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Contract farming could unlock value chain: experts

Contract farming could unlock value chain: experts

A visiting delegation of agricultural experts suggested that Cambodia’s struggling rice industry should develop a contract farming model that if used systematically would help confront the complicated supply chain dynamics that bog down smallholder farmers.

The Global Institute for Tomorrow (GIFT), a Hong Kong-based think tank, spent the last week researching strategies and interviewing farmers in Takeo and Battambang provinces to identify key challenges in the rice sector.

Speaking on Friday at Raffles Hotel, Chandran Nair, founder and CEO of GIFT, said contract farming could be a critical solution to secure farmers’ livelihoods and hoped that the group would soon launch a project to demonstrate its benefits here.

“Contract farming in Cambodia could be done carefully through a pilot project, starting with smaller farmers,” he said. “But it requires that farmers trust the contract farming model that we have been developing and researching.”

Nair noted that while some contract farming was currently being used in Cambodia, it often failed to address supply and value chain dynamics as well as the fluctuation of production costs. “Our group is trying to identify the key value chain problems first before contract farming can be a success,” he said, adding that as a whole, contract farmers need a guarantee that contracts are consistently enforced and farmers get adequate returns.

However, he said the model was not yet developed enough to be applied to large-scale industrial farmers. “We propose that smaller farmers should try contracts and together, as a pilot project, we can see if there is adequate financing and insurance to control risk,” he said.

Sok Puthyvuth, president of the Cambodia Rice Federation and CEO of SOMA Group, said the proposed project could help resolve challenges from the ground up. “We gathered researchers from abroad to study the challenges our rice industry faces,” he said.

“It is a helpful plan, giving us the ideas of how to properly use contract farming.” He said that for smaller farms agriculture insurance – a proposal aimed at mitigating the risks of contract farming for farmers – was not yet viable due to the policy costs. However, the primary conclusion of the research was that farmers and millers need to have a reliable supply chain.

“The main issue is that there is still unstable production and prices, and that both millers and farmers fail to uphold their responsibilities,” Puthyvuth said. In order to promote the rice industry, he said that a systematic plan needs to be agreed upon that tackles the whole rice production process.

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