Resilience on the Test Bench in Cambodia

Cooperative Phnom Sontuk

Located in the province of Kampong Thom, roughly 2,5 hours north of the Cambodian capital Phnom Penh and located on the direct route to Siem Reap, the cooperative (AC), which initially started out as a conglomerate of 15 groups of cashew nut farmers, struggles to survive the Covid-19 pandemic.

Focused on catering to the cashew nut needs of the local markets (restaurants, hotels, transient travellers) before the pandemic started, their stable customer base is dwindling while the country is locked up, leaving the tourism sector behind fading. With no income generating sales, the AC does have no funds for buying the raw nuts from its members for processing and their members cannot wait. With farmers under pressure to sell their produce fast in dire need of cash, they are forced to sell their raw nuts to middlemen traders who sell them on to Vietnam. Under these conditions the whole business model and with it the promise, that each individual member will benefit, is under immense pressure.

Struggling with its non-diversified customer base, the AC’s flagship product – cashew nut – is exposed to additional market pressure. In a market where cashew nuts used to raise a price 20-fold higher than rice, a lot of farmers started growing the fruit. When Covid hit and borders were closed market prices for raw cashew nuts dropped down to $1.5 a kg compared to $2.0 a kg in pre-Covid times.

Add to that the lack of processing facilities in the country itself, which leaves farmers forced to sell their raw nuts for export to countries like Vietnam, where they are processed eventually. A total of 95 percent of raw cashew nuts are exported. Only 5 percent are processed locally. Processed cashew nuts, however, achieve market prices of up to $7.5 a kg this year. The lack of processing facilities and infrastructure hence means a huge loss of potential earnings for the farmers in the country.

Due to its attractive price level and the robustness of the plant the first fruits can be harvested already after 18 months and trees carry fruits for up to 40 years), it is projected that within the next 4 years, the production of raw cashew nuts will increase by 50% (currently its at 250 t a year) which could mean a potential drop in prices (due to oversupply), or a great potential if the nuts could be processed into diversified, high value products. However, with no proper investment this earning potential will be drained out of the country.

With the only real business left for AC Phnom Sontuk being the sale of cashew plant seedlings, the AC business model is on the test bench for its crisis readiness.

DGRV in Cambodia, together with its local partners, is focusing on developing resilient, business-oriented cooperatives. COVID-19 is putting conventional approaches on the test bench. Entrepreneurial perspectives to matchmaking, market sourcing and – readiness as well as attracting investments are key for engaging and retaining members and thus needed for establishing a resilient cooperative sector, based on self-help, self-responsibility and solidarity.

Future Steps

In the project phase 2021-2023 of the new WINGS project, DGRV’s local partner organization Buddhism for Development (BFD) will support the Phnom Sontuk Agricultural Cooperative Cashew Nut business to find new markets and strengthen their role in the supply chain for national demand and export.