farming

Methodology

Focus on Takeo One of main lowland rice production areas High flow of farm inputs, credit provision, cross-

border trade, and emergence of contract farming

Qualitative approach – KIIs and FGDs in four districts with different access to irrigation

Respondents - farmers, traders, contractors/millers, exporters, importers, MFIs, government officials

Secondary and primary data

Theng Vuthy, PhD

Fertilizer value chain study

Fertilizer import and distribution points

Organic DistributionVietnam Distribution

Centers

Vietnam EntryPoints

Organic Entry Point

Thai Distribution Centers

Future Vietnam Urea Entry Point

Thai Entry Point

Fertilizer procurement and distribution channels

Licensed Cambodian Importers (1 based in Takeo, 4 in flow)

Prov. distributors / wholesalers

Prov, District and Village Retailers

Seasonal Village Distributors

Smallholder Farming Households

Credit sales Cash sales

Mobile distributors / wholesalers

Note: Quality fertilizer flow ; Possible fake flow

Fertilizer channels in Takeo

Urea and DAP value chain (Feb, 2012)

 

Granular Urea DAP (USA)

($/50 kg)% of imported

price ($/50 kg)% of imported

price

Bag Cost Importer at Vietnam border - - 31.5 100

Transport to Cambodia (<100km@$0.25) - - 0.3 0.8Into store - - 0.1 0.2Cost into Border Warehouse - - 31.8 101.0Label change & importer's markup - - 1.7 5.3Importers Selling Price 24 100 33.5 106.3Transport to province (100 km @ 0.25) 0.3 1.0 0.3 0.7Distributor markup and handling 0.8 3.1 0.8 2.2Into store Provincial Distributor 25.0 104.1 34.5 109.3Provincial distributor markup 0.5 2.0 0.5 1.4Distributor selling price 25.5 106.1 35.0 110.7Transport to village dealer & handling - - 1.0 2.9Into store at village dealer - - 36.0 113.6Dealer markup for cash sale 3.3 12.7 0.5 1.4Retail Cash Price 28.8 118.9 36.5 115.0

Sample # Product % Total N % Total P2O5

% Total K2O

% Total Sulfur

Total Nutrient %

5. 20-20-15 21.90 10.50, 11.40 9.00   77.0012. 20-20-15+TE 16.40, 16.80 16.70, 17.40 14.20   88.0021. 20-20-15+TE 17.10 18.20, 18.00 13.60   68.2224. 20-20-15 17.70, 18.50 19.50 11.60   90.1828. 20-20-15 20.70 19.60 9.77   91.0434. 20-20-15+TE 17.20 17.50, 17.30 12.80   86.3638. 20-20-15 17.80, 18.10 21.20 10.40   90.3642. 16-16-8-13(S) 13.90 5.51, 5.47 0.15 12.10 48.9043. 16-8-8-13(S) 17.20 8.66 2.85 15.60 89.7246. 20-20-15-13(S) 24.60 12.80, 12.20 11.90 2.12 89.6460. 16-8-8-13(S) 16.30 6.80, 6.92 3.47 15.00 83.4173. 20-20-15 + TE 17.80, 19.00 20.30 9.41   88.5688. 20-20-15 + TE 16.10,16.20 20.30 11.70   87.6492. 20-20-15 +TE 15.80,16.10 21.10 9.79   85.4497. 25-20-10 +TE 23.00 19.60 12.30   99.82

102. 20-20-15 + TE 21.60 16.20, 16.60 9.43   86.60

Source: IFDC / WB, 2010; Note: Overall index value of the fertilizer is 98%

Blended fertilizer samples nutrient analysis

From blender/producers – either poor blending quality or mixing (reported both from Thailand and Vietnam)

Adulteration and or dilution (e.g., mixing poor fertilizer with good one)

Re-bagging – putting poor quality or cheap fertilizer in bag labeled with urea or DAP

Coating with oil to change product appearance (e.g., coating 6-20-0-4 to give DAP appearance)

During high prices in 2008-9, about 30% of fertilizers were fake

Fake fertilizer – how does it happen?

MAFF and PDA cracked down on fake fertilizers by increasing certification and training of

wholesale and retail shops farmer training and awareness

Increase competition of importers for market share in a small total market

Farmers have realized that cheap fertilizers do not provide good crop responses

Reduction of fake fertilizers

Kem Sothorn

Farm credit

Supply of credit to rice farmers

Good supply of credit from MFIs Borrowers increasing, mostly larger farmers Most small farmers still cannot access credit Factors limiting access to available credit -

Lack of collateral High risk and vulnerability among the poor Small farm size and poor physical infrastructure Lack of skills to use credit effectively Lack of livelihood diversification Difficulties in forming group loan

Not all credit used for agriculture Farmers mostly use credit to diversify

income sources and for household expenditure

Most farmers access inputs from traders on credit with high interest rate

General improvement in living conditions and food security, partly because of access to credit

Women are better managers of household expenditure and investment

Impacts of credit on rice farmers

Credit for rice farmers can work effectively if there is good combination of physical infrastructure market availability skill and extension services mechanisms to cope with shocks and reduce

vulnerability Most MFIs focus on their own

sustainability rather than helping farmers by reducing interest rates

Preliminary observations

Nou Keosothea and Chhim Chhun

Rice value chain

Links in rice value chain

Farmers produce varieties of rice

Sun dryStore in

the house

Village or local collector

s

Local rice mill

Provincial rice mill

Vietnamese traders

Regional traders

Transport to Phnom

Penh

Transport to Vietnam

Exporting

Indicate the huge amount of paddy rice

Farmers sell rice immediately after harvest Local traders the first link, transporting to regional

traders Vietnamese traders are key to setting price, quality, and

quantity Actors get information (prices, quantity, quality) mainly

from Vietnamese traders Traders manipulate information for own benefit Farmers are price takers No active producer organizations in place Local traders are short of capital

capacity to buy rice about 5-10 tons per day no storage facility

Relationships in rice value chain

Prices and margins along chain

Key Value Chain ActorsWet season rice Dry season ricePrice

(riel/kg)% of farm

gatePrice

(riel/kg)% of farm

gateFarmers’ selling price 1,000 100 850 100Handling and transport 150 15 - -Village or local collectors’ markup 150 13 20 2.4Village or local collectors’ selling price 1,300 130 870 102.4Regional traders ‘/ millers’ handling and markup 200 20 80 9.4Regional traders’ / millers’ selling price 1,500 150 950 111.8Exporters’ handling and markup - - 80 9.4Vietnamese traders’ buying price - - 1,030 121.2

Wet season rice is for home consumption, dry season rice is for income and repayment of input costs

Post-harvest operations inefficient – storage, Cambodia trading capacity, investment capital;

Farmers are price takers, no bargaining power

Local and regional traders make more profit

Rice marketing is highly dependent on Vietnamese traders who set prices, quality, and quantity of rice marketed in Cambodia

Preliminary findings

Nou Keosothea

Rice contract farming

Nature of contractual arrangements Contractor solely developed the contract terms Contractor provided rice seed without interest and

bought rice about 300 to 500 riel/kg above market price from contracted farmers

Farmers not included in contracting process and can only agree or disagree with the contract terms

Local authorities (villages and communes) were used to monitor the contract terms at the village level and received cash 50 riel/kg from contactor

Contractor managed, controlled, and approved whole process of contractual arrangements

Received good quality seed without interest

Guaranteed market with better price For farmers who kept the contract terms,

cash loan at 1.4% per month cf. MFI interest rate 2-3 % per month

Received technical support from contractor which can improve yield (e.g. 0.5-1 ton/ha)

Overall increase in rice price for villages that have contract farming

Benefits to contracted smallholders

Problems faced by famers

Obeying contract terms on quality, moisture content, and transportation to the mill

Lack of cost and benefit analysis of CF membership

Natural disasters - drought and flash flood led to farmers losing money

Some contract farmers did not follow the contract terms and contractor did not renew contract for whole village

Secured market for the product Increasing credit for ‘good’ farmers Better selection of farmers and locations Good management to plan, organize,

and coordinate production Provide technologies that are suitable for

small famers Strict monitoring of quality and quantity

of members’ product to benefit whole community

Conditions enabling smallholders to benefit from CF schemes

Contract farming has benefited ‘good’ farmers in study areas by giving access to … good quality seed credit technology market

Benefits come with problems of … monitoring complying with the contract terms natural disasters (drought and flood)

Summary

Next steps for Year 1 plan

Analysis and draft case study reports Sharing research findings in regional

workshop in Danang in July Revised draft reports addressing

comments from the workshop Publish in ACIAR report