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Page 1: Shining a light on the global cassava market: exploring ...cassavavaluechains.net/wp-content/uploads/2020/07/Global-markets… · Shining a light on the global cassava market: exploring

Shining a light on the global cassava market: exploring the multitude of factors that impact farm gate price and livelihoods

Dr. Jonathan NewbyRegional Cassava Coordinator – Asia; Country Manager – Lao [email protected], Lao PDR

Jonathan Newby, Cu Thi Le Thuy and Erik Delaquis

ACIAR CASSAVA PROGRAM FINAL REVIEW JULY 2020

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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

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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

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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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Tapioca Starch (Super High-Grade) Export Price (USD/T)

Tapioca Chips Export Price (USD/T)

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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

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Starch World Asia World Tapioca Conference

Industry engagement to share information

Meeting between Thai Tapioca Starch Association and Vietnam Cassava Association

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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

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Sustainability: Development of ‘The Cassava Lighthouse’

“Helping cassava stakeholder navigate the cassava economy”

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Impact: We built a community of information sharing

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Where to start…..

What is cassava used for?

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A multi-billion global commodity most people know nothing about….. Farmers, government, researchers, donors

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Valu

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cass

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expo

rts (

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on U

SD)

Cassava roots and chips

Cassava starch (tapioca)

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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.

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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

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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

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It has been a wild ride for the cassava sector during life of the project!

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Tapioca Starch (Super High-Grade) Export Price (USD/T)

Tapioca Chips Export Price (USD/T)

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Policy reformDrought

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Starch processors would like to stay in the train tracks

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Price to high = processors look for substitutes

Price to low = farmers grow other crop

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Where is cassava grown?

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A Southeast Asian supply story, with implication for Africa

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Eastern Asia

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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

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Asia’s cassava revolution has been a market driven one…. influenced by domestic and international policies

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• 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

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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.

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In a connect market, location and logistics matter

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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

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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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Cheaper to import

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Logistics and freight cost are important

$30MT

$15-20/t +$10-20 truck and clearance

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CASSAVA

Often not a high policy priority

But always highly impacted by policies

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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.

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Chinese maize self-sufficiency

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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

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Chinese maize, US corn starch and Thai cassava starch

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Chinese Maize (DCE Nearby Futures) Cassava Starch (FOB Bangkok)-200

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How long can this last?

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Maize price in Thailand impact on cassava price

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Difference US Maize (FOB Gulf) Thai Corn (USD)

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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.

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Biofuel mandates, Ethanol prices and cassava

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e)

Root cost in Ethanol (Thai) CBOT Ethanol (USD/litre) Crude oil (average)

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

Molasses Dried Chips Fresh root Future CBOT

Cost

per

litr

e (U

SD)

Feed stock Other costs

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• 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

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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

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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)

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Historical: Cassava Mealybug

0

5

10

15

20

25

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

Cass

ava

yiel

d (t

/ha)

Area

of c

assa

va p

rodu

ctio

n in

Tha

iland

(Mill

ion

ha)

Area harvested Yield

6

8

10

12

14

16

18

20

22

150

200

250

300

350

400

450

500

550

600

650

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Jan-

15Ju

l-15

Jan-

16Ju

l-16

Jan-

17Ju

l-17

Jan-

18Ju

l-18

Jan-

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

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In our Asian story• Incomes rising• Consuming more

animal protein• Increase in feed

demand

Thinking of the livestock feed sector…..

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Vietnam: maize and swine fever

0

0.5

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

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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

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Cassava Mosaic Disease

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Value of Thailand and Vietnam imports from Cambodia

0

50

100

150

200

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

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Vietnam relative to Thailand – Excess capacity

0

10

20

30

40

50

60

1000

1500

2000

2500

3000

3500

4000

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

0

20

40

60

80

250

300

350

400

450

500

550

600

Jan-

16

Mar

-16

May

-16

Jul-1

6

Sep-

16

Nov

-16

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

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

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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

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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

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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)

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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

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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

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Close to real time data on:

productionprices

policies

is sorely needed by all actors in the cassava sector to facilitate investment decisions

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Thank you!http://cassavavaluechains.net/

https://www.facebook.com/groups/1462662477369426/

https://cassavadiseasesolutionsasia.net/https://www.facebook.com/groups/2394808117512232