Value chains and commodity prices: getting cassava out of the red and into the black

Sep 14, 2017

At the National Steering Committee on Cassava Ministry of Commerce, Phnom Penh 5 September 2017

Cassava farming was never for rich farmers.  But at least last year the average price for fresh root at farm was 3.5 cents (about 140 Riel) a kilo.  There was hope it would get back into profit at 4.4 cents.  It’s now down to 2.6 cents (about 100 Riel).

So why do famers bother?  Part of the answer is the famers are in fact seasonal migrant workers, either inside the country or to the neighboring countries such as Thailand.  They leave the cassava in the ground for around 10 months to fetch what price it gets when they come home. Unlike rice, it doesn’t take much care during its growing period and cultivation.

Low returns in the cassava sector are a serious problem. 80% of the population still lives in rural areas and Cassava is Cambodia’s largest agricultural export crop by weight after rice, so these commodity prices falls have had wide spread and serious effects. They have highlighted weaknesses in production, supply chain and exports.

This makes the proposed development of a national Cassava policy all the more important.  It also can suggest ways in which we can turn challenges into opportunities.

There are three possible areas where such opportunities might lie, and where we might want to focus in developing a national policy.  The first is around new techniques and innovations in farming and production.  New and better varieties, better mixes, more successful strategies for protection against crop disease and improved fertilizers. In a tripartite programme with the RGC, MAFF, UNDP and the Government of China (MofCom) a Cassava handbook was produced.  We worked with farmers  and in pilot sites saw significant improvements in yield. Further innovation and greater investment in Research and Development could help us build on these achievements.

The second area of opportunity may be structural and around the value chain.  We have already helped famers form larger cooperatives that bring benefits to both farmers and processors.  Cooperatives that can command higher and more consistent quality can charge higher prices and reduce risk and costs to their buyers.  Earlier this year I visited some of these cooperatives around Battambang.  Times are indeed tough for these farmers, but better coordination has helped them get better prices than they would have on their own.  A new national policy might be able to build on this, for example through contract farming models or similar improvements to integration along the value chain.

The third area to focus is the expansion of export markets.  This may require policy guidance in a number of ways.  Cambodia may be well suited to more niche markets where production may be smaller but value is higher, for example in starch and human consumption goods.  Being able to do more processing and refining in country and so to shift exports further up the value chain may be another way to boost the value of exports.  At present our exports focus more on immediate neighbors, some of whom are Cassava exporters themselves, and so a wider range of export markets might be possible.  Improvements to infrastructure will be key to making this work.

In all these endeavors, there is a clear role for Government, partnering with private sector and leading on policy.  With the right policies in place, well some targeted investments by Government, and with some help from development partners, we can crowd in private investment.  There are great opportunities for transformations within the Cassava sector.

We are always at the mercy of global commodity prices but with smart policies and investments there is a lot we can to mitigate those risks and bring a much higher return to farmers in Cambodia.