A Lack of Standards Often Results in a Poor Safety Net For Farmers, Claims Official
The Council of Ministers is reviewing a draft law submitted by the Agriculture Ministry that will require farmers and traders to draw up contracts with each other before any transaction is carried out between them, Agriculture Minister Chan Sarun said by telephone Monday.
According to Mr Sarun, there are not enough standards when trading agricultural products, resulting in heightened speculation regarding prices and poor safety nets for farmers.
“All investors and traders will have to honor their contracts when the law passes, meaning that both parties will have to rely on each other,” said Mr Sarun. “Contracts between farmers and traders are very important. It can reduce the risk factor for farmers.”
Mr Sarun explained how farmers make informal deals with traders and in some cases retract their agreement to sell if another trader agrees to pay more. “[Likewise], traders will have to buy the products from the farmer once they have signed the contract.”
Heng Bunhor, director of the Banteay Meanchey provincial department of agriculture, said that the lack of formal agreements between farmers and traders meant that farmers very often only agree to sell their product once the price reaches an acceptable level.
For example, the current price for wet cassava is presently standing at 0.8 baht, or $0.02 per kg, an 80 percent drop compared to the same period last year. Thus, Mr Bunhor said, “most farmers have not sold their cassava because it is so cheap.”
Mr Bunhor added that difficulties could arise when trying to formulate contracts with traders in neighboring Thailand. “Thai traders often don’t want to draw up contracts,” he said. “They just want to make a big profit.”
Herve Conan, program officer at Agence Francaise de Developpement, the French government’s aid arm, said that the benefits to the farmers would depend on the type of contract drawn up between farmers and traders.
“The contract must be fair in order for the farmer to really benefit,” he said.
Phan Pich, director of the Pailin provincial agriculture department, agrees. He said that fair contracts in an agricultural sector where there “isn’t a real market” would be difficult to bring about.
“For the poor families, they are forced to sell straight away and more affluent families keep hold of their crop and sell when the price is high,” he said.
(Additional reporting by Simon Marks.)