IJERD – International Journal of Environmental and Rural Development (2021) 12-2

Research article
erd

Evaluation of Organic Rice Contract Farming Model inCambodia
CHANMONY SOK*Graduate School of Agriculture, Tokyo University of Agriculture, Japan
Email: Chanmony0223@gmail.com

TOMOHIRO UCHIYAMA
Faculty of International Agriculture and Food Studies, Tokyo University of Agriculture, Japan

NINA N. SHIMOGUCHI
Faculty of International Agriculture and Food Studies, Tokyo University of Agriculture, Japan
Received 15 January 2020

Accepted 29 October 2021(*Corresponding Author)

Abstract In Cambodia, organic farming under contract farming scheme is considered as oneof the measures for better access to markets and poverty reduction since 2012. Previous
literature revealed that organic rice farmers can generate more profit by engaging in contract
farming. But only a few organic farming cases under contract farming succeeded. Since there
was a lack of empirical study on current condition and issues of contract farming design andarrangement, this study clarified the effectiveness of organic rice contract farming
arrangement and determined the most suitable contract farming model for small-scale farmers
to maximize economic benefits. From a total of 5,053 organic rice contract farming
households in Preah Vihear province, a total of 90 respondents were randomly selected. In
the study area, two different organic rice contract farming models were found, namelyintermediary model (Model A) and the multipartite model (Model B). Economic analysis
approach revealed that even farmers in model A received a higher rice price than model B,
but there were still model A farmers who did side-selling much more than model B farmers.
Thus, third-party in model B seemed to play an essential role in contract farming to makeproper arrangements as well as to balance the bargaining between farmers and contractors.
In general, model B contract farming (also known as multi partite model) is recommended
for organic rice farmers to maximize their economic benefits as well as profits.
Keywords contract farming model, organic rice, small-scale farmers.

INTRODUCTION
In Cambodia, about 90% of the poor live in rural areas and rely on agriculture for their primarysources of livelihood (NIS, 2008). To promote and improve agricultural productivity and marketing
access for agricultural products, the government has been promoting contract farming (CF) andorganic farming to remove some constraints on agricultural growth and linkages to input and output
markets. (MAFF Cambodia, 2012). However, the advantages of CF can only be achieved if contract
arrangements are well managed and are mutually beneficial to both farmers and contractors. For CF
overview, various forms of CFs have been practiced in Cambodia since 1950, mainly throughinformal arrangements. But this stopped during the civil war between 1975 and 1979 (Couturier, etal. 2006). Recently, there have been a few organic rice contract farming reintroduced though somecontracts had already failed, and very few have succeed (Cai et al., 2008; Nou and Heng, 2013).
According to Cai et al. (2008) and Nou and Heng (2013) found that serious managerial issues
including remain, leasing to the poor management. As a result, farmers have often slipped out of thecontract before the end of the contract period.
Preah Vihear province, located in northern Cambodia, is known as the largest area producing
organic rice within contract farming. As shown in table 1, there are 32 Agriculture Cooperatives(ACs) with 5,053 total members. However, the actual sale was low in some years due to natural
disasters and some problems in contract farming arrangements.
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Table 1 Organic rice contract farming in Preah Vihear Province
Year

Agriculture
Cooperatives (AC)Member(HH)

Cultivatedarea(ha)Estimate-Productionin Contract (tons) (a)

2014
2015
2016
2017
2018

8
1225
32
32

891
1,669
3,151
5,162
5,053

2,293
4,185
8,703
15,812
16,052

1,800
8,666
13,79526,538
26,786

Actual saleTons
Percentage(b)(b)/(a)
1,466
81
2,790
32
11,47683
13,98453
1,555
43

Source: Provincial Agriculture Department, 2019

For this study, CF is defined as arrangements where farmers are the ones who provide land,
labor, and capital; and contractors provide technical supports, requirement supports, and market tofarmers.
Modalities of Contract Farming and Types of Contracts
According to FAO (2001) there are ﬁve contract farming models. 1) Centralized: an agribusinesscompany buys produce from many small-scale farmers with tight control over quality and quantity.
2) Nucleus estate: an agribusiness company combines CF with direct involvement in plantation
production. 3) Multipartite: farmers sign contracts in a joint venture established between anagribusiness company and a local entity. 4) Intermediary: an agribusiness company may havecontracts with intermediaries who then sign contracts with a larger number of farmers. 5) Informal:
more informal verbal purchase agreements are signed on a seasonal basis, with inputs provided by
the company often being restricted to seed and fertilizer.
OBJECTIVE
This study aims to understand the effectiveness of organic rice contract farming (ORCF) arrangementand determine which contract farming model is the most suitable for small-scale farmers with respect
to maximizing benefit and farm incomes. Specifically, this study aims to:
1. identify the ORCF models by small-scale farmers in the study area;
2. determine the effectiveness of each contract farming model on small-scale farmers livelihood interm of income generated, and productivity; and3. evaluate the difference ORCF models with focus on benefit and contract enforcement.
METHODOLOGY
In this study, both primary and second data were collected. A total of 90 respondents were randomly
selected from 5,053 organic rice contract farming households within 2 different ORCF models inPreah Vihear Province. Contractors, agricultural officers, NGOs, and union of agricultural
cooperative were interviewed using questionnaire forms and groups discussions. Descriptive andprofitability analyses were utilized.
RESULTS AND DISCUSSION
Organic Rice Contract Farming Models’ Characteristic
From field observation, in the study area, there are two different organic rice contract farming models
were identified as follows.
Intermediary model (Model A): Farmers and contractors are directly engaged to each other;farmers who provide land, labors, and capital; and contractors provide technological supports,
requirement supports, and market.
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Multipartite model (Model B): Union agriculture cooperative links farmers to contractors andtechnical support; there is support from NGOs to union and farmers; farmers who provide land, labor,and capital and pay for union operation; and contractors provide markets.
Table 2 Arrangement of contract farming models
Categories
Farmers
Contract formulas
Contract format
Crop schedule
Pricing policies
Technical assistance
Loan
Input provision
Training provision
Communication
Monitoring
Cost of operation

Model A
Certified and cooperative
agriculture (AC) member
Based on market specifications
Legally formal agreement
Yes
Fixed before harvesting 1-3 weeks
by contractors
Sometimes
No
LimitedSometimes
Through cooperative
Sometimes
ACModel B
Certified and cooperative member inUnion of AC
Based on market specifications
Legally formal agreement
Yes
Fixed before harvesting 1-3 weeks bycontractors and Union
Yes
Yes
LimitedFrequentlyThrough union cooperative
Sometimes
Union + AC

Source: Field survey, 2019

All farmers in both models are certified by the same certification institute. Contract farming
agreement, crop schedule, technical assistance, and input provision are similar in both contract
farming models. However, contract farming model A did not provide loans to ACs or farmers, while
ACs in model B could get loans from union agriculture cooperative. In addition, farmers in model B
could get more support than farmers in model A. For example, union agriculture cooperatives arewith farmers and contractors to set up price of organic rice. However, farmers in model B must pay
the union 30 riels/kg of their organic rice production and another 30 riels/kg as AC operation cost
while farmers in model A need to pay 30 riels/kg only as AC operation cost. Overall, all those support
and arrangements affected farmers’ productivity, as well as profits.
Organic Rice Farmers’ Characteristic in Both Contract Farming Models

Fig. 1 Income source of farmers in both models
Source: Field survey, 2019

Farmers in both models depend on organic rice cultivation as main income; this is about 50% of total
income, followed by off-farm income such as wages, construction name as a few, and livestock
breeding on their farms. Beside rice farming, farmers in both models produce other crops such as
cassava and cashew nuts. In addition, all farmers could grow organic rice once a year, and most of
the farmers do long maturity rice rather than medium maturity. Recently, direct-seeding method isthe common practice in organic rice cultivation in the study area while transplanting method isdecreasing.
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Table 3 Organic rice contract farmers' characteristicItems
Number of Household (HH)
Family size (person)
Age (years)
Farming experiences (years)
Education (years)
Planted rice land size (ha)Income (rice) per HH
Income (rice) per ha (riels/year)

Model A
45
4.36
44.29
25.16
6.22
4.25
8,671,311
2,101,846

Model B
45
4.76
40.22
21.80
4.49
3.44
8,608,900
2,611,896

A-B(0.40)
4.07
3.36
1.73
0.81
62,411(510,050)

T-Stat(1.36)
1.80
1.46
2.65
1.86
0.07
(4.28)

*
**
*
**
**
*

Source: Field survey, 2019, Note: *Signification at level 0.06 to 0.10 **Signification at level less than 0.05

Farmers in model A are 4 years older and use 0.81ha of rice cultivation land more than farmers
in model B. Moreover, income from organic rice per HH are very similar in both models, but income
from organic rice per ha in model B is higher than farmers in model A meaning there are somedifferences in each productivity.
Profitability of Organic Rice Farming in Both Models
Table 4 Total production cost of organic rice production
Items
Variable cost
Fuel consumption ofLand preparation
Transportation
SeedThreshing
Combine harvester
Fixed cost
Total labor cost
Family labor
Hired labors
Exchange labors
Total production cost

Unit: '000 riels /haModel A
Model B
Direct seeding
Transplanting
Direct seeding
Transplanting
MediumLate
MediumLate
MediumLate
Medium
Late
485.1
515.7
282.9
258.1
569.7
515.2
587.1
353.9
55.9
18.1
303.8
70.0
37.3
259.2
600.1
234.0
292.1
74.0
1,344.4

53.5
18.0
197.5
64.1
182.6
288.2
532.0224.7
237.9
69.4
1,335.9

56.0
19.6
126.0
81.3
259.2
983.5
356.8
506.7
120.0
1,525.6

54.3
18.8
105.0
80.0
296.4
966.6
343.3
570.0
53.3
1,521.1

57.8
18.5
305.8
83.9
103.7
254.9
511.6
217.5
208.2
85.9
1,336.2

57.9
18.0
179.4
75.2
184.6
273.2
457.1
213.1
153.9
90.0
1,245.4

58.7
20.7
139.8
105.1
262.7
246.9
665.1
206.6
251.2
207.3
1,499.1

58.6
20.0
113.8
105.3
56.3
274.6
850.0
350.0
287.5
212.5
1,478.5

Source: Field survey, 2019, Note: Labors cost is 20,000 riels per 8 hours per person. 4050 riels= 1USD (2019/10/01)

As shown in Table 4, farmers in model A spent more on labor cost due to a lower use of combine
harvester services while farmers in model B received more support from the union including combine
services during harvesting. Overall, farmers in model B spent less in production cost than farmers inmodel A. Moreover, family labor and exchange labor are considered as noncash cost because farmers
did not pay in cash. However, farmers in model B still use more exchange labor than farmers inmodel A; this affected the cash income in both models. The study found that when there weredifferences in cash incomes, farmers’ decisions were also different.
In Table 5, all organic rice prices were already deducted from the cost of union and AC.
Therefore, contract farming model A provided higher price of rice than model B but yield in contract
farming model B was a higher in each category. From field observation, farmers in model B usedcombine harvester services during harvesting that could keep the high volume and quality of rice
(preventing grain loss), while almost farmers in model A had done the harvesting by hand. Therefore,
farmers in model B could generate more profit than farmers in model A, especially on cash income.
In addition, medium rice maturity usually could provide higher yield but during that time, there wasdrought in the middle of the cultivation season which affected the yield of medium maturity. Afterall, farmers in model B could generate more profit and cash income than farmers in model A eventhough farmers in model A got higher price.

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Table 5 Total profitability of organic rice production in both contract farming models
Unit: '000 riels/haItems
Model AModel B
Cultivation method
Direct seeding
Transplanting
Direct seeding
Transplanting
Rice typeMedium Late Medium Late Medium Late Medium Late
Yield (Tons/ha)
1.74
1.64
2.05
2.00
1.96
1.87
2.30
2.15
Price (Riels/kg)
1,407
1,117
1,510
1,130
1,384
1,087
1,405
1,108
A.Gross revenues
2,448.6 1,831.9 3,095.5 2,260.0 2,712.7 2,027.7 3,231.5 2,382.2a. Total Variable cost
485.1
515.7
282.9
258.1
569.7
515.2
587.1
353.9
b. Total Fixed cost
259.2
288.2
259.2
296.4
254.9
273.2
246.9
274.6
c. Total Labor cost
600.1
532.0
983.5
966.6
511.6
457.1
665.1
850.0
B.Total noncash cost
308.0
294.1
476.8
396.6
303.4
303.2
413.9
562.5
C.Total Production cost (a+b+c) 1,344.4 1,335.9 1,525.6 1,521.1 1,336.2 1,245.4 1,499.1 1,478.5
D.Total Cash income (A-C+B)
1,412.2
790.1 2,046.7 1,135.5 1,679.9 1,085.4 2,146.3 1,466.2
E.Total profit (A-C)
1,104.2 496.0 1,569.9 738.9 1,376.5 782.2 1,732.4 903.7
Source: Field survey, 2019, Noted: 4050 riels= 1 USD (2019/10/01)

Key Challenges and Main Concern in Both Organic Rice Contract Farming Models
From field observation in 2019, contractors in both contract farming models made late payment tofarmers which caused some problems in contract farming arrangement such as side-selling. Side
selling referred to farmers who sold some or all their contracted productions to other sellers besidethe contractors. Since those farmers immediately needed cash in hand, they decided to do side selling.
Therefore, farmers who did the side selling received lower unit price compared to unit price incontract farming. In addition, there were about 22.84% of farmer respondents in model A who didside-selling while model B had about 18.56%.
As shown in Fig.2, farmers in model B did side selling less than farmers in model A because
farmers in ACs in model B could get some loans from union to make the payments on time insteadof the late payment from contractors, while ACs in model A used their own capital to make payments
on time. So, it seems that union in model B has played an important role to keep good contract
arrangement.

Fig. 2 Reasons of farmers did side selling in both contract Farming models
Source: Author’s compilation based on field survey, 2019

Table 6 showed that farmers in model A had more concerns than farmers in model B in eachcategory because farmers in model A did not have any third party (e.g. union) to balance the powerof contractors and farmers as well as good arrangement. However, both contract farming modelⒸ ISERD180

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farmers still have concerns; thus, both contract farming models need to improve those conditions.
Moreover, farmers in model B also complained about the high interest rates from the union andoperation costs. In addition, poor infrastructure leads to higher spending on production cost offarmers and union operation.
Table 6 General benefits and concern in both contract farming models
CategoriesNConcerns
Limited access to creditPrice bargain
Noncompliance
Poor infrastructure

Model A
45%100Model B
45%100Total
90%100313133
3769697382

152026
38

33
4458
84

4651
5975

51
5766
83

Source: Field survey, 2019

CONCLUSION
Two different organic rice contract farming models were found in the study area, namely theintermediary model (Model A) and the multi-partite model (Model B). Model B farmers paid moreon third-party (union) operation and resulted in more support (e.g. training, loan) than model Afarmers. As results, model A farmers could get a higher price of organic rice than model B farmers.
However, with the current situation, that of having support from the union which allowed model B
farmers to generate more profit and cash income than farmers in model A. Moreover, there were stillmodel A farmers who did side-selling more than model B farmers. Thus, union in model B seemed
to play an essential role in contract farming to make proper arrangements while ensuring the farmers’
profits and balancing the power of farmers and contractors. Overall, with the current condition, contract
farming model B (also known as multi-partite model) is recommended for organic rice farmers tomaximize their economic benefits and profits.
Part of the limitations of this study was time constraint. Thus, further study should focus on thekey challenges in contract farming relationship within the supply chain in order to propose andcritically evaluate options for improving contract farming conditions for organic rice farmers andintroducing more efficient and sustainable contract design based on all actors in contract farming
using both qualitative and quantitative approaches.
REFERENCES
Cai, J., Luyna, U., Sununtar, S. and Ping, S. 2008. Rice contract farming in Cambodia: Empowering farmers
to move beyond the contract toward independence. ADBI Working Papers, 109, Asian Development BankInstitute, Tokyo.

Couturier, J., Savun, S. and Ham, P. 2006. Inventory of farmer organizations in Cambodia. MAFF andMinistry of Foreign Affairs of France, Phnom Penh.
MAFF Cambodia. 2012. Policy document on promotion of paddy rice production and export of milled rice.
Ministry of Agriculture Forestry and Fisheries, Phnom Penh.
NIS Cambodia. 2008. Cambodian census. National Institute of Statistic (NIS), Phnom Penh.
Nou, K. and Heng, M. 2013. Emerging contract farming: A case of high quality rice in Cambodia. Phnom Penh,Cambodia.
Provincial Department of Agriculture. 2019. Preah Vihear province annual report of contract farming 2019.
Preah Vihear Provincial Department of Agriculture, Ministry of Agriculture, Forestry and Fisheries, 6,Cambodia.

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