Thailand Cassava Guide

There are two major varieties of cassava.

• Sweet variety
  

-Contains low quantities of hydrogen cyanide and does not require much processing. -The roots of this variety will rot quickly if left in the soil after maturity.

-Rarely mass cultivated, due to limited demand

-Minute cyanide content

-Little application in food processing or bio-fuel industry

-Mainly consumed directly or as a cooking ingredient

• Bitter variety
  

-Contains a high hydrogen cyanide content

- requires the roots to be detoxified before consumption to avoid poisoning

-Unlike the sweet variety, the roots of this variety can be left unharvested in the soil for a long period and will not spoil even after ripening

-Not suitable for human consumption but highly valuable for industrial processing into cassava starch, chips, pellets which have various industrial applications

There are three grade classifications of cassava root that are mainly used in the market:

• Extra grade
  

A superior quality. The cassava included in this grade must be uniform in shape, quality, and size. It also must be free of defects, with the exception of very slight superficial defects.

• Grade 1
  

Cassava included in this grade must be of good quality. Slight defects are allowed in the case these do not affect the general appearance, the quality, the keeping quality, and the presentation of the cassava root.

- Slight defects in shape;

- Bruising, not exceeding 10% of the surface area; and

- Scraped areas, not exceeding 20% of the surface area.

• Grade 2
  

This grade includes cassava which does not qualify for inclusion in the higher grades, however, satisfies the minimum requirements stated above.

Competition in the Chinese market is growing particularly with Vietnam. The preference for Thai cassava starch is high but Vietnam has a competitive price and proximity advantage especially right now when sea logistics, and shortage of cargo containers is a major issue (Vietnam mainly do cross-border) .  

-At least 80% of Thailand’s cassava export are in the form of Cassava starch.

-China imports comprises around 60~70% of all Thai cassava export volume.

Timeline: 

-2016: Continuous high production, low price of maize in China. The alcohol industries reduced their imports of cassava chips significantly. Same year, Chinese importers also imposed lower pricing on other cassava products.

-2017: export values dropped by 8% as a result of decreased demand from China. Low import demand and export prices farmers suffered capital losses and many of them shifted to other crops such as sugarcane and maize. Incessant rains caused backlogging and many crops were damaged. Lack of capital and any motivation to take care of their cassava crops high volumes were left to rot.

-2017~2019:Total production and export dramatically fell.

-2020~ : the market is diversifying their export countries away from China to other Asian countries

Exporter/processing companies consider the distance of farmers to the factories when buying fresh supplies. Farms with distance of at most 50 km from the factories are highly preferred. Farther than this they will have to source their cassava not from farmers but from middlemen (collectors) who can secure more volume to make the transportation cost worth it.

99% of all farmer’s produce is fresh cassava roots, the remaining 1% is cassava chips. Farmers sell to retail and wholesaler collectors because they pay upfront and in cash but relatively lower prices. Starch factories offers a higher pricing but requires higher quality and do not pay upfront (takes 2~3 weeks) because they conduct cassava starch quality tests on the fresh casava roots. Retail collectors will also distribute to wholesale and starch factories. Wholesale collectors will process the cassava to chips and pellets for domestic and export. Cassava chips are mostly sold to major animal feed industries (Cargill, Betagro), ethanol, alcohol and citric acid industries. Cassava starch is mainly for export, and are directed to food, sweetener, paper production and MSG manufacturers.

Starch processing firms are the only channel that can be approached. 

• Cassava starch (Tapioca)
  

Tapioca is a starch extracted from the cassava root through a process of washing and pulping. The most common use of starch is to add to puddings or mix with fruit.

• Cassava flour
  

Cassava flour comes from ground cassava root. It's fine and powdery which is mainly used as a swap for all-purpose flour in gluten-free baking.

• Cassava chips
  

This is the most common form in which dried cassava roots are marketed and most exporting countries produce them. The chips are dried irregular slices of roots that vary in size but should not exceed 5 cm in length so that they can be stored in silos. They are produced extensively in Thailand, Malaysia, Indonesia, and some parts of Africa.

Cassava is available all year round, with the peak season of harvest from April to December.

-Government Floor Prices: The Thai government tends to impose export floor pricing on cassava starch and chips as a way to increase the income of small scale farmers. Recent figures are $480/ ton (from $475) and domestic wholesale from 13.5 to 13.6 baht.

-Logistics Issue: Container shortage has increased the logistic cost up to 300%. At the moment sea shipments are kept to a minimum.

-Very saturated market: Players in the industry have increased exponentially.Competition is increasing and competitive pricing once an advantage has levelled the playing field. This can be an opportunity as well.

-Climate Change: Cassava plant is a hardy croup that can withstand low moisture and nutrient poor soil but this strength is now becoming a weakness face with climate change, as Thailand experience record floods and rains, The roots becomes waterlogged and rot, which greatly reduce harvest volume. As many of the farmers are small scale, without any government subsidy, they do not have much incentive to pay more to save rotting crops.

- Pre-harvest spot contract: Majority of the transaction with China with the exception of tenders are spot purchases. Most contract last at most 3 months.

-Substitute Products: Maize has the same applications in almost all the industries that uses Cassava feedstock such as biofuel, food manufacturer, feeds etc, and China produce this locally. When prices of maize in China drops, the import volume for cassava starch also drops significantly.

-Competitions: Vietnam although less preferred by Chinese importers have a pricing and proximity advantage over Thailand which is a major threat right now as shipping container shortages continue to delay transactions (Chinese buyers use Thai pricing as standard, and impose 10~20% lower prices for Vietnamese suppliers)

-Bargaining Power: Because of the structure of the Thai cassava starch market especially its value chain (high reliance on export), Thai suppliers lack bargaining power and highly exposed to risks coming from any policy changes with the destination countries.

Thailand is the top exporter of cassava in 2020 with 66.85% of its share in export and a value of USD 631.86M. It is followed by Costa Rica with 11.56% of share in export and value of USD 109.26M, and Vietnam with 10.43% of share in export and value of USD 98.56M. 

Global Market Production in 2020 was 5,278,056 tons ($1,179,081M), and Thailand is the leading world exporter with 3,055,751 tons (USD 683,354), with a 27% growth.

In 2020, highest importer is China 3,354,929 tons (USD 782,879) followed by Japan but the difference with the import quantities with China is very large (4,714 tons).

China imports cassava starch used to mainly to use as feedstock for bio-ethanol fuel. The demand from China is greatly influenced by domestic policies for grains particularly for maize which has the exact same applications in the same industries that utilizes cassava (animal feeds, ethanol, alcohol, food industries). The rest of the imports are coming mainly from Asian countries particularly from Japan, Korea, Malaysia, Philippines and Indonesia. For other destination countries, cassava starch is mainly used as material for the paper industry.