Contract Farming in Cambodia Increases

A new study reveals that Cambodia’s agricultural investment landscape is changing as contract farming gains momentum nationwide, replacing the concession model.
A worker carries a pack of rice at a store in Phnom Penh. Kiripost/Siv Channa
A worker carries a pack of rice at a store in Phnom Penh. Kiripost/Siv Channa

Cambodia’s agricultural investment landscape is changing rapidly as the concession model declines and contract farming rises, according to a new study published by a Cambodian think tank and its partners.

The 2022 case study on ‘Agricultural Investment at the Crossroads in Cambodia: Towards inclusion of smallholder farmers?’ indicates that the large-scale development model driven by agro-industrial concessions is out of steam and other forms of investment linking farmers with companies and markets are emerging.

The findings reveal the decline of the concession model, but rise of contract farming (CF). “In a broader perspective, the rise of contract farming in Cambodia relates to the development of global agrarian capitalism, in particular to the convergence of industry and agriculture,” said the study.

In 2020, there was an increase from 20 in 2013 to 936 contracts in 2020 of agricultural commodities.

Better access to the market to sell products, a higher price than that prevailing in spot markets, and access to affordable credit are among the reasons Cambodian farmers and agribusiness engage in contract farming.

In another policy brief, ‘Making contract farming more inclusive for smallholder farmers in Cambodia’, co-written by Ngo Sothat of Centre for Policy Studies (CPS) think tank, suggests that, “Although the study showed that most farmers involved in contract farming benefited from higher income and that some were satisfied with their contractual arrangements, the research also highlighted serious risks for smallholder farmers and a lack of trust that impeded more satisfactory and longer-term relationships.”

Blockchain for organic Cambodian rice: BlocRice

In late 2018, global charity Oxfam introduced blockchain technology to help connect a network of people in the rice supply chain, including rice farmers, agricultural cooperatives, Cambodian exporter AmruRice, Dutch importer and manufacturer SanoRice, and consumers.

Using distributed ledger technology for smart contracts, blockchain application BlocRice, developed by Schuttelaar & Partners, has involved more than 50 farmers in Preah Vihear, Cambodia’s northern province. In 2019, the project was upscaled to a commercially viable level by adding more farmers, introducing direct links with consumers, and improving their living income.

In Cambodia, BlocRice could be the first blockchain solution, based on a secured, decentralised database using cryptography.

CF is increasingly seen as an effective mechanism to maximize the inclusion of and benefits for small-scale farmers, while giving some control over production to agribusinesses without requiring land ownership. The drawbacks, however, are the limits of the flexibility of farming and marketing.

Agriculture, led by rice production, represents approximately one third of Cambodia’s GDP and employs 80 percent of the population, according to the International Finance Corporation (IFC).

The case study’s authors are Jean-Christophe Diepart, of Mekong Region Land Governance Project, and CPS’s Ngo Sothat, Ngin Chanrith, and Oeur Il. Analyzing Development Issues Centre (ADIC) also contributed to the research.