The role of Contract Farming in the
Development of a Competitive and Sustainable
Cassava Sub-sector in Vietnam

Tiago Wand...
The Context in Vietnam
Dramatic increase in production due to a major
expansion of area and significant productivity gains
Regions

Area
(‘000 ha...
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 d...
Cassava farmers have enjoyed favorable price
trends
Farm-gate price of cassava in Krong Bong, Dak Lak
(US$/ton)
160
140

U...
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 Chi...
Supply outlook not so favorable
 Limited scope for further productivity gains through adoption of
high-yield, high-starch...
Price outlook is relatively favorable
 Prices may have peaked in early 2008
however…
 Strong demand fundamentals
 Tight...
Trend in the prices of cassava fresh roots, dry chips and
starch (FOB Bangkok) in Thailand from 2003 to 2008.
440

400

40...
Actual or planned factories for the production of anhydrous ethanol
from cassava in Asia
Country

Company

Location

China...
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...
The way forward
A concerted, multi-stakeholder effort will be required
to address sustainability issues at the farm level
Local policy fra...
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

 La...
There is an opportunity for engaging the
starch processing sector…
 Close links to cassava farming households (contract f...
Is contract farming a suitable model for
cassava production?
No, under low-input (traditional) systems…
Company need

x ca...
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-spec...
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
...
Cassava is the second most important commercial
crop in Krong Bong

No. cassava farming and processing
households
Area und...
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

di...
Intervention (late 2006 – early 2007)
Improve contract design and implementation

Collect
harvesting
tickets
Arrange
trans...
Improvements in contract design
Registration process

Measuring of farm size no longer
necessary

Consultation with
farmer...
Improvements in implementation of contracts
Issuing of harvesting
tickets

One new field office
Impact of contract traders...
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: wh...
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)...
Thank you for your attention!
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam
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The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam

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8th Asian Cassava Research Workshop
Vientiane, 20-24 October

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The role of Contract Farming in the Development of a Competitive and Sustainable Cassava Sub-sector in Vietnam

  1. 1. 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
  2. 2. The Context in Vietnam
  3. 3. 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
  4. 4. Hanoi Main producing areas Ho Chi Minh
  5. 5. 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
  6. 6. 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
  7. 7. Mid-Term Market Outlook for Vietnam
  8. 8. 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
  9. 9. 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
  10. 10. Price outlook is relatively favorable  Prices may have peaked in early 2008 however…  Strong demand fundamentals  Tight supply conditions
  11. 11. 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
  12. 12. 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)
  13. 13. Key challenges in the cassava sub-sector in Vietnam
  14. 14. 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
  15. 15. The way forward
  16. 16. 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
  17. 17. Current situation in Vietnam Local policy framework Extension Farmers Research/Projects Contracting firms
  18. 18. Local policy framework Extension Farmers Research/Projects Contracting firms
  19. 19. The role of contract farming in the development of a sustainable (competitive) cassava sub-sector
  20. 20. 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
  21. 21. 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
  22. 22. Is contract farming a suitable model for cassava production? No, under low-input (traditional) systems… Company need x cassava
  23. 23. Yes, under innovative, higher-input and skill-intensive systems… Company need x cassava
  24. 24. 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)
  25. 25. The experience of SADU in Krong Bong district, Dak Lak province
  26. 26. 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
  27. 27. 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
  28. 28. The dry starch supply chain
  29. 29. The dry cassava chips supply chain
  30. 30. 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
  31. 31. 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
  32. 32. 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
  33. 33. 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
  34. 34. New intervention (June 2008 - …) Pilot of long-season cassava in 5 hectares (KM94)
  35. 35. 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
  36. 36. SADU is also promoting adoption of simple harvesting tools
  37. 37. SADU is also promoting adoption of improved processing technologies
  38. 38. 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
  39. 39. Thank you for your attention!

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