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Contract farming paying off for growers, millers, say industry insiders

Content image - Phnom Penh Post
Rice farmers gather rice grains for sale after harvest season in Battambang province. Heng Chivoan

Contract farming paying off for growers, millers, say industry insiders

Contract farming between community producers and rice millers or buyers brings growers great benefits, with an expanded market and more favourable prices, industry insiders have said.

Contract farming refers to an agreement between a company and an agricultural community regarding prices, quantities and standards of quality.

Signatures of Asia Co Ltd chairman and CEO Chan Sokheang told The Post on Thursday that contract farming in the paddy production sector would bring better prices for farmers than the market and ease concerns about market shortages and price fluctuations.

“Farmers should join together to form a community and enter into contracts with local rice millers or buyers in their area. They will be guaranteed a price, technical assistance and support if they encounter any problems, as well as financial support,” Sokheang said.

However, he said farmers must adhere to their contracts and be loyal to their partners for contract farming to be successful.

Signatures of Asia currently has contracts with 30 communities – consisting of nearly 4,000 families – in Preah Vihear, Banteay Meanchey, Stung Treng, Kampong Speu and Mondulkiri provinces, Sokheang said.

He said the high-quality phka malis paddy cost his company between 1,030 and 1,080 riel ($0.25 and $0.27) per kilogramme when bought from one such community on Thursday, while organic paddy goes for between 1,450 and 1,700 riel, which is slightly down on last year.

“Prices would not be as high when selling to middlemen,” Sokheang said.

Amru Rice (Cambodia) Co Ltd vice-president Kann Kunthy said that in addition to better prices, contract farming gives farmers access to the latest technology in land use, seeds and chemical fertilisers, as well as to low-interest loans from banks.

Adopting technology would not only reduce the cost of using seeds and agrochemicals, but also boost yields and quality, he said.

“Contract farming with communities can help companies obtain quality paddy in sufficient quantities and allow us to determine the sources of the paddy we export,” Kunthy said.

He added that Amru Rice currently participates in contract farming with 60 paddy communities – comprising around 10,000 farmers – in Preah Vihear, Kampong Chhnang, Kampong Speu, Takeo, Battambang, Banteay Meanchey, Kampong Thom, Siem Reap and Kampong Cham provinces.

Hem Sothea, the vice-president of the Kraing Lvea organic rice community in Kampong Chhnang province’s Samaki Meanchey, said traders often tried to lowball communities, threatening to not buy their paddy and forcing the farmers to sell at lower prices.

“Farmers have in the past been forced to sell paddy to traders despite making a loss, because if they didn’t sell, there would be no money with which to pay back the bank,” she said.

She said her community of 223 families has entered in contract farming with Amru Rice.

Kong Pheach, the director of the Department of Agro-Industry under the Ministry of Agriculture, Forestry and Fisheries, told The Post that farming communities could become more profitable by considering the needs of buyers in their production.

“Contract farming has given a lot of benefits to farmers, and we hope that such sales contracts will be taken up throughout the country,” Pheach said.

He said the ministry encouraged contract farming in all provinces, with the concerns of farmers regarding the market lessened as all parties complied with their contracts.

Cambodia exported a total of 514,149 tonnes of rice in the first 11 months of this year, up 3.4 per cent on the 497,240 tonnes exported during the same period last year, a report from the Secretariat of One Window Service for Rice Export Formality stated.

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