The first shipment of cassava in a major deal between a subsidiary of Chinese biofuel firm Henan Tianguan Group and a Cambodian logistics company left Cambodia on Friday, according to the local firm.
The multimillion-dollar deal could potentially more than double last year’s total cassava exports to China.
The agreement, signed in November, would see Advanced Glory Logistics (AGL) supply 150,000 tons of cassava in 2015 and is the first time Tianguan Global Cassava Processing Co. Ltd.—whose parent company, Henan Tianguan Group, is one of four nationally appointed ethanol producers in China—has sought to buy cassava chips directly from a Cambodian firm, according to AGL project manager Siek Hun.
AGL’s role is to source cassava from smallholders and handle all the domestic transport, customs procedures and shipment of cassava, Mr. Hun said.
If successful, the deal will more than double last year’s total cassava exports to China, which amounted to about 60,000 tons, he said.
“There is more demand for Cambodian cassava for sure. We have a growing interest from Chinese companies, but local companies don’t have capital to buy, store and supply cassava to them,” Mr. Hun said, adding that with such a large order to fill, it would be important for AGL to maintain a steady supply of cassava at stable prices.
“The international price is fluctuating every day; sometimes, it’s too high and we cannot buy it or sell. It has many factors. When there is global oversupply, the price will drop,” he said.
The current export price of Cambodian cassava is $190 per ton, Mr. Hun said. If this figure creeps much lower, it will be difficult for farmers to turn a profit, he said, deterring them from farming cassava.
Mr. Hun said Tianguan Global is concerned about this possibility and is set to meet with government officials to discuss setting a floor price for cassava.
Hean Vanhan, deputy director of the Agriculture Ministry’s general directorate of agriculture, said AGL would need to collect cassava from growers promptly and regularly, or risk suppliers looking elsewhere to offload their crop.
“Sellers will not wait for them,” he said.
In another major cassava deal, signed last month, Cambodia’s Tai Zhong Shen Development Group agreed with China’s Ru Hui International Group to export 200,000 tons of cassava to China for $49 million, according to Chinese state news agency Xinhua.
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Correction: A previous version of this article incorrectly stated that the deal was made between Advanced Glory Logistics and China’s Henan Tianguan Group. The deal was made between Advanced Glory Logistics and Tianguan Global Cassava Processing Co. Ltd., a subsidiary of Henan Tianguan Group. The article also incorrectly stated that Advanced Glory Logistics was committed to exporting 150,000 tons of cassava in 2015. The company expects to export 150,000 tons this year.