In Cambodia, the price of rice (paddy) often falls below KHR 1,000 (USD .24), discouraging farmers from producing rice for commercial purposes. To help its rice-producing members, the Farmer and Nature Net Association (FNN) reached out to AMRU Rice Company, which was interested in sourcing organic jasmine rice. FNN facilitated a contract farming partnership between AMRU and Svay Chochep Meanchey Agriculture Cooperative, located in Khnach Kantout village, Svay Chochep commune, Bosert District, Kampong Speu province, Cambodia.
Under the contract farming scheme, AMRU Rice Company guarantees a premium price for organic paddy rice through a three-part premium system:
- The premium is based on the market price and a guaranteed premium price.
- The company provides an additional KHR 30 per kilogram to the cooperative, compensating workers tasked with maintaining the Internal Control System (ICS) booklet, as stipulated by cooperative policies.
- The company contributes an additional KHR 20 per kilogram to FNN to facilitate coordination between the farmers and the Control Union unit.
For the 2023-2024 season, the cooperative mobilized 453 farmers to cultivate Rumduol rice (fragrant organic rice) over an area of 602 hectares, with an expected yield of around 1,800 tons.
FNN’s Role in Supporting Farmers
Before the organic rice was sold to AMRU Rice, FNN played a crucial role in supporting the farmers by:
- Organizing ICS training workshops
- Following up on the booklets filled by the Board of Directors (BOD) of the cooperative, who are in charge of the ICS
- Reporting ICS training outcomes to the company and Union Control
- Accompanying the Union Control during field monitoring to obtain organic certification (issued by the Union Control)
This system allowed the cooperative to meet its contractual obligations by successfully delivering 1,800 tons of organic Rumduol rice to AMRU Rice Company.
The contract farming model also enabled the cooperative to boost sales of both traditional organic rice and Rumduol rice. FNN’s additional contributions included managing ARISE funds and coordinating with microfinance institutions (MFIs) to help cooperatives aggregate member-produced organic rice under the contract terms. In 2023-2024, the cooperative leveraged financial support, receiving USD 90,000 from the ARISE program of the Asian Farmers’ Association for Sustainable Rural Development (AFA) and USD 100,000 from MFIs. These funds facilitated the collection of 1,400 metric tons of organic rice, further strengthening the cooperative’s capacity to fulfill its contracts and meet market demands.
Innovation/Good Practice
Before transitioning to organic rice production, members of the Svay Chocheap Meanchey Agricultural Cooperative relied on chemical inputs such as pesticides and fertilizers. However, with the assurance of a stable market, the cooperative committee convened a meeting to introduce the concept of organic agriculture to its members. Recognizing the benefits, the farmers collectively agreed to adopt organic farming practices, replacing chemical inputs with locally sourced botanical pesticides and organic fertilizers certified by Ecocert, a European Union-accredited certification body. They also committed to selling their organic produce to the designated company.
The transition to organic farming brought tangible benefits to the farmers. They observed that using local materials to produce organic compost reduced input costs, increased income, and supported environmentally friendly practices. To further support this shift, the cooperative sought assistance from FNN through the ARISE program, a revolving fund managed by AFA, of which FNN is a member. The ARISE fund enabled the cooperative to purchase organic produce from its members, addressing the critical challenge of working capital constraints.
With a signed contract between the cooperative and the company, recognized by the Provincial Department of Agriculture, Forestry, and Fisheries (PDAFF), the cooperative gained confidence in securing loans. The company’s guarantee reassured microfinance institutions (MFIs), making it easier for the cooperative to access financing. This arrangement not only provided farmers with a secure price for their paddy but
Impact
The partnership between 453 smallholder farming families and AMRU Rice Company creates a win-win situation that promotes both economic and environmental sustainability. The agricultural cooperative benefits from the premium price offered by the company, fostering sustainable development and increased farmer incomes.
Farmers gain access to high-quality seeds that enhance rice productivity and save costs by using compost instead of purchasing external organic fertilizers. For instance, an organic rice farmer can earn approximately KHR 1,620 (USD 0.40) per kilogram of rice. With a yield of 3,000 kilograms per hectare, this translates to KHR 4,770,000 (USD 1,192) under the contract. In comparison, high-quality conventional rice sells for around KHR 1,300 (USD 0.32) per kilogram, yielding KHR 3,900,000 (USD 974) per hectare. Organic farming thus provides an income boost of KHR 870,000 (USD 217) per hectare.
Beyond financial gains, the shift to organic rice farming aligns with broader goals of sustainability. It promotes environmental conservation, supports climate change mitigation, and contributes to the government’s rice export policy. These practices ensure long-term benefits for both the community and the ecosystem.
Additionally, the initiative provides financial sustainability for FNN. By securing income through its involvement in the program, FNN builds resilience to operate independently of project funding and donor support in the future.
Facilitating Factors
AMRU Rice Company has built a solid reputation for its collaborative approach with smallholder farmers, characterized by flexibility and a deep understanding of their challenges. The company purchases both organic rice and SRP-certified rice, which meet the stringent standards of the Sustainable Rice Platform recognized by the European Union (EU).
The success of this partnership is rooted in the strong organizational capacity of the farmers. Their ability to consistently uphold production standards is supported by effective communication and the leadership of a competent Board of Directors (BOD) and controller committees. This structure not only ensures smooth operations but also facilitates the process of obtaining certification from the Control Union (CU), further enhancing the credibility and marketability of their produce.
Challenges
Despite the strong cooperation between FNN, AMRU Rice Company, and the agricultural cooperative, several challenges persist:
- Farmers sometimes struggle to meet the agreed-upon purchase volumes.
- The company’s delayed transfer of payments to the community creates financial strain.
- Some farmers sell their produce to middlemen offering higher prices, undermining the cooperative’s supply chain.
- Rainy seasons negatively impact the quality of paddy, reducing its market value.
Lessons learned
Key takeaways from the partnership include:
- Signing contract farming agreements between the company, FNN, and the cooperative’s BOD is essential for ensuring farmers commit to producing organic rice.
- Providing ICS training to controller committees before planting season helps streamline the certification process with the Control Union by ensuring accurate documentation.
- Contract farming provides farmers with a stable market and guaranteed prices.
- Creating maps of members applying organic practices is vital for audits by organic certification bodies, enabling farmers to obtain organic certification and sell their rice as certified organic.
- Facilitating partial payments for rice immediately after loading helps farmers maintain financial stability and incentivizes participation.
Recommendations
To address the challenges and strengthen the partnership, the following measures are recommended:
- The company should prepare hauling trucks in advance to ensure on-time collection of rice.
- The company should provide advance payments to the cooperative, enabling them to pay farmers promptly upon loading.
- Agricultural cooperatives should secure sufficient capital to purchase rice independently in case of delayed payments from the company.
Implementing these strategies can enhance trust, improve operational efficiency, and ensure the long-term success of the partnership.
Related articles:
- https://asiapacificfarmersforum.net/cambodia-a-promising-partnership-between-an-agricultural-cooperative-and-a-rice-company/
- https://asiapacificfarmersforum.net/cambodia-fnn-organic-agri-cooperatives-sign-contract-farming/
- https://asiapacificfarmersforum.net/cambodia-fnn-kraing-leav-agricultural-cooperative/
- https://asiapacificfarmersforum.net/cambodia-development-of-akphivat-srok-yoeung-cooperative/
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