The role of Contract Farming in the
Development of a Competitive and Sustainable
Cassava Sub-sector in Vietnam
Tiago Wandschneider, Project LeaderSADU-CIAT
8th Asian Cassava Research Workshop
Vientiane, 20-24 October

The Context in Vietnam

Dramatic increase in production due to a major
expansion of area and significant productivity gains
Regions
Area
(‘000 ha)
Yield
(ton/ha)
Production
(‘000 ton)
2000
2007
%
change
Red River Delta
8.3
7.6
- 8.4
9
11.9
32.2
74.4
89.9
20.8
3.8
1.1
Northeast
48.4
55.3
14.3
8.8
13
47.7
426.7
719.6
68.6
21.5
9
Northwest
35.3
42.9
21.5
7.5
9.8
30.7
265.3
419.2
58
13.4
5.2
North Central Coast
38.4
58.8
53.1
6.6
15.4
133.3
255.2
906.3
255.1
12.9
11.4
South Central Coast
37.1
65.3
76
8.9
15.7
76.4
329.5
1,021.4
210
16.6
12.8
38
129.8
241.6
9.3
15.2
63.4
351.5
1,976.5
462.3
17.7
24.8
Southeast
24.4
130.8
436.1
8.8
21.3
142
215.5
2,779.1
1,189.6
10.8
34.9
Mekong River Delta
7.7
6.3
- 18.2
8.9
11.6
30.3
68.2
73.1
7.2
3.4
0.9
237.6
496.8
109.6
8.4
16.1
91.7
1,986.3
7,984.9
301
100
100
Central Highlands
Vietnam
2000
2007
%
change
2000
Share of
production
(%)
Source: Ministry of Agriculture and Rural Development (MARD)
2007
%
change
2000
2007

Hanoi
Main producing areas
Ho Chi Minh

Key drivers of growth in the cassava sub-sector
 Availability of high-yield, high-starch varieties
 Large and growing demand for starch and dry cassava,
especially in China
 Government investment in industrial starch processing units

Cassava farmers have enjoyed favorable price
trends
Farm-gate price of cassava in Krong Bong, Dak Lak
(US$/ton)
160
140
U S $/ton
120
100
80
60
40
20
0
2003
2004
2005
Fresh roots
2006
Dry cassava
2007
2008

Mid-Term Market Outlook for Vietnam

Demand outlook is favorable
 Strong and growing demand for dry cassava in China
 Strong demand for cassava starch in China
 Growing demand for dry cassava for industrial feed in Vietnam
 Growing demand for starch in Vietnam
 Cassava ethanol plants as a new source of demand in Vietnam
But
Starch factories may have to close due to concerns over the
environmental impacts of waste water

Supply outlook not so favorable
 Limited scope for further productivity gains through adoption of
high-yield, high-starch varieties
 Limited scope for continued expansion of cultivated area
 Most increased supply will have to come from improved
cultivation practices
 fertilizer use is increasing but need for site-specific solutions
 significant obstacles to adoption of other technologies and
management practices that are critical for increasing or sustaining
yields => many cassava farming practices are not sustainable

Price outlook is relatively favorable
 Prices may have peaked in early 2008
however…
 Strong demand fundamentals
 Tight supply conditions

Trend in the prices of cassava fresh roots, dry chips and
starch (FOB Bangkok) in Thailand from 2003 to 2008.
440
400
400
360
360
320
320
280
$US /ton
440
280
Starch
240
240
200
200
160
160
Dry chips
120
120
80
80
Fresh roots
40
40
0
0
J M M J
2003
S N
J M M J
2004
S N
J M M J
2005
S N
J M M J
2006
S N
J M M J
2007
S
N
J M M J
2008
S N

Actual or planned factories for the production of anhydrous ethanol
from cassava in Asia
Country
Company
Location
China
Guangxi New Tiande Energy Ltd. Co.
China Food Comp. (COFCO)
China Food Comp. (COFCO)
Other factories
Qinzhou, Guangxi
Beihai, Guangxi
Wuzhou Guangxi
Indonesia
Sampoerna Bio-energy: 3 factories
Sorini Corporation
EN3 Co. Ltd: 3 factories
East Java
SE. Sulawesi
S. Sulawesi
Thailand
Thai Nguan Ethanol Co. Ltd
Khon Kaen
International Gasohol Corp
Rayong
Phakwantip Co. Ltd.
Prachinburi
6 factories using cassava and/or molasses
16 factories
Vietnam
Petrosetco+Itochu Co.
Petrosetco
Petrosetco
Hai Phong Engine Comp.
HCM city
Binh Dinh
Baria Vungtau
Gia Lai
Quang Nam
Quang Nam
Dak Lak
Yen Bai
Capacity
(‘000 l/day) Status
Fresh root
requirement
(‘000 t/year)1)
420
840
1,260
1,510
operating
completed in 2007
2,500
2,500
600
planned
planned
planned
4,688
4,688
1,125
10,501
130
150
60
1,000
7,170
stopped operating
completed, not operating
completed, not operating
to be completed in 2008
licensed
244
281
112
1,875
13,443
15,955
to be completed in 2009
planned
planned
planned
planned
planned
planned
planned
624
703
703
750
2,780
333
375
375
400
planned
1) based on 300 working days per year and a conversion of 160 l ethanol/ t fresh roots
2) in next 10 years China will require 3.1 mil. tons ethanol/year from cassava or 24.22 mil. tonnes fresh roots.
787
1,575
2,362
2,832
7,556 2)

Key challenges in the cassava sub-sector
in Vietnam

Will Vietnam remain a very competitive producer
of cassava and cassava-based products?
 The future of the starch industry is under threat due to
concerns over their environmental impact
 The sustainability of cassava production is under serious
threat due to unsustainable cultivation practices

The way forward

A concerted, multi-stakeholder effort will be required
to address sustainability issues at the farm level
Local policy framework
Extension
Farmers
Research/Projects
Contracting firms

Current situation in Vietnam
Local policy framework
Extension
Farmers
Research/Projects
Contracting firms

Local policy framework
Extension
Farmers
Research/Projects
Contracting firms

The role of contract farming in the
development of a sustainable
(competitive) cassava sub-sector

Some context
 Cassava in Vietnam is grown by smallholders
 Under contract with starch factories
 Without contract
 Large cassava plantations are not socially and politically
feasible

There is an opportunity for engaging the
starch processing sector…
 Close links to cassava farming households (contract farming)
 Many starch processing firms are becoming increasingly
concerned with the long-term sustainability of their supply
base
 Potential to develop new, win-win production models that also
have a positive impact on soil fertility

Is contract farming a suitable model for
cassava production?
No, under low-input (traditional) systems…
Company need
x cassava

Yes, under innovative, higher-input and
skill-intensive systems…
Company need
x cassava

Entry points for intervention
 design and implementation of contracts
 network of field staff for provision of site-specific technical
advisory services
 fertilization
 Inter-cropping
 Adoption of hedgerows
 new, win-win production models (short and long season
cassava  off-season supplies)

The experience of SADU in Krong Bong
district, Dak Lak province

Some context on SADU Vietnam
 3 provinces, 6 districts
 Small team + limited budget
 Cassava is one of 9 target supply
chains
 SADU also works on strategic crosscutting issues
Krong Bong

Cassava is the second most important commercial
crop in Krong Bong
No. cassava farming and processing
households
Area under cassava 2007
Production 2008
Farm-gate value of cassava roots
~ 4,000
3,500 ha
(500 ha in 2002)
55,000 tons
US$ 3.7 million

The dry starch supply chain

The dry cassava chips supply chain

Intervention strategy for the dry starch chain
SADU Project
dialogue, advice, training,
linkage, technical
assistance
dialogue
training
resources
vertical coordination
cultivation practices
off-season
services
Cultivation practices

Intervention (late 2006 – early 2007)
Improve contract design and implementation
Collect
harvesting
tickets
Arrange
transport
Travel to
the factory
Wait for
delivery
Travel to
the factory

Improvements in contract design
Registration process
Measuring of farm size no longer
necessary
Consultation with
farmers
Harvesting calendar now set by
farmers
Role of group leaders
Financial package being revised
Input supply
Plans to supply fertiliser to 10
model groups
Transport services
Contract with traders
Off-season contracts
No change, increased investment
in off-season cultivation

Improvements in implementation of contracts
Issuing of harvesting
tickets
One new field office
Impact of contract traders?
Loan disbursement
No major change
Impact of contract traders?
Technical assistance
Demonstration services
Plan to work with 10 model groups
Vertical coordination
Facilitative attitude towards traders
Contracts with traders
Farmers no longer have to travel to
the factory
Payment procedures

New intervention (June 2008 - …)
Pilot of long-season cassava in 5 hectares (KM94)

CIAT trials, Naphok Agricultural Station
 KM 94 was planted during the normal season (June) on medium
fertility soils: white sandy loam, low in OM (1.77%) but high in K
(0.34 me/100 g)
 The plots were irrigated 1 month after planting. Weeding was
carried out once. Mulching with rice straw (10 t/ha) was used.
Harvest
Yield (t/ha)
Starch content (%)
11 months
41.4
27.8
13 months
65.5
29.1
18 months
150.0 (!)
27.2

SADU is also promoting adoption
of simple harvesting tools

SADU is also promoting
adoption of improved
processing technologies

Conclusions
 The private sector must be part of the solution (development
of a sustainable cassava sub-sector in Vietnam)
 Working with supply chain champions is critical for impacts at
scale (leveraged impacts)
 Working with supply chains reduces the cost and enhances
the sustainability of interventions

Thank you for your attention!