postharvest practices: maize value chain (lao - thailand)
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Postharvest Practices: Maize Value Chain (Lao - Thailand)
Ass. Prof. Nongluck Suphanchaimat Post harvest Practices: Experiences and Best Practices in Israel and Thailand Mekong Institute 2 November 2011
• Postharvest value chain
• Free trade and Postharvest value chain of Maize
Supply chain VS Value Chain
• A value chain is a chain of activities for a firm operating in a specific industry. The study focuses on business unit for construction of a value chain. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value.
•supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.
Overview of the vegetable supply chain in Lao PDR
Source : Surveys in collaboration between AVRDC and MAF (Lao PDR), 2005. N=200.
Farmers
WholesalersCollectors
Grocery shops
Wet marketvendors
Streetvendors
Restaurants
Consumers
67%6%
61%
19%
95%
39%
26%
47%14%
Orange postharvest management
40 bht/kg
150 bht/kg
Value Chain
• Mapping actors (roles & responsibilities)
• rules & regulation• Cost and margin by actors• mapping constraints and possible solutions
Study of “the full range of activities which are required to bring a product or service from conception, through the intermediary phases of production, delivery to final consumers, and final disposal after use”
(Kaplinsky 1999, pg. 121).
VC: Mapping actorsInput ProductionCollectionWheel sale
retail
Production
Consumption
Export
Input tradesBankMoney lender
ActorFarmers
CooperativesVillagetraders
traderscentralmarket
Processor ConsumerExporter
Farmers/
CooperativeVillage traders Processor Consumer Exporter
Growing
Harvesting
drying
Collect
Store
transport
Storage
Processing
Distribution
packaging
- Storage consumer
-Grading
-Transport
-Storage
-packaging
VC: Roles of Actors
input production trading processing Consumers
export
- Mature
- Purity
- Non-toxic
- Color
- Size
- Moisture
- Color
- Size
- Uniformity
- Smell
- Grade
- Color
- Taste
- Package
- Product
- Quality
VC: Information of the chain
product
information
(1) Financial cost : monetary expense of production resources. (land, labor, capital)
land : rentlabor : wagecapital : interest
Cost : Financial cost
Opportunity cost
Opportunity cost : imputed cost to the value chain actor’s time land and capital.
Opportunity cost for labor : the cost incurred if a person is employedOpportunity cost of land : the return on leasing the land to another producer.Opportunity cost of capital : the interest rate that one would receive from a bank.
2. Opportunity cost
VC: Cost and margin
Cost : money that an actor in the VC contribute
Margin : money that an actor receive minus cost
Cost of entry : investment and operating cost required for an actor to enter the VC
e.g. border traders in Lao should have own truck and credit with gasoline station, register with trader association.
Marketing margins:
• the percentage of the final weighted average selling price taken by each stage of the marketing chain. The marketing margin covers the costs involved in transferring produce from one stage to the next and the profit of those doing the marketing.
Marketing costs:
• the costs involved in moving produce along the marketing chain for example,
• produce preparation
- packaging costs, - handling and transport costs
- storage costs, - processing costs,
- product losses, - fees and commissions.
Generally, the more complex and lengthy the marketing chain the higher are the marketing costs.
Profit margins (or profit or returns)
• the difference between total revenue and total costs calculated for each operator in the marketing chain
Free trade and postharvest value chain of Maize
• ASEAN Tree liberalization started in 1992
• In 2003 ACMECS framework Cambodia,
Lao, Myanmar and Thailand initialize to
utilize each countries’ strengths
• 2010 Free trade within ASEAN
Expectations of the Free Trade
• Increase competitiveness, generate growth along the borders
• Create employment opportunities• Facilitate relocation of agricultural and
industrial industries• Reduce income disparity between
countries• Countries act according to comparative
advantage
Xayaboury Province LaoPDR
Loei Province Thailand
Thailand
Laos
520 km NE of Bangkok.Feed corn area 68,300 ha in 2002 but 40,000 ha in 2007
Arawan district with same landscape as Laolarge drop of feed corn 43 registered farmerswere interviewed.
30,000 ha of feed corn area52% of Xyaboury area
48 farmers in villageTak dad, Bung Ma Hui Tang Paklai district were interviewed based on
headmen selection
china
VN
1980Adopted improved seed “Suwan1”
from Thailand
1998 Adopted hybrid seed “888” from Thai private company
2007 Hybrid seed from Vietnam, China are also available
2010 Cassava has become competitive crop
In Lao
Maize import tax to Thailand
Before 2003
• Import tax 2.75 bht/kg• Require Phytosanitary
certificate• Complicated custom
procedure
After 2003
• Tax free• Require Phyto.
Certificate• Require certificate of
origin• Relax custom
procedure
Figure 3 Feed cron expansion in Lao
0
100,000
200,000
300,000
400,000
500,000
2000 2001 2002 2003 2004 2005 2006
To
n o
r h
a
0
1
2
3
4
5
To
n p
er h
a
Cultivated area (hectare) Production (Tons)
yield (ton/ha)
Thailand Lao
0
1,000
2,000
3,000
4,000
5,000
2000 2001 2002 2003 2004 2005 2006 2007
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
Planted area 000 ha Production 000 ton
Yield (ton per ha)
Feed corn production and yield in trading countries
Thai production is declining while Lao has increased even without chemical fertilizer. Area expansion in Lao is obvious after 2003
0
50
100
150
200
250
2000 2001 2002 2003 2004 2005 2006 2007
0
20
40
60
80
100
120
Farm price (US$ perton)
% import from Lao
Import from Lao and farm gate price in Thailand
Increase in farm gate price in Thailand despite an increase in import volume from Lao
-100,000.0200,000.0300,000.0400,000.0500,000.0600,000.0700,000.0800,000.0900,000.0
1,000,000.0
2003 2004 2005 2006 2007 2008 2009 2010
To
n
0.01.02.03.04.05.06.07.08.09.010.0
Bh
t/kg
Import Export Import pr Export pr
Thailand Import Export of Maize
After free trade Thailand import more andre-export also increase. Each year Thailand needs about 1 million imported maize volume for domestic use
Full contract
In Lao
Incomplete contract in Thailand
inputs Provide from contractor
same
technique yes yes
Buy back product
yes Not necessary
Contract farming
Lao feed corn have to be mixed with Thai product at 1:1 ratio
ThaiLao
mapping actors : MaizeProdu
ction
Collection
Consumption
Lao Maize growers
On farm feed consumption
Traders in Lao (23)
Border
trader (16)- Uncobbed
Trader with silo - Clean
& mix Export Animal
feed
processing
Thai Maize growers
compare yield and cost
5.6
4.9
113.7
137.3
4.4
4.6
4.8
5
5.2
5.4
5.6
5.8
Lao (n=45) Thai (n=43)
0
20
40
60
80
100
120
140
160
Average yield(ton per ha)
Total cost (US$per ton)
Thai
21%
8%
24%
39%
7%
Land preparation Seed Labor cost Chemical Interest
35%
11%
37%
6%
11%
Lao
Thai use more chemical input and use seedlingmachine
1,000.0
1,050.0
1,100.0
1,150.0
1,200.0
1,250.0
1,300.0
1,350.0
1,400.0
2006 2007 2008
5.0
5.1
5.2
5.3
5.4
5.5
5.6
5.7
Lao Thai
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
1,600.0
1,800.0
2006 2007 2008
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
Rainfall (mm)
Yield (ton/ha)
Comparison of farm gate price in Lao and Thailand
118.9
152.6
99.4
122.0
153.7137.1
0.020.040.060.080.0
100.0120.0140.0160.0180.0
2006 2007 2008
Lao
Thai
Farm gate price in LaoIs related to the Thai market
Logistic cost Maize traders in LaoShipping cost of maize to Thai border
Item Amount kip/ton
1 Shipping form Local trade office 100,000 kip/form 5,555
2 Certificate of origin Local trade office 80,000 kip/200 ton
400
3 Certified form Local ag office 100,000 kip/form 5,555
4 Exporter fund Trade union 10 kip/kg 10,000
5 Business tax Local fiscal office 3.5%/kg (std price
600 kip/kg) 21,000
6 Shipping service 100,000 kip/200
ton 500
7 tax Tax office 20,000 kip/100 ton 200
8 Crossing border fee 282,000 kip/truck
(18 ton/truck) 15,666
9 gasoline 120,000 kip/truck 6,667*
65,543
* Shipper own truck 256 kip = one bhtAbout 256 bht per ton
Value Chain Actor
Costs Revenues
Profits Margins
Unit Total Cost
Added Unit % Added Cost
Unit Price Unit Profit
% Total Profit
s
Unit Margi
n
% Retail Price
Cost*
Farmers A - #VALUE! G G-A (G-A)/(K-
F)
G G/K
Assemblers
G B #VALUE! H H-B-G (H-B-G)/(K-
F)
H-G (H-G)/K
Processors #VALUE! C #VALUE! I I-C-H (I-C-H)/(K-
F)
I-H (I-H)/K
Traders #VALUE! D #VALUE! J J-D-I (J-D-I)/(K-
F)
J-I (J-I)/K
Retailers #VALUE! E #VALUE! K K-E-J (K-E-J)/(K-
F)
K-J (K-J)/K
Total F=(B+C+D+E)
100 K-F 100 K 100
Lao farmer Lao trader Thai Thai Exporter/processor
Feed mill (10)
Selling price 4.5 5.3 6.3 88
cost 3.5 0.25 0.4 1.45
Margin % 18% 19% 27%
unit profit 1 0.55 0.6 0.25
% profit 17% 9% 10% 4%
VC –Maize in Oct 2007
VC -MaizeFarmer Lao
tradersThai Trader processor Consumer (10)
activities
plant Sell input on credit
Buy output and service transport
Sell input provide credit
Buy outputUncob (1 kg of feed corn contains 0.7 - 0.8 corn grains)
Clean mix(Thai & Lao at 1:1) and store
Export grain or sell to animal feed mill
Regu lation
Plant on slope less than 38 degree
Sun dried before harvest
Store with cob
Collect contracted farmers first
Deduct debt from farmers’ income
Price mixed grade for Lao maize
Price by grade for Thai product
Must pay back debt before receive new seed
Must deliver as grain
Identify origin
Price by grade
Free of Alfa toxin
Moisture less than 14%
Impurity less than 5%
Farmers Collector Border Trader
Trader exporter
Farmers Exchange labor
Receive credit use trader machine
Exchange in cash
no
Collector Provide input credit
Buy at mixed grade
Trade in regular areas
transport to trader
Cash advance
no
Border Trader
no Collector act as agent in the village
Meeting
set up fund
Share trucks
exchange
Trader exporter
no no Declare export amount
Price by grade
meetingExchange info
VC: Example of roles & regulation
inputCorn
productionprocurement processing
activities Sale on credit
-Farm plan
-Herbicide application
-Un-cobbed
- dried
-Transport
- clean dry mix
Difficulties -Lack of cash
- too expensive input
-Dry spell
-Lack of production techniques
-Poor road
-High transportation cost
-Aflatoxin
-rainfall
-Lack of drying technology
possible solution
-Credit lending service
-Contract farming
-cooperative
-road improvement
-Farmers field days
-Provision of farm pond
-covered storage -silo
- Mix corn from various sources
Mapping constraints and possible solutions
• Although open markets and economic integration can enhance rural growth but at the same time encounter risk of economic losses to superior competitors, instability, and worsening inequality
•(Rosegrant and Hazell 2001).
Impact from free trade
Impact of free trade on Thai-Lao farmers
• Large expansion into sloping areas• increase use of hybrid seed and herbicide
Lao PDR
Myanmar
Cambodia
Vietnam
Malaysia
Indonesia
Taiwan
SingaporeFlow outFlow in
Commodity flows after free trade
0.40.16
0.1
1
Planted Area in mllion ha
Problems in market credit link
• Thai traders buy Lao product at mixed grade. • For Thai product, 14% moisture is standard and
price will reduce about 0.12 bht/kg for each 1% increase in moisture.
• In bad year, Lao farmers have to wait for traders who provided credit who tend to prolong their collection or wait for the price to increase. Indebted farmers will be affected most since they generally depend on maize income to buy rice and pay back debt.
Problems in logistic• High fixed cost in transportation and poor road limited investment in transportation services in Lao, traders should have own vehicles• 40-60% of the operating costs of traders were on fuel. So, concerns over fuel efficiency is necessary.• Causes of fuel inefficiency are empty running, Lao traders transport construction material from Thai•Inefficient border procedures causing delays and double-handling. This has been solved. Lao vehicle is allowed to load products across Thai border and stay for a few days, Border staffs work overtime. • Other problems are access to loans and credit, high interest rates 3% per month in Lao
Governance of the Value chain involve
improvement of efficiency of the chain
and relations of actors.
Chain management process
Rules and regulations
Value chain improvement
Investments to improve the value chain
• Develop trust, Thai traders receive credit from bank and suppliers so able to provide credit for seed and cash advance to Lao traders based on hybrid seed purchased. Initially, credit service is provided among acquainted trading partners.
• Rely on initiative and leadership of a private company for sustainability of a chain project. Lao traders initiate trade union and try to develop mutual fund.
• Provide incentives price by grain quality
Differentiation of food products
• In recent year, the use of geographic branding and certification has become a common tool to protect and differentiate high quality food products. Advantages are: 1. it enables producers to control supply which has
obvious advantages. 2. it enables groups of producers within the region to
collectively decide how to improve the quality or process.
3. the producers learn how to produce and market a highly differentiated product that could be extended to other products.
Guarantee price
Mkt ref price
subsidize
d vol
Avg amount per farmer (Max vol)
2008 8.5 7.3 750,000 ton -
Oct 2009
7.1 5.55 - 10 ton per farmerMax 20 ton
Guarantee price of feed corn in Thailand
• Due to high oil price in 2008, the Thai gov’t supported farmers by setting high mkt price endedup high gov’t stock and had absorbed feed corn from neighboring countries.
• In 2009, gov’t change to support price system, Registered Thai farmers can receive subsidized
price. Actual market price was lower.
Under free trade gov’t intervention
cannot confine to only domestic
market
How farmers are better linked to the chain?
• Lao traders invested in shelling equipment facilitate un-cob maize help left maize cob to replenish the soil
• Lao government promote traders with silo to invest in the planting location.
• Allow competitive market for good hybrid seed
• Promote farm credit through Agricultural bank
.
Challenges
• How can small scale farmers in Lao benefit from the value added process?
• How can marketing competitiveness can be improved in both countries?
References• Rosegrant, M. W. and P. B. R. Hazell. 2001. Transforming the rural
Asian economy: The unfinished revolution. 2020 BRIEF 69. IFPRI.
• Suphanchaimat N and Khonesavanh Vongxay 2010, Impact Analysis of free Trade on Farming Systems in Northeast Thailand and Northern Lao PDR in Masuo Ando.edited Impact Analyses of economic integration on agriculture and policy proposals toward poverty alleviation in rural East Asia. Japan International Research Center for Agricultural Sciences Tsukuba, Ibaraki, Japan. pp 11- 24
• Department for International Development. 2008. Making Value Chains Work Better for the Poor: A Toolbook for Practitioners of Value Chain Analysis. A publication financed by the UK Department for International Development (DFID). Boonruang Song-ngam, Desktop Publishing. Cambodia.145 p.
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