Fresh Push for contract farming

Frustrated with the failure of a $27 million emergency loan package to help rice farmers find a fair market price for their crop and stem the tide of smuggled paddy across the borders, Agriculture Minister Veng Sokhon is flogging a new model for the nation’s restive rice farmers: contract rice farming.

Addressing a meeting yesterday between government policymakers, the Cambodian Rice Federation (CRF) and private sector rice millers and exporters, Sokhon said the emergency loan package announced in September had failed to provide a secure local market for farmers to sell their rice paddy at a reasonable profit.

“The root of the issue is the impact on the livelihood of farmers as paddy rice prices decreased to a point that they could not make any profit from farming,” he said. In response, he said the government would look to encourage more contract rice farming, and would for the first time instruct provincial officials to oversee and enforce the agreements.

In contract farming, buyers sign agreements with farmers for the production and supply of crops to be delivered at a future date, usually at predetermined volumes, qualities and prices. Buyers often supply seeds, fertiliser and other inputs upfront, recovering these costs from the production while sparing farmers the burden of debt.

Sokhon pointed out that government regulations for contract farming have existed since 2011, but until now have not been enforced. “It’s time for enforcement, and from now on all provincial governors and directors of provincial agricultural departments will intervene by officially stamping [the agreements] and standing as witnesses to ensure that they are honoured, and to ensure the price and market for farmers.”

He added that contract farming was a valuable model, as “it gives farmers assurance that they will receive a fair price for their rice paddy, and that they won’t need to worry [about finding a market for their crop] after the harvest”.

Angkor Kasekam Roongroeung Co Ltd (Angkor Rice) was the first company in Cambodia to introduce large-scale contract farming. It has applied the model to non-certified organic rice since 2001, and reportedly has contracts with over 50,000 smallholder farmers for cultivating fragrant rice.

Amru Rice, one of the nation’s largest rice exporters, has also applied contract farming, though on a smaller scale. According to Sokhon, the company’s efforts have resulted in a significant improvement in the livelihoods of rural farmers.

“Amru has already implemented contract farming, which offers more benefits to the community, as buyers agree to a fair price and buy at that price,” he said.The chairmen of Angkor Rice and Amru Rice could not be reached for comment yesterday.

Tang Chhong Ngy, marketing manager of rice miller LBN Angkor (Kampuchea), said his firm was already developing its own model for contract farming, but millers were generally against the practice as it locks them into purchase prices.

“Many rice millers think contract farming requires a lot of paperwork, and they try to avoid it in order to take advantage of farmers by dropping their prices [after harvest],” he said. Chhong Ngy said the government’s latest push for contract farming would depend entirely on the willingness of the parties involved. He claimed the government has promised to oversee and enforce the agreements before, but expects it could be some time before this actually happens.

Va Saroeurn, president of Mongkol Agricultural Development Cooperative in Battambang province’s Sangke district, said smallholder farmers in the cooperative had been offered contract farming agreements before, but rejected them.

“We know about the benefits of contract farming, but it is hard for us to follow the strict criteria of these agreements, even if they offer a good price,” he said.

According to Saroeurn, the farmers struggle to produce standard rice paddy. Contract farming, however, sets conditions on quality and techniques, such as cultivation without chemicals, limitations on fertiliser use and the farming of one single variety of rice.