Contract Farming in Lao PDR: Cases and Questions - LAD - nafri

Getting tough?
Contracts are also becoming tighter, focusing on the
individual as much as the group, and involving more officials
in hope that fewer farmers will sell contracted production to
traders.
“Now we are working with DAFO and the district chiefs
to oversee and witness production agreements. Farmers
will individually sign-up to the group and the rules and
requirements of the contract. During harvest if a farmer is
found to have sold coffee to a trader he will get a warning
like a ‘yellow card’ eventually leading to a ‘red card’. There
will be penalties such as the withdrawal of technical support
and group membership,” says Khamdy.
Jhai is also changing its contracts to place more
responsibility on the individual farmer. Until now village heads
have guaranteed the contract on behalf of some villagers,
especially those who are illiterate. This coming season
however Jhai will photograph villagers requiring they sign
the contract and a book confirming their acceptance of
the contract. Ariya, Jhai’s managing director, hopes these
measures will heighten their sense of individual responsibility
and obligation.
“This year we are going to spend more time explaining why
the contract is important, what it means, why we need it,
what we are doing for marketing. We have to get them to
understand more about this, to make them realize that if Jhai
has a problem, they will have a problem, maybe Jhai will fail,”
says Ariya.
processing regime, others lack the appropriate machinery or
adequate drying facilities.
Given cashflow problems, illustrated by farmers taking loans
in exchange for coffee beans, some villagers or production
groups are either poorly managed or simply lack the funds
to adequately equip themselves to meet high production
standards traders demand.
Khamdy thinks the government needs to step in to address
the issue with farmers and through production groups.
“Official authorities need to be deeply involved with the
process. Now we have a laboratory and cup taster, we aim
for every farmer to come in to see and taste the coffee before
export so they can learn who is growing the best coffee to
help raise standards.”
Sisanouk however doubts groups are ready to provide the
services and results counted on by traders and officials
pushing stricter contract regimes and division of the industry
into farmers, processors and traders under the proposed
coffee board. “They have to form groups that function.
When the coffee board forms there will be meetings at the
Lao Plaza Hotel, but the farmers have never set foot in such
a place, they have no experience of this.”
Indeed many seem unaware of these developing issues
and efforts to strengthen and define coffee production in
Laos, says May in her field: “I don’t know about the future
prospects, my job is coffee, I just plant and sell.”
Yet there is only so much that can be done to strengthen
contracts given the developing judicial system and
widespread ignorance about legal procedures and their
costs. “It would be better to have a guarantee and penalties
if either party does not respect the contract,” says Phonsak,
the thriving farmer in Salavan. “If the contract is broken I
don’t know what I’ll do, I don’t know how to file a lawsuit.”
Challenges
Securing production alone will not help Laotian coffee build a
brand, a key to more markets and higher prices, if quality is
patchy. “Some farmers don’t strictly follow the contract rules
for the production methods,” says Khamdy, the research
centre director.
While some farmers are not as diligent as they might be, or fail
to understand the importance of following the production and
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