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Market Reports
 
FEED Business Worldwide - July 2012
 
Cambodia's lopsided feed and livestock trade with Thailand  
 
by F.E. OLIMPO
 
 
Cambodia is in the sad position of being a self-sufficient exporter of feed crops but a net importer of feed itself. Of its annual feed demand of 700,000 tonnes, it only produces about 170,000 tonnes a year. The rest has to be imported from Thailand or Vietnam.
 
Moreover, this dependence on others to do its value-added processing extends into the livestock end of its supply chain: it can't even raise enough hogs for its own need, importing about 1,500 pigs a day from Thailand.
 
Ironically, these pigs are fattened using corn and cassava bought cheaply from Cambodia. And because Thailand is chronically short of farm hands, chances are these animals are also being tended by cheap Cambodian immigrant labor working in Thailand.
 
With hardly any added value from Cambodia itself, Thailand eventually exports these pigs to Cambodia, usually at prices higher than those in the local market. Or why go through the trouble of getting documentation and even bribing border guards to facilitate inspection just to send those pigs beyond the border?
 
Aside from skewing its agribusiness trade balance and making it dependent on others for its protein, Cambodia's dependence on Thai feed and livestock has other perverse effects.
 
For example, since pork prices in Thailand are high at the moment, Thai farmers have sharply reduced their live-pig exports to Cambodia, causing the country's own pork prices in Cambodia. In this way, Thai hog market inflation is quickly exported to Cambodia.
 
On the other hand, when Thai swine prices are low due to oversupply, Thai farmers would do the opposite: They then flood Cambodia with pig exports to mop up excess supply back home.
 
This happened late last year at the time of the severe flooding in Central Thailand. For fear their animals would be trapped by rising waters, pig farmers disposed of their stocks prematurely by the trucks. As the local market could absorb only so much, a great deal of these pigs was dumped in Cambodia, causing pork prices there to plummet by as much as 18% -- to the consternation of Cambodian pig farmers.
 
As Thailand tends to have an excess of hogs at most times, this dumping of Thai swine into Cambodia undercuts domestic prices. This in turn makes for razor-thin profit margins in Cambodian hog farming. That discourages domestic hog production, ensuring that its dependence on Thailand for pork continues to grow.
 
 
Tit-for-tat trade wars
 
The lopsided relationship also leads to tit-for-tat trade wars. For example, in 2010, when Vietnam suffered an outbreak of the blue-ear disease, Cambodia unilaterally banned all kinds of pork and pig imports, including those from Thailand, which was not even afflicted by the disease. This sent Thailand's own hog market into a serious tailspin. The fact this devastating action occurred shortly after bordering Thai and Cambodian soldiers exchanged artillery fire was not coincidental.
 
Of course, being a global agribusiness superpower, Thailand has the means to fight back –and it certainly did so. 
 
Later that year, despite a free-trade regime between the two country's Thai border officials started making it difficult to export Cambodian corn into Thailand. Earlier this year, that was turned into an all-out ban on Cambodian corn imports As a result, Cambodia's commerce ministry reports that Cambodia's corn exports fell 65% year-on-year during the first two months of 2012 following Thailand's ban.
 
Chan Nora, state secretary at the Commerce Ministry, said Thai regulations "for the import of agricultural goods (especially corn) were very strict," adding they were a lot different from those of last year.
 
But the Thais were not yet through with Cambodia: This April, without any prior notice, Thailand stopped all imports of cassava from Cambodia to shore up domestic prices. Because of the sudden decision, more than 1,600 tonnes of cassava were stuck - and rotting - at the Thai-Cambodian border in Banteay Meanchey.

Officially, Thailand denied such a ban existed, as it would have been a violation of the ASEAN free-trade agreement (AFTA). The decision not to allow Cambodian cassava in, Thailand explained, came from Thai commodity importers themselves who must have thought that bringing in more cassava could have only brought prices further down and hit their bottom lines in the process.
 
 
The above are excerpts, full versions are only available in FEED Business Worldwide. For subscriptions enquiries, e-mail membership@efeedlink.com
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