FEATURE STORY

Cambodian Agriculture in Transition: Opportunities and Risks

August 19, 2015

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Nearly a half of Cambodia’s labor force is working in agriculture. With continued economic growth, the number of people working in agriculture will decline while farm wages will increase. 

Tiina Joosu-Palu/World Bank

STORY HIGHLIGHTS
  • Four million people were lifted out of poverty due to positive developments in the Cambodian agriculture sector over the last decade.
  • Cambodian agriculture saw high growth rates but needs to find new pathways to drive future growth as global food prices decline and farmland diminishes.
  • The challenge is to move away from increasing production through land expansion to being more productive and competitive.

The last decade was golden for Cambodian agriculture. The annual agricultural sector growth of 5.3% between 2004 and 2012 was one of the highest in the world, according to a new World Bank report, Cambodian Agriculture in Transition: Opportunities and Risks , prepared with the support of the Australian government.

Yields increased for all crops by 4% during 2004-2012. Farm production expanded at a competitive price level allowing Cambodia to increase its agricultural exports and successfully compete with producers in Thailand, Vietnam and Myanmar.

Life has changed for many Cambodian farmers, who have benefited from larger crops and higher rice prices over the recent years.

“My rice production has grown every year and brought in good profits,” says Mun Mom, who farms lotus on his land of two hectares and rents 13 hectares for growing rice. “I have used this money to expand my production and hire six people to work with me. I pay them $5 daily, and this is good money.”

Farm wages have doubled over the last decade, and are now better aligned with salaries in other sectors, according to the new report.

The success of Cambodian agriculture helped four million people out of poverty. The poverty headcount dropped from 50% in 2007 to 18% in 2012.

Although the focus of Cambodian agricultural production is still on rice, the last decade showed positive trends of altering production towards more profitable crops like vegetables, cassava and maize, and starting agricultural side-businesses to secure farm livelihoods and generate incomes.

“It is very important for farmers to have some other income in addition to growing rice,” says Leng Neath, a rice farmer who also raises 950 ducks. “Until recently I had three hectares for rice but this wasn’t enough to feed my family. I bought my first ducks a couple of years ago, and now sell about 900 eggs every day.”


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Mechanization and higher use of quality fertilizers would help farmers to increase productivity and thereby farm incomes. 

Tiina Joosu-Palu/World Bank

" My rice production has grown every year and brought in good profits. I have used this money to expand my production and hire six people to work with me. I pay them $5 daily, and this is good money.  "

Mun Mom

farmer

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Farmer Hour Meng confirms that growing vegetables is the most profitable agricultural activity in Cambodia. 

Tiina Joosu-Palu/World Bank

New pathways needed to sustain agricultural growth

A large share of past agricultural production growth was caused by the expansion of cultivated area. Presently, there is not much suitable land left for continued environmentally sustainable expansion.

In addition, relatively high global food prices meant farmers made more money selling rice even though profits per hectare grew at a lower rate due to rising production costs.

The last two years have raised some concerns about the future of Cambodia’s farming because annual agricultural growth has dropped below 2%.

“With global food prices declining and the land frontier diminishing, Cambodia has lost its two main drivers for agricultural growth,” says Sergiy Zorya, a senior agricultural economist at the World Bank and a lead author of the report. “The country needs to find new pathways to ensure at least 5% growth over the next 15 years, which is needed to keep farm wages growing and reduce poverty further.”

Farmers’ vulnerability has grown

While poverty has declined, the number of vulnerable people has increased. Most people who have escaped poverty still remain poor. The loss of only $0.7 per day would bring poor families back into poverty, and cause a doubling of Cambodia’s poverty rate back to 40%.

This high rate of vulnerability is a sign of modest agricultural productivity and farmers’ inability to respond to economic or weather shocks. Small farms with land of less than one hectare are particularly affected.

Poor infrastructure, particularly limited irrigation and rural roads, and inadequate access to technology and extension services are the major challenges that Cambodian farmers currently face.

Chim Phal, a rice farmer from Kamong Ampil Agricultural Commune near Phnom Penh, lost his entire rice crop because of the lack of rain in early 2015. “My land doesn’t have access to irrigation or any other water source. I depend completely on the weather,” explains Chim Phal. “Years like the current one leave me without any income.”

Productivity is a way forward

A long-term vision for Cambodian agriculture is in moving towards more value added, productive and competitive agriculture to ensure that farm incomes continue to grow and be sustained despite rising input costs, price volatility, and weather hazards.

A rise in productivity would have the largest positive effect on farm incomes, especially if the shift from traditional to modern technologies is accompanied by increased use of quality seeds, fertilizers and irrigation, according to the new report.

Farmers producing fragrant rice, processing cassava into dry chips, and undertaking other activities to diversify their products can further increase their incomes.

Key to maintaining farm competitiveness is lowering production costs through better management of existing resources and minimizing drops in farm output prices by lowering logistics costs.

The continued success of Cambodia’s agricultural sector is, indeed, one of the most important engines for economic growth and poverty reduction in Cambodia.



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