How the EWEC Project’s Business Linkage Model Builds Profitable Business Relationships between Rice Farmers and Millers
Rice millers are like the ties that bind.
In the rice farming industry, they play a significant role in integrating production improvements and market opportunities for farmers. In countries like Lao PDR where farming is confined largely among smallholder farmers and farmer groups, rice millers are central figures in the pre- and post-production activities of rice farmers.
The RLED-EWEC Project’s work with rice millers in Khammouane province of Lao PDR builds on this critical role. Guided by the Project’s vertical business linkage model, rice millers and farmers form a strong, mutually beneficial business relationship that transcends arm-length transaction. Rice millers work with seed-producing farmers who supply them with seeds that the former in turn sells to other farmers. When the harvest is ready, millers offer the farmers a fair market price for their rice. This business linkage has proved beneficial especially to smallholder farmers since not only do they have access to quality seeds but they also have better market opportunity for their product.
Mr. Bounmy Khamanyvong of Bounmy Rice Mill is one of the five rice millers under the Project who actively supports farmers by providing them supply of seeds on credit. He works with some 100 farmer-households that are members of various farmer groups in five villages in Khammouane’s Nongbok district.
“It is difficult to simply rely on the day-by-day buying and selling practice in the market. Because there are other rice sellers in the market, it is difficult for me to make sure that I have quality paddies for my mill and have the seed variety that the market needs,” he says. “So I decided to work with farmer groups because it is easier. It helps me save time and cost since I can only call the head of the group and he coordinates with the other members on the volume of seeds that I need,” he further explains when asked the reason why he joined the Project. “The farmer group also helps evaluate which of the members can supply the seeds in advance. He is also my focal point when it’s time to purchase the paddies.”
Joining the Project offered him opportunities to also gain more knowledge from the many trainings and site learning visits so he can improve his mill infrastructure and operation. One of these would be information on Good Agricultural Practices (GAP)-certified rice and Good Manufacturing Practices (GMP)-certified rice mills. Employing GAP and GMP standards, he notes, has proved to be a smart decision. “I am getting more milled rice from GAP paddies than from non-GAP ones. Following GMP standards learned from the Project has also helped me minimize losses and contamination and has improved my storage management; I make good sales of milled rice now,” he shares. The improvement in sales has also made him more confident in investing for the development of his own. After all, an enhanced brand translates to increased trust with both existing and new clients. “If I can continue to get the same quality of milled rice that I’m getting now, I am sure I can attract more buyers and retain existing ones,” he explains.
At the community level where farmers have limited access to both production inputs and markets for their paddies, this form of business linkage that the Project introduced proves to be beneficial and brings about a number of positive systemic changes especially among farmers. According to Mr. Viseth Khotsouvanh, head of the SME Promotion Division of the Provincial Department of Industry and Commerce in Khammouane, such form of market modality can help address market shortage and insecurity for many rice farmers. “Rice millers are empowered to actively work with farmers in providing input supplies and offering fair prices to ensure the quality under GAP. Farmers in turn have more market options and improved bargaining power with the participating millers and even other buyers,” he explains.
He and his team have joined the Project staff on regular supervision visits and have even attended a number of trainings on rice market development and GMP standardization. This kind of model, he also observes, supports the national government’s objective to align the rice industry with export requirements pertaining to food safety and consumer protection. “This market modality that MI’s project introduced will be applied to new projects of the Lao Government in Khammouane and in other provinces.”
Indeed, this is exactly the kind of scaling up that the EWEC Project envisions. Already underway are initiatives to expand the model to other towns and districts in Khammouane. Similarly, the Project has also successfully engaged another miller in neighboring Savannakhet province to adopt the model. Over time, it is hoped that these small steps would inspire other productive partnerships among rice farmers and millers in more provinces and ultimately, across the country.
The RLED-EWEC Project is an initiative by Mekong Institute and supported by the Swiss Agency for Development and Cooperation. The Project has been working since 2013 with rice farmers in Khammouane and Savannakhet in Lao PDR, as well as with maize growers in Myawaddy, Myanmar and coffee farmers in Quang Tri, Vietnam. For more information about the Project, visit: http://www.mekonginstitute.org/what-we-do/ongoing-projects/rled-ewec-project/