8th Asian Cassava Research Workshop
Vientiane, 20-24 October
The role of Contract Farming in theDevelopment of a Competitive and Sustainable
Cassava Sub-sector in Vietnam
Tiago Wandschneider, Project LeaderSADU-CIAT
The Context in Vietnam
Dramatic increase in production due to a majorexpansion of area and significant productivity gains
Regions Area(‘000 ha)
Yield(ton/ha)
Production(‘000 ton)
Share ofproduction
(%)
2000 2007%
change 2000 2007%
change 2000 2007%
change 2000 2007
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
Central Highlands 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
Vietnam 237.6 496.8 109.6 8.4 16.1 91.7 1,986.3 7,984.9 301 100 100
Source: Ministry of Agriculture and Rural Development (MARD)
Main producing areas
Ho Chi Minh
Hanoi
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 pricetrends
Farm-gate price of cassava in Krong Bong, Dak Lak
(US$/ton)
0
20
40
60
80
100
120
140
160
2003 2004 2005 2006 2007 2008
US
$/t
on
Fresh roots Dry cassava
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 theenvironmental impacts of waste water
Supply outlook not so favorable
Limited scope for further productivity gains through adoption ofhigh-yield, high-starch varieties
Limited scope for continued expansion of cultivated area
Most increased supply will have to come from improvedcultivation practices
fertilizer use is increasing but need for site-specific solutions
significant obstacles to adoption of other technologies andmanagement practices that are critical for increasing or sustainingyields => 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 andstarch (FOB Bangkok) in Thailand from 2003 to 2008.
0
40
80
120
160
200
240
280
320
360
400
440
J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N J M M J S N
0
40
80
120
160
200
240
280
320
360
400
440
Starch
Dry chips
Fresh roots
$US
/ton
2003 2004 2005 2006 2007 2008
Actual or planned factories for the production of anhydrous ethanolfrom cassava in Asia
Fresh rootCapacity requirement
Country Company Location (‘000 l/day) Status (‘000 t/year)1)
China Guangxi New Tiande Energy Ltd. Co. Qinzhou, Guangxi 420 operating 787
China Food Comp. (COFCO) Beihai, Guangxi 840 completed in 2007 1,575China Food Comp. (COFCO) Wuzhou Guangxi 1,260 2,362Other factories 1,510 planned 2,832
7,556 2)
Indonesia Sampoerna Bio-energy: 3 factories East Java 2,500 planned 4,688Sorini Corporation SE. Sulawesi 2,500 planned 4,688EN3 Co. Ltd: 3 factories S. Sulawesi 600 planned 1,125
10,501
Thailand Thai Nguan Ethanol Co. Ltd Khon Kaen 130 stopped operating 244International Gasohol Corp Rayong 150 completed, not operating 281Phakwantip Co. Ltd. Prachinburi 60 completed, not operating 1126 factories using cassava and/or molasses 1,000 to be completed in 2008 1,87516 factories 7,170 licensed 13,443
15,955
Vietnam Petrosetco+Itochu Co. HCM city 333 to be completed in 2009 624Petrosetco Binh Dinh 375 planned 703Petrosetco Baria Vungtau 375 planned 703Hai Phong Engine Comp. Gia Lai 400 planned 750
Quang Nam planned 2,780Quang Nam plannedDak Lak plannedYen Bai planned
1) based on 300 working days per year and a conversion of 160 l ethanol/ t fresh roots2) in next 10 years China will require 3.1 mil. tons ethanol/year from cassava or 24.22 mil. tonnes fresh roots.
Key challenges in the cassava sub-sectorin Vietnam
Will Vietnam remain a very competitive producerof cassava and cassava-based products?
The future of the starch industry is under threat due toconcerns over their environmental impact
The sustainability of cassava production is under seriousthreat due to unsustainable cultivation practices
The way forward
A concerted, multi-stakeholder effort will be requiredto address sustainability issues at the farm level
Farmers
Local policy framework
Extension Contracting firms
Research/Projects
Farmers
Local policy framework
Extension Contracting firms
Research/Projects
Current situation in Vietnam
Farmers
Local policy framework
Extension Contracting firms
Research/Projects
The role of contract farming in thedevelopment 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 politicallyfeasible
There is an opportunity for engaging thestarch processing sector…
Close links to cassava farming households (contract farming)
Many starch processing firms are becoming increasinglyconcerned with the long-term sustainability of their supplybase
Potential to develop new, win-win production models that alsohave a positive impact on soil fertility
Is contract farming a suitable model forcassava production?
No, under low-input (traditional) systems…
Company need
x cassava
Yes, under innovative, higher-input andskill-intensive systems…
Company need
x cassava
Entry points for intervention
design and implementation of contracts
network of field staff for provision of site-specific technicaladvisory services
fertilization
Inter-cropping
Adoption of hedgerows
new, win-win production models (short and long seasoncassava off-season supplies)
The experience of SADU in Krong Bongdistrict, Dak Lak province
Some context on SADU Vietnam
3 provinces, 6 districts
Small team + limited budget
Cassava is one of 9 target supplychains
SADU also works on strategic cross-cutting issues
Krong Bong
Cassava is the second most important commercialcrop in Krong Bong
No. cassava farming and processinghouseholds
~ 4,000
Area under cassava 2007 3,500 ha(500 ha in 2002)
Production 2008 55,000 tons
Farm-gate value of cassava roots 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
vertical coordinationcultivation practices
off-season
dialogue
resources
services
Cultivation practices
training
Intervention (late 2006 – early 2007)Improve contract design and implementation
Collectharvesting
tickets
Arrangetransport
Travel tothe factory
Wait fordelivery
Travel tothe factory
Improvements in contract design
Registration process Measuring of farm size no longernecessary
Consultation withfarmers
Harvesting calendar now set byfarmers
Role of group leaders Financial package being revised
Input supply Plans to supply fertiliser to 10model groups
Transport services Contract with traders
Off-season contracts No change, increased investmentin off-season cultivation
Improvements in implementation of contracts
Issuing of harvestingtickets
One new field officeImpact of contract traders?
Loan disbursement No major changeImpact of contract traders?
Technical assistance Demonstration servicesPlan to work with 10 model groups
Vertical coordination Facilitative attitude towards tradersContracts with traders
Payment procedures Farmers no longer have to travel tothe factory
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 mediumfertility 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 wascarried 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 adoptionof simple harvesting tools
SADU is also promotingadoption of improved
processing technologies
Conclusions
The private sector must be part of the solution (developmentof a sustainable cassava sub-sector in Vietnam)
Working with supply chain champions is critical for impacts atscale (leveraged impacts)
Working with supply chains reduces the cost and enhancesthe sustainability of interventions
Thank you for your attention!