Thailand Cassava Guide

-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: Most of the transactions with China, except for tenders, are spot purchases. Most contracts last at most three months.

-Substitute Products: Maize has the same applications in almost all the industries that use Cassava feedstock, such as biofuel, food manufacturer, feeds, etc., and China produces this locally. When prices of maize in China drop, 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 are highly exposed to risks coming from any policy changes with the destination countries.

-According to the General Administration of Customs of the People's Republic of China: GACC issued Notification No. 248, dated April 12, 2021, regarding the registration and management of imported food producers from abroad to the People's Republic of China. This requires that entrepreneurs wishing to export all kinds of food products to China register with the GACC, effective from January 1, 2022.

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 farmers’ produce is fresh cassava roots; the remaining 1% is cassava chips. Farmers sell to retail and wholesale collectors because they pay upfront and in cash but at relatively lower prices. Starch factories offer higher pricing but require higher quality and do not pay upfront (it takes 2~3 weeks) because they conduct cassava starch quality tests on the fresh cassava roots.

Both public and private sectors encourage farmers to do clean cassava chips to increase the value-added to their production. The lack of places to dry cassava chips, lack of cassava chipping machines, and a long time for the processing are the leading causes for farmers not fulfilling the request.

Retail collectors will also distribute to wholesale and starch factories. Wholesale collectors will process the cassava into 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 is directed to food, sweetener, paper production, and MSG manufacturers.

Starch processing firms are the only channel that buyers can approach. 

Source: Case study 

• 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.

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.

The top three varieties of cassava in Thailand are Kasetsart 50, followed by Rayong 5, and Rayong 72.

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.

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

Thailand is the top exporter of cassava in 2021 with 66.4% of its share in export and a value of USD 1.26B. It is followed by Lao with 14.1% of share in export and value of USD 268.68M, and Vietnam with 10.1% of share in export and value of USD 191.9M. 

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 2021, the highest importer was China, 5.16M mt (USD 1.26B), followed by the Netherlands, with imported quantities of 10,065 mt (USD 3.03M). China imports cassava starch, mainly used as feedstock for bio-ethanol fuel. Domestic policies for grains greatly influence the demand from China, primarily maize, which has the same applications in the same industries that utilize cassava (animal feeds, ethanol, alcohol, and food). The rest of the imports come mainly from Asian countries, particularly Japan, Korea, Malaysia, the Philippines, and Indonesia. For other destination countries, cassava starch is used primarily as a material for the paper industry.

Cassava root should meet the minimum quality requirements below:

• Weight about 300 G and above and not less than 20 cm in length
  

• Whole
  

• Firm
  

• Wholesome, not affected by rot, mold, or deterioration
  

• Free of mechanical damage and bruising
  

• Free of pests
  

• Free of abnormal external moisture
  

• Free of any foreign smell and/or taste
  

Source:

Standards for Cassava Products and Guidelines for Export

Competition in the Chinese market is growing, particularly in Vietnam. The preference for Thai cassava starch is high. Still, Vietnam has a competitive price and proximity advantage, especially when sea logistics and cargo container shortages are significant issues (Vietnam mainly does cross-border). Other competitors include Cambodia, Indonesia, and Lao.

Cassava features among staple food products which are rather tolerant to crisis periods in terms of consumption. Given the fact that cassava is largely consumed in countries with low incomes as their main food and where it constitutes an affordable and important diet item, it is not expected that the COVID-19 pandemic will lead to a deep decrease in cassava consumption. It is more likely that people would cut the consumption of more expensive food items on the backdrop of lower incomes but keep the main diet element. In the medium term, therefore, population growth will continue to stimulate growth in demand for cassava.

Source:

Global Cassava Market Is Expected to Successfully Resist the COVID Pandemic