CattleNetwork.com, KS
11/18/2008
BANLUNG, Cambodia -- A few years ago, this dusty frontier town was little more than a junction of dirt tracks in the jungle, with a handful of wooden buildings and beat-up old cars. Then global crop prices shot up, and Banlung became a boomtown.
Farmers swarmed in and cleared land to plant rubber, soybeans and other cash crops. In similar ways, small farmers in many other countries, such as Bangladesh, Russia, Ukraine and Nigeria, ramped up production to profit from the dramatic rise in the prices of agricultural products in recent years.
Now, however, the future of the expansion in Banlung and elsewhere is in doubt as grain prices have plummeted because of the global economic slowdown. With investors pulling money out of commodities and growth slowing across the world, corn prices are down about 50% since the end of June, while wheat is down about 30%.
A slowdown in new farmland development could hinder efforts to ease the global food shortage. Earlier this year, those shortages triggered riots from Haiti to Egypt to Pakistan and raised fears of permanently higher prices for basic foodstuffs. Some agricultural analysts worry that when the world economy recovers, the food crisis will return in full force.
New plantings in places like Banlung remain a tiny part of global output, which is dominated by agricultural production in big countries including the U.S., Brazil, Canada, Australia and China. But they helped make this year likely the highest ever for grain production globally.
The Food and Agriculture Organization of the United Nations warned in a report this month that "troubles loom ahead" as farmers cut back on production to gird against lower prices, potentially leaving the world short when demand springs back.
Dan Basse at AgResource Co., a research firm in Chicago, forecasts drops in global output of some key crops next year as farmers grow more cautious. Mr. Basse sees a nearly 3% decline in corn production and a decline of more than 4% in wheat output.
Already there are signs the momentum in Banlung is fading. Although many Cambodian farmers haven't yet decided how much to grow next year, land transactions in the area have slowed considerably, suggesting a decline in demand for property to create more farms and the land speculation that went with it.
"You used to sit in the breakfast shop and just see the deals happening," says Jan Noorlander, a local representative for CARE, the international aid agency, in Banlung. "Now people are sitting back," he says. "People are pretty wary right now."
That's a sharp reversal from the gold-rush like boom that hit Banlung a few years ago. It wasn't pretty: The new investment in agriculture brought allegations of land theft and illegal forest-clearing. Indigenous hill tribes that once practiced subsistence farming sold off communal land to buy cars, stereos and conveniences.
Meanwhile, in Bangladesh and other parts of Asia, farmers added a second or third rice crop beyond what they would normally grow. In Russia, farmers added an additional 2.6 million hectares of grains, while other countries that previously produced well below their potential, including Ukraine, Nigeria, and parts of Eastern Europe, also boosted agricultural output.
In all, global cereals production is expected to hit a record high of roughly 2.2 billion metric tons this year, an increase of more than 5% from a year earlier, the FAO says. That was mostly from traditional agricultural powerhouses like the U.S. but some newer frontiers helped.
For Cambodia, agricultural investment promised a return to its glory days 40 years earlier as an important regional producer of rice, rubber and other crops. Then the Southeast Asian nation descended into decades of civil war, including a period in the late 1970s when it was controlled by the genocidal Khmer Rouge group.
Cambodia has since stabilized. Private traders have expanded their reach into the remotest parts of the country to encourage small farmers to plant more, and foreign investment has followed. Kuwait recently agreed to give Cambodia more than $500 million in loans to boost farm production and improve roads to transport crops, among other things.
As a result, Cambodia has emerged as a notable exporter of rice for the first time since the 1960s. This year it is expected to produce 6.7 million tons or more of rice, compared to 4 million or less a decade ago, giving it a surplus of about 2.5 million tons. Government ministers have started referring to rice as "white gold."
"I never thought I'd have the money to buy a piece of land," says Mey Pov, 44 years old. He moved to Banlung from a nearby province a few years ago and got a job managing a new 50-acre farm with rubber trees and soybeans for an outside investor. He then took his income and bought his own five-acre farm, with hopes of becoming an even bigger agricultural producer someday.
Farmers are disappointed by falling prices, says Yang Saing Koma, a Cambodian agronomist who runs CEDAC, an agricultural development organization that works in villages teaching farmers how to boost yields. However, in the long run, "I still think there's potential" to produce more crops in Cambodia, he adds.
Cambodia is using about three million hectares for farming, less than half its estimated 6.5 million hectares of fertile land. It has made minimal investments in irrigation, grain storage and market training for farmers. Analysts think that with more work -- and sustained investment -- Cambodia can double its rice production.
Banlung is among the most promising new farming areas of the country. Bombed heavily by U.S. forces during the Vietnam War, Banlung was largely cut off from the world by bad roads and thick malarial jungle. Most of the residents -- a mixture of ethnic hill tribes that spoke their own dialects and rarely handled money -- eked out a living farming small plots and gathering nuts and wild fruits in the forest.
That began to change this decade as roads improved and global prices for soybeans, rubber, rice and other crops skyrocketed. Demand in Vietnam, a 70 kilometer trek away, accelerated. The amount of land in the area around Banlung devoted to cash crops shot up around 50% in the past several years, local officials say, and the area's population, which includes people living in communities in the forest outside the town, swelled to more than 133,000, from roughly 90,000 a decade ago.
The town market -- where vendors still sell cat skins for use in tribal medicines -- became jammed with traders. At the Acleda Bank, where customers come and go in bare feet, managers say they recently had as much as $3 million on deposit, mainly from land sales and farming activities over the past two years.
Now that crop prices are falling, economists say some farmers will have no choice but to curtail expansion. And the motorbikes, televisions and other consumer goods they spent money on won't help feed them in tougher times.
11/18/2008
BANLUNG, Cambodia -- A few years ago, this dusty frontier town was little more than a junction of dirt tracks in the jungle, with a handful of wooden buildings and beat-up old cars. Then global crop prices shot up, and Banlung became a boomtown.
Farmers swarmed in and cleared land to plant rubber, soybeans and other cash crops. In similar ways, small farmers in many other countries, such as Bangladesh, Russia, Ukraine and Nigeria, ramped up production to profit from the dramatic rise in the prices of agricultural products in recent years.
Now, however, the future of the expansion in Banlung and elsewhere is in doubt as grain prices have plummeted because of the global economic slowdown. With investors pulling money out of commodities and growth slowing across the world, corn prices are down about 50% since the end of June, while wheat is down about 30%.
A slowdown in new farmland development could hinder efforts to ease the global food shortage. Earlier this year, those shortages triggered riots from Haiti to Egypt to Pakistan and raised fears of permanently higher prices for basic foodstuffs. Some agricultural analysts worry that when the world economy recovers, the food crisis will return in full force.
New plantings in places like Banlung remain a tiny part of global output, which is dominated by agricultural production in big countries including the U.S., Brazil, Canada, Australia and China. But they helped make this year likely the highest ever for grain production globally.
The Food and Agriculture Organization of the United Nations warned in a report this month that "troubles loom ahead" as farmers cut back on production to gird against lower prices, potentially leaving the world short when demand springs back.
Dan Basse at AgResource Co., a research firm in Chicago, forecasts drops in global output of some key crops next year as farmers grow more cautious. Mr. Basse sees a nearly 3% decline in corn production and a decline of more than 4% in wheat output.
Already there are signs the momentum in Banlung is fading. Although many Cambodian farmers haven't yet decided how much to grow next year, land transactions in the area have slowed considerably, suggesting a decline in demand for property to create more farms and the land speculation that went with it.
"You used to sit in the breakfast shop and just see the deals happening," says Jan Noorlander, a local representative for CARE, the international aid agency, in Banlung. "Now people are sitting back," he says. "People are pretty wary right now."
That's a sharp reversal from the gold-rush like boom that hit Banlung a few years ago. It wasn't pretty: The new investment in agriculture brought allegations of land theft and illegal forest-clearing. Indigenous hill tribes that once practiced subsistence farming sold off communal land to buy cars, stereos and conveniences.
Meanwhile, in Bangladesh and other parts of Asia, farmers added a second or third rice crop beyond what they would normally grow. In Russia, farmers added an additional 2.6 million hectares of grains, while other countries that previously produced well below their potential, including Ukraine, Nigeria, and parts of Eastern Europe, also boosted agricultural output.
In all, global cereals production is expected to hit a record high of roughly 2.2 billion metric tons this year, an increase of more than 5% from a year earlier, the FAO says. That was mostly from traditional agricultural powerhouses like the U.S. but some newer frontiers helped.
For Cambodia, agricultural investment promised a return to its glory days 40 years earlier as an important regional producer of rice, rubber and other crops. Then the Southeast Asian nation descended into decades of civil war, including a period in the late 1970s when it was controlled by the genocidal Khmer Rouge group.
Cambodia has since stabilized. Private traders have expanded their reach into the remotest parts of the country to encourage small farmers to plant more, and foreign investment has followed. Kuwait recently agreed to give Cambodia more than $500 million in loans to boost farm production and improve roads to transport crops, among other things.
As a result, Cambodia has emerged as a notable exporter of rice for the first time since the 1960s. This year it is expected to produce 6.7 million tons or more of rice, compared to 4 million or less a decade ago, giving it a surplus of about 2.5 million tons. Government ministers have started referring to rice as "white gold."
"I never thought I'd have the money to buy a piece of land," says Mey Pov, 44 years old. He moved to Banlung from a nearby province a few years ago and got a job managing a new 50-acre farm with rubber trees and soybeans for an outside investor. He then took his income and bought his own five-acre farm, with hopes of becoming an even bigger agricultural producer someday.
Farmers are disappointed by falling prices, says Yang Saing Koma, a Cambodian agronomist who runs CEDAC, an agricultural development organization that works in villages teaching farmers how to boost yields. However, in the long run, "I still think there's potential" to produce more crops in Cambodia, he adds.
Cambodia is using about three million hectares for farming, less than half its estimated 6.5 million hectares of fertile land. It has made minimal investments in irrigation, grain storage and market training for farmers. Analysts think that with more work -- and sustained investment -- Cambodia can double its rice production.
Banlung is among the most promising new farming areas of the country. Bombed heavily by U.S. forces during the Vietnam War, Banlung was largely cut off from the world by bad roads and thick malarial jungle. Most of the residents -- a mixture of ethnic hill tribes that spoke their own dialects and rarely handled money -- eked out a living farming small plots and gathering nuts and wild fruits in the forest.
That began to change this decade as roads improved and global prices for soybeans, rubber, rice and other crops skyrocketed. Demand in Vietnam, a 70 kilometer trek away, accelerated. The amount of land in the area around Banlung devoted to cash crops shot up around 50% in the past several years, local officials say, and the area's population, which includes people living in communities in the forest outside the town, swelled to more than 133,000, from roughly 90,000 a decade ago.
The town market -- where vendors still sell cat skins for use in tribal medicines -- became jammed with traders. At the Acleda Bank, where customers come and go in bare feet, managers say they recently had as much as $3 million on deposit, mainly from land sales and farming activities over the past two years.
Now that crop prices are falling, economists say some farmers will have no choice but to curtail expansion. And the motorbikes, televisions and other consumer goods they spent money on won't help feed them in tougher times.
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