Working with the Private Sector to Leverage Impacts

Experience with cassava in Krong Bong, Vietnam

Chiang Mai, 26 September 2007

Tiago Wandschneider, SADU Project

Small-scale Agro-enterprise Development in the Uplands - SADU

Hanoi

Hue

Ho Chi Minh

Krong Bong, Dak Lak

Cassava is the second most important commercial crop in Krong Bong

No. cassava farming and processing households

> 4,000

Area under cassava 2007 3,500 ha(500 ha in 2002)

Production 2007 65,000 tons

Farm-gate value of cassava roots

US$ 2.1 million

Value added from dry cassava processing

US$ 400,000

� Competitive/efficient marketing system

� Limited dissemination of technical messages

� Soil erosion and declining soil fertility are becoming major issues

Starch value chain: 40% of district production

The Yang Kang starch factory

Starting year of operation 2004

Processing capacity 75,000 tons fresh roots

Processed volumes20052006

17,840 tons42,243 tons

No. contract growers 1,640

� input credit

� consumption loans

� guaranteed purchase of fresh roots

� competitive prices

Key features of contract farming scheme

Weaknesses in contract design (baseline)

1. registration process

2. consultation with farmers

3. role of group leaders

4. input supply

5. transport services

6. off-season contracts

Weaknesses in contract implementation (baseline)

1. issuing of harvesting tickets

2. loan disbursement

3. technical assistance

4. vertical coordination

5. payment procedures

Payment

Phiếuthuhoạch

Collect harvesting tickets

Arrangetransport

Travel to the factory

Wait fordelivery

very high transaction costs =>

many farmers rely on traders as intermediaries

Travel to the factory

Long waiting times at the factory gate

Do farmers and the factory need a contract?

(+)

cassava (off-season)

Farm

er s’need

(+)

(-)

(-)cassava (season)

Company need

Both farmers and the factory can benefit froma more trader-centred system!

Intervention strategy

training

SADU Project

dialogue, advice, training, linkage, technical

assistance

vertical coordinationcultivation practicesoff-season contracts

dialogue

resources

services

Cultivation practices

Outcomes: improvements in contract design

Registration process Measuring of farm size no longer necessary

Consultation w/ farmers

Harvesting calendar now set by farmers

Role of group leaders Financial package being revised

Input supply Plans to supply fertiliser to 10 model groups

Transport services Contract w/ 4 traders and YU

Off-season contracts No change, increased investment in off-season cultivation

Outcomes: improvements in contract implementation

Harvesting tickets One new field officeImpact of contract traders?

Loan disbursement No major changeImpact of contract traders?

Technical assistance Demonstration servicesPlan to work w/ 10 model groups

Vertical coordination Facilitative attitude towards traders Contracts w/ traders

Payment procedures Farmers no longer have to travel to the factory

Intervention costs (year 1)

Activities Cost (US$)

RMA 1,500

RMA workshop 1,100

Case studies 8,000

Technical assistance 2,400

Project staff salaries 6,000

Other 1,500

Total cost 19,500

� variation in farmer net incomes?

� employment effects?

� impact on non-contract growers?

Some target impacts (1)

∆ yield ∆ production ∆ farmer gross income

income multiplier effect

1 ton/ha 1,800 tons/ annum

$US 57,375 1.?

Some target impacts (2)

� release of labour for productive and leisure activities

� potential for increase in farm-gate prices

∆ starch content of roots ∆ farmer/trader net income

+ 1%, 15% supplies US$ 9,375/annum

The dry cassava chain (60% of local production)

Interventions: promoting adoption ofsimple slicing tools

� Reduced labour costs

� Shorter drying time (4-5 days)

=> scaling-up of processing activities

=> lower risk of product spoilage due to rain

� Improved product quality

Profitability, small commercial processor (US$)Manual slicing

8 cycles (10 tons dry cassava/cycle)

Mechanical slicing

10 cycles (10 tons dry cassava)

fresh roots 6,050 fresh roots 7,563

labour 250 labour 125

bags 40 bags 50

Diesel 107

depreciation 9

maintenance 5

Cost 6,340 Cost 7,859

Revenue 7,710 Revenue 9,375

Profit 1,370 Profit 1,516

∆ profit = 146

� technology piloted

� Conditions for commercialisation of technology in place

Outcomes

� Tool improved

� disc, belt => motorised

� blades w/ inclination

� different size holes

In the next two seasons, SADU will focus on:

� demand for slicing tool

� linkages between processors and manufacturers

� the concept of group purchases

� direct linkages with exporters

� scaling-out

Intervention costs (until August 2007)

Activities Cost (US$)

RMA 800

RMA workshop 400

Case studies 1,000

Demonstration of tool 1,125

Meetings w/ processors + exporters 565

Staff salaries 2,500

Monitoring visits 200

Total cost 6,590

Target impacts

∆ profit, 100 commercial enterprises US$ 16,400

additional local demand for fresh roots 4,400 tons

labour savings, 150 farmer-processors 1,200 man-days = US$2,250

potential labour displacement… 3,800 man-days = - US$9,500

Thank you for your attention!Thank you for your attention!Thank you for your attention!Thank you for your attention!