Dr. Jonathan NewbyRegional Cassava Coordinator – Asia; Country Manager – Lao [email protected], Lao PDR
Shining a light on the global cassava market: exploring the multitude of factors that impact farm gate price and livelihoods
Jonathan Newby, Cu Thi Le Thuy and Erik Delaquis
ACIAR CASSAVA PROGRAM FINAL REVIEW JULY 2020
Project objectives
ASEMObjective 1 – Assess the current production, marketing, and institutional arrangements for cassava in major agroeconomic zones and value chains in Laos and Cambodia.
1.1 Understand the macro-level drivers for the development of the local cassava industry in different agroeconomic zones in each country, including changing market conditions and policy settings.
AGBObjective 1 – Assess opportunities and constraints for smallholder production andmarketing of cassava within different value chains
1.1 Understand the macro-level drivers for the development of the cassava industryincluding changing market and policy arrangements for cassava (starch, feed, chips) andsubstitutes (e.g., maize, potato, and sugar) and the potential benefits and risks to value chainactors
ACIAR CASSAVA VALUE CHAIN AND LIVELIHOOD PROGRAM
1. Global markets and external polices2. Local value chains and domestic policies3. Household livelihoods and trajectories4. Field level agronomic and economic
results5. Implications for household livelihoods6. Implications for local value chain actors
Global markets and policies
Local value chains and policies
Household livelihoods and trajectories
Agronomic & economicsPlot level
Why?• Understand the trajectory of the industry• What are the underlying market drivers?• What are the risks that will impact
prices?• Understanding builds trust between
actors
• What does this mean for farm level economics?
• What does this mean for livelihoods?• What does this mean for industry
competiveness?• What does it mean for the incentive for
actors to engage in either the adoption or scaling of new technology?
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Thai
Fre
sh ro
ot p
rice
(USD
/t @
25%
star
ch
Star
ch a
nd C
hips
-FO
B Ba
ngko
k (U
SD/t
)
Roots USD/t (25%)
Tapioca Starch (Super High-Grade) Export Price (USD/T)
Tapioca Chips Export Price (USD/T)
Activity and outputActivity Review information on global and national cassava production, utilisation, trade, and policies.
Original outputAnnual market update
Actual outputAnnual market updates, blogs, presentations, Facebook group, website
Starch World Asia World Tapioca Conference
Industry engagement to share information
Meeting between Thai Tapioca Starch Association and Vietnam Cassava Association
Social Media Engagement
• 1070 approved members July 2020. • 59 Countries • Over 700 remain active in last 12
months with 658 members active in the last 30days of the projects.
• In the last 12 months of the project there was around 250 posts per year, 303 comments and 4,366 reactions.
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13-17 18-24 25-34 35-44 45-54 55-64 65+
Women Men
Sustainability: Development of ‘The Cassava Lighthouse’
“Helping cassava stakeholder navigate the cassava economy”
Impact: We built a community of information sharing
Where to start…..
What is cassava used for?
A multi-billion global commodity most people know nothing about….. Farmers, government, researchers, donors
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2010 2011 2012 2013 2014 2015 2016 2017 2018
Valu
e of
cass
ava
expo
rts (
Billi
on U
SD)
Cassava roots and chips
Cassava starch (tapioca)
On the demand side – the market outlook for cassava in Asia needs to be considered in the context of substitutes in different applications
1. Global markets where cassava chips compete with other forms of carbohydrate for processing animal feed or ethanol such as maize, sorghum, wheat, molasses – oil, gas.
2. Markets where cassava starch competes largely on price with substitutes such as maize and potato starch, sugarcane.
3. Markets where the functional properties of the starch are desired. Consumer preferences, clean label segment, gluten free etc.
And on the supply side – the relative competitiveness against other land use in the context of different trends and shocks
• Own price and relative prices to other commodities that can be produced in agro-ecological zones• Influenced by a range of policies
• Changes in costs of production• Changing labour costs and ease of mechanization
• Long term climate trends• Short term Floods and droughts• Changes in land suitability and land
degradation (both ways)• Impact of pest and disease
Index of Thai cassava roots against global commodities that compete for smallholder land, labour and capital
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Maize Sugar, world Thai Roots
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Palm oil Coffee, arabica Coffee, robusta
Rubber, SGP/MYS Thai Roots
It has been a wild ride for the cassava sector during life of the project!
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Cass
ava
Chip
s -FO
B Ba
ngko
k (U
SD/t
)
Star
ch-F
OB
Bang
kok
(USD
/t)
Tapioca Starch (Super High-Grade) Export Price (USD/T)
Tapioca Chips Export Price (USD/T)
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650
Fres
h ro
ots 2
5% (U
SD/t
)
Cassava Starch (FOB Bangkok) Roots USD/t (25%)
Policy reformDrought
CMDCOVID
Flood
Starch processors would like to stay in the train tracks
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DOM
ESTI
C PR
ICE
(BAH
T/KG
)
EXPO
RT P
RICE
(FO
B U
S/M
T)
Export Price (FOB US/MT) Domestic price (Baht/kg)
Price to high = processors look for substitutes
Price to low = farmers grow other crop
Where is cassava grown?
A Southeast Asian supply story, with implication for Africa
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VALU
E O
F EX
PORT
S BY
SO
URC
E (B
ILLI
ON
USD
)
Eastern Asia
Europe
Northern America
South-eastern Asia
World
While making up only around 13% of global cassava area & 25% of production, the global trade in cassava remains a Southeast Asian story
Re-export
Asia’s cassava revolution has been a market driven one…. influenced by domestic and international policies
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Cass
ava
prod
uctio
n in
SEA
(mill
ion
tons
)0
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Area
of c
assa
va p
rodu
ctio
n in
SEA
(Mill
ion
ha)
Indonesia
Thailand
Vietnam
CambodiaLao PDR
• Grown throughout the region, and still an important famine crop
• Commercial production clustered around processing hubs
• Cross border movement of :• products (roots, chips) • stem cuttings• capital• technology• labour.
• Millions of USD of raw products following across borders and into the global market
Facts and favours: Accessing district data via year books and phone calls and personal connections
• Most comprehensive data on cassava production
• Still working off getting Province year books
• Long lag time and inconsistency between countries
• Known under reporting of significant scale
• Remote sensing area yet to deliver.
In a connect market, location and logistics matter
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Fres
h ro
ot p
rice
(USD
/t)
Root price (USD/t) - 3/12/2019
Eastern Cambodia Vietnam
Thailand
WesternCambodia
Lao PDR
Indonesia
Transport and logistics can determine a lot
• Transport cost from KPN to Bangkok Port was around $85 per ton
• Need to pay less for roots in order to meet the global reference price.
• Also so freight protection if processing happens domestically….. but road > sea
Strong linkages between countries outside mainland SEA with traders and processors seeking out a better margin on large volumes
• Indonesia is second largest importer of cassava starch despite being one of the largest global producers
• Different market segments with strong direct consumption
• Transport and logistics -80
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Diffe
renc
e (T
hai -
Dom
estic
@ F
acto
ry g
ate)
Star
ch P
rice
(USD
/t)
Difference Thai Starch (FOB Bangkok) Indonesia Starch (East Java) Thai + Freight
Cheaper to import
Logistics and freight cost are important
$30MT
$15-20/t +$10-20 truck and clearance
CASSAVA
Often not a high policy priority
But always highly impacted by policies
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14Ex
port
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ried
cass
ava
(Mill
ion
tons
)
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3
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rt v
alue
drie
d ca
ssav
a (B
illio
n U
SD)
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rt o
f cas
sava
star
ch (M
illio
n to
ns)
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Expo
rt v
alue
cas
sava
sta
rch
(Bill
ion
USD
)
Reorientation of export market from Europe to Asia
Europe livestock feed The Common Agricultural Policy (CAP) and Cassava
Protection of domestic grain market in Europe created an opportunity for Asian cassava chips
Geopolitics played its part.
Chinese maize self-sufficiency
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-100
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c-08
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p-09
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ar-1
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ar-1
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ar-2
0
USD
per
MT
Difference US Gulf Maize CNF China + VAT Chinese Futures (DCE) US Gulf Maize (FOB)
Stockpile28 March 2016 the Chinese government announced an end to the floor price for maize.
The result was a significant fall in maize prices, with the nearby futures falling by around RMB 300/kg (from RMB 2000).
Dalian Futures for a September delivery fell below RMB 1600/kg.
Price support
Reform
Chinese maize, US corn starch and Thai cassava starch
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-19
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ava
Star
ch (U
SD/T
)
Mai
ze p
rice
(USD
/T)
US Maize (FOB Gulf) US Maize +Freight+ VAT
Chinese Maize (DCE Nearby Futures) Cassava Starch (FOB Bangkok)-200
-100
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700
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-18
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-19
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20
USD
/MT
Difference Tapioca starch (Super High-Grade) FOB Bangkok Corn starch, Midwest
How long can this last?
Maize price in Thailand impact on cassava price
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98
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-00
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USD
/t
Difference US Maize (FOB Gulf) Thai Corn (USD)
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-50
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98
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USD
/tDifference Thai Corn (USD) 80%Cassava+20%Soymeal (USD)
Maize price support 8.5THB/kg for 2019-2020 cropTariffs and quotas
Cassava price guarantee is set at 2.50 baht per kg, limited to 100 ton per family.
Biofuel mandates, Ethanol prices and cassava
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ct-0
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11
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12
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13
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-14
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-15
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15
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16
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-16
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17
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17
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18
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8
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18
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-19
Oct
-19
Mar
-20
Crud
e (U
SD/b
bl)
Etha
nol (
USD
/Litr
e)
Root cost in Ethanol (Thai) CBOT Ethanol (USD/litre) Crude oil (average)
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0.80
Molasses Dried Chips Fresh root Future CBOT
Cost
per
litr
e (U
SD)
Feed stock Other costs
• Impact on demand for cassava• Impact the price of cassava roots
• Impact on competitiveness of other cassava sectors
• starch, livestock feed
• Those secondary processors look for alternative cheaper feedstock if possible
• Eg. Sweetener manufacturers
Non-price trade barriers
• Quarantine concerns on raw material and inputs (stems)
• Quality standards• Restricting the export of raw products to
encourage domestic value adding• Other geopolitical concerns between
trading partners
The outlook is impacted by a wide range of policies aimed at supporting domestic farmers, self-sufficiency, promote development,
achieve other policy objectives
Not only for the commodity of concern (cassava)
Not only in the region of production or consumption (Asia)
Historical: Cassava Mealybug
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25
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Cass
ava
yiel
d (t
/ha)
Area
of c
assa
va p
rodu
ctio
n in
Tha
iland
(Mill
ion
ha)
Area harvested Yield
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150
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250
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350
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450
500
550
600
650
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06Ju
l-06
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07Ju
l-07
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08Ju
l-08
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09Ju
l-09
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10Ju
l-10
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11Ju
l-11
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12Ju
l-12
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13Ju
l-13
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14Ju
l-14
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15Ju
l-15
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16Ju
l-16
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17Ju
l-17
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18Ju
l-18
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19Ju
l-19
Jan-
20
Dom
estic
Pric
e (B
aht/
kg)
Expo
rt P
rice
(FO
B U
S/M
T)Export Price (FOB US/MT) Domestic price (Baht/kg)
Reduce yieldReduction in area
Price spike
In our Asian story• Incomes rising• Consuming more
animal protein• Increase in feed
demand
Thinking of the livestock feed sector…..
Vietnam: maize and swine fever
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1
1.5
2
2.5
320
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
1520
1620
1720
1820
1920
20
Valu
e of
mai
ze im
port
s (Bi
llion
USD
)
India
BrazilArgentina
USA
Jan-May
Fall Army Worm (FAW)
• Impact supply of maize in the region and rising prices?
• Farmers looking for alternatives to maize? Cassava is a likely substitute in many areas.
ASF + FAW = What change in maize balance
Impact on maize priceChange in cassava demand
Change in cassava supply
Cassava Mosaic Disease
Value of Thailand and Vietnam imports from Cambodia
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50
100
150
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250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thai
Impo
rt V
alue
from
Cam
bodi
a (M
illio
n U
SD)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0
50
100
150
200
250
300
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Viet
nam
impo
rts f
rom
Cam
bodi
a (M
illio
n U
SD)
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
20182018
2017 2017
2020
2020
2017 to 2019 loss $95.2m 2017 to 2019 loss $111.2m
Vietnam relative to Thailand – Excess capacity
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10
20
30
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50
60
1000
1500
2000
2500
3000
3500
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4500
5000
Jan-
17
Mar
-17
May
-17
Jul-1
7
Sep-
17
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Jul-1
9
Sep-
19
Nov
-19
Jan-
20
Mar
-20
May
-20
TayN
inh-
Thai
30%
(USD
/t)
Fres
h ro
ot p
rice
(30%
SC) (
Thai
Bah
t per
ton)
Difference (USD/t) Thai (30%) Sonla DakLak TayNinh Thai (25%)
-60
-40
-20
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20
40
60
80
250
300
350
400
450
500
550
600
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16
Mar
-16
May
-16
Jul-1
6
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16
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-16
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17
Mar
-17
May
-17
Jul-1
7
Sep-
17
Nov
-17
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18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Jul-1
9
Sep-
19
Nov
-19
Jan-
20
Mar
-20
May
-20
Bang
kok-
HCM
C (U
SD/t
)
Star
ch p
rice
(USD
/t)
Difference FOB HCMC High FOB HCMC Low FOB Bangkok
$30 more for Roots $40 less for starch
Pushing the extensive margin to the Thai border
• The Tay Ninh hinterland has extended to the Thai border
• How long can operate in this situation???
• Not long for small factories with low efficiency
• New factories in Cambodia
• Importance of co-product livestock feed from residue
• $25/t on top of starchD.Smith et al.
Watch Webinar on cross border trade
The market looks for new supply – Lao PDR
0
20
40
60
80
100
120
140
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thai
Impo
rt V
alue
from
Lao
PDR
(Mill
ion
USD
)
2010 2011 2012 2013 2014 2015
2016 2017 2018 2019 2020
0
2
4
6
8
10
12
14
16
18
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Viet
nam
impo
rts o
f Lao
star
ch (m
illio
n U
SD)
May
Myanmar is the next frontier of expansion
-100
0
100
200
300
400
500
600
Jul-1
2
Dec-
12
May
-13
Oct
-13
Mar
-14
Aug-
14
Jan-
15
Jun-
15
Nov
-15
Apr-
16
Sep-
16
Feb-
17
Jul-1
7
Dec-
17
May
-18
Oct
-18
Mar
-19
Aug-
19
Jan-
20
Jun-
20
Star
ch p
rice
(USD
/t)
Difference Wholesale Ayeyarwady (USD/t) FOB Bangkok (USD/t)
Market implications of COVID-19
0
50
100
150
200
250
300
350
400
450
0
500
1000
1500
2000
2500
3000
3/01/2020 3/02/2020 3/03/2020 3/04/2020 3/05/2020Fr
esh
root
s bor
der
(KHR
/kg)
Fres
h ro
ots
30%
star
ch co
nten
t (VN
D/kg
)
Domestic (VND/kg) Cambodian (VND/kg)
Chang Riec border gate (Riel/kg)
• Stockpiling required – reduce processing capacity until border with China opened
• Roots stuck at the border lose quality (starch content) so lower price given to farmers
• Uncertainty gives opportunity for traders
• Lower global demand
• Labour restriction impact planting and harvest
• Market closure (Myanmar)
• Remittances and non-farm labour
Connectivity between countries, agricultural markets and sectors means that the prices that farmers receive in a
remote upland community could be impacted by a policy or production shock thousands of kilometres away
Mapping the domestic value chain at the start of a project doesn’t capture dynamics of the market and risk faced by
farmers
There is genuine interest in this information from stakeholders
Close to real time data on:
productionprices
policies
is sorely needed by all actors in the cassava sector to facilitate investment decisions
Thank you!http://cassavavaluechains.net/
https://www.facebook.com/groups/1462662477369426/
https://cassavadiseasesolutionsasia.net/https://www.facebook.com/groups/2394808117512232