Value Chain Analysis
High Value Crops
Cambodia is estimated by VCA to be producing:
In billions US$:
|Millions of tons|
|fruit and vegetables||0.20 |
Unfortunately, there is a serious lack of statistical information on what happens to the production. Cambodia borders two larger and more efficient agriculture producers which have more organised value chains able to buy primary products in Cambodia and to transport and process and export them.
The chart above actually tells us a lot about the situation in Cambodia.
The farm gate value of agricultural crops is estimated by VCA at $ 2,3 billion, 80% of it being in the way of rice. The farm gate prices used are nominal ones and farmers probably get 20% less or $ 1.84 billion.
The trader sale value of agricultural crops is estimated as being $ 2.53 billion. Of this, we estimate that $1.0 billion is sold across the porous borders, a majority to traders from Vietnam who generally offer far better terms than local traders because they are better funded.
The unofficial billion dollars value is then processed and becomes around $ 1.3 billion and is either consumed locally freeing other equivalentproduce for export or is exported directly at a value estimated at $ 2.2 billion.
Of the $ 1.53 billion produce that remains in Cambodian hands,
the processed value is estimated as being $ 2.1 billion
of which $ 0.2 billion is then exported and
wholesalers buy the rest at $ 2.0 billion
to be sold retail at $ 2.1 billion.
Cambodian agricultural production has traditionally followed the above pattern because the country does not possess a good deep port with large volume of trade and transport through Vietnam and Thailand is often cheaper than through Sinoukville. The trend is now greatly reinforced because of the liberal trade regime adopted by Cambodia and for historical reasons the lack of saved capital in the hands of traders and processors. There is little working capital and farmers are forced to use what credits they can get. The resulting system works but at an opportunity cost of US$ 1.2 billion.
There are few reliable trade statistics for Cambodia, we have estimated all the above. It is also not possible to resurrect trade data from statistics in Vietnam or Thailand. That means that it is impossible to know for certain. The situation makes planning problematical and monitoring baseless. The only solution is to try to develop accurate estimates and have a better collection of production data.
Cambodian costs of production for rice, maize, cassava, cashew and rubber and other commodities are not that different than those in neighbouring countries. Energy, transport and processing costs are somewhat higher. But the country produces excellent rice, rubber, pepper and fruit and vegetables that can compete in regional markets.
Although a bit dated, in 2003, the above chart showed the competitiveness of produce as reflected in local market prices in singapore, KL, Phnom Penh and Colombo. In particular, the exercise draws attention to chillies and capsicums which are particularly comptitive for Cambodia. The chart also gives indication of the price diffeentials and the attractiveness of teh singapore market in particular.
Given that there is no cold chain, farmers have little or no credits, transport is weak, Cambodian production of fruit and vegetables has lagged and the country imports a great deal of its food from its two neighbours. At the same time, what is being produced in the country is often of very good varieties. In the past, we have undertaken competiveness assessment in regional markets and found that Cambodia has excellent prospects. Unfortunately, very little investment has taken place in agriculture, the banks have found it far more profitable to put money into property development.
However, given its competitiveness, there is no reason why it cannot develop along the lines of export led pro poor agricultural diversification and greatly increase the value of its agricultural produce.
There are some large plantations in Cambodia producing oil palm, durian, coconuts and other fruits. Some large landholdings are purely speculative. But most farmers are small farmers, typically with less than 2 ha of land and a small home garden around their houses.
Although some farmers benefit for a while from donor programmes, they are a very small minority. Most small farmers do not enjoy extension, finance, information or any other form of assistance. It is a free market economy. The credits that are available are trade credits for fertilisers and chemicals and payment terms often include having to sell to the supplier on harvest at unfavourable prices.
Local traders and processors also lack access to funding and end up generally acting as traders except for food supply to the retail market. The mills that supply the local market are active and have little trouble in gaining access to rice although the maize people complain about difficulties.
Foreign traders and agents often also extend credits to farmers and are fairer in weights and measures. As a result, they too have little problem in procuring what they need.
The main crop accounting for 80% of the agricultural output is paddy with production outstripping consumption leading to a mounting surplus of rice. The chart below traces production and consumption including the trends of the two.
This mounting surplus of rice is a testament to the hard work of small farmers reacting to cash needs and a stable market in the form mainly of Vietnamese traders and agents buying promptly and fairly. The rice is then transported to Vietnam in small lots which are allowed free transit over the porous borders. The rice that goes across the borders is milled and either consumed or frees local milled rice for export. It is in the mutual interests of both parties. Farmers produce and can sell what they wish to sell promptly, Vietnam is able to export the rice. The mounting regional surplus of rice does pose vulnerability issues. Cambodia relies rather heavily on rice as a commodity.
Some rice is consumed within the country and some of that is also milled in Cambodia while a part comes back milled from Vietnam. The mounting suplus in Cambodia is increasing what Vietnam (Thailand a bit) has available for export. The export figures for Vietnam thus include Cambodian rice exports. We estimate that a billion dollars worth of produce goes across the border. It is likely soon to exceed 4 million tons of paddy.
The importance of this one billion dollars worth of produce going across porous borders is that by the time it is processed and exported, Cambodia would have been able to earn $2.2 billion. Of course, there are problems that prevent Cambodia from doing so. In the presence of these problems or obstacles, the role of Vietnamese traders is quite critical and bneficial. The main problems appear to be:
Lack of finance for farmers
Lack of working capital for processors
Poor infrastructure for transport
Small volume catered for by port
Lack of research on export markets
Critical mass required for shipment
No EXIM bank
A good value chain analysis should pick up on such issues. There have been so many chain studies but poor implementation and even worse analysis. It is thus not surprising that the problems have not been tackled properly and there is no strategy for rice let alone for less critical crops.