Despite Cambodia’s cashew being among the best in the world, it has not been able to adequately cash in on its unique selling proposition. With only 42 processing plants spread across the country, only ten percent of its crop is processed here; 90 percent of the raw cashew is sent to Vietnam, where it is processed, packed and sold at a much higher price to other global markets. Unless the government comes up with a decision to have its own processing plants, it is most unlikely that Cambodia will ever attain the top slot as the global cashew producer Prime Minister Hun Manet included cashews among the priority crops when he presided over the closing ceremony of the annual meeting of the Ministry of Agriculture, Forestry and Fisheries late last month. The Royal Government of Cambodia has announced its grand ambition of knocking the world’s leading cashew producer, the West African nation of Ivory Coast off its lofty pedestal. Silot Uon, President of Cashew nut Association of Cambodia (CAC) emphasized the importance of developing new cashew varieties that would be resistant to climate change, one of the biggest threats to the cashew industry in the Kingdom today. Other priorities Silot listed out for the industry included establishing community warehouses to ensure a year-round supply of raw cashew nuts (RCN) for locals, increasing the number of processing facilities and transforming the entire province of Kampong Thom into an industrial zone solely for cashew production and processing. Despite being ranked among the world’s top ten cashew nut producers, Cambodia barely manages to process 10 percent of its own crop. Over 90 percent, the major proportion of the crop is sent to Vietnam as exports, where it is processed and sold for higher prices to other global markets. Cambodia exports cashew nuts to China, Japan, Laos, the United Arab Emirates among other countries. HCST Cambodia’s aspirations for world leadership in the cashew industry received a huge boost with the World Cashew Conference in Siem Reap from February 1 to 3 this year. Needless to say, the achievement would spell unprecedented opportunities for agribusiness and job creation. Silver lining In 2023, raw cashew nut exports by the Kingdom touched a revenue of $837 million as per the Cashew Nut Association of Cambodia (CAC) report. This marked an annual drop of 16.9 percent. The report also revealed a total of 656,000 tonnes in exports, which registered an annual decline of 7.6 percent in volume. Vietnam received around 618,000 tonnes in exports amounting to 94.2 percent. However, Silot took heart from the news of the drop in exports, explaining that it meant that there was a corresponding increase in the processing facilities. The association estimates approximately 700,000 hectares of land in the Kingdom is currently under cashew cultivation, comprising 10 provinces. A report from the Ministry of Agriculture, Forestry and Fisheries (MoAFF) put the total exports of raw cashew nuts at 425,977 tonnes last year, a decline of 9.9 percent annually. The current price of dried cashews in Cambodia is in the vicinity of $1,700 to $1,900 per tonne according to Touch Bun Hour, Secretary of State at the MoAFF. As per the ministry’s estimates, Cambodia has a total of approximately 2.38 million hectares of land suitable for cashew crops. Apart from Vietnam, the biggest exporters of Cambodia’s cashew nuts include China, Japan, Laos and the United Arab Emirates. Unofficial data compiled by the CAC suggests 652,538 hectares currently account for cashew plantations spanning 22 provinces with Kampong Thom leading with 144,089 hectares. Mondulkiri Province with 8,572 hectares rounds off the top ten. Chakrya Muth (third left), Founder and Chairwoman of Handcrafted Cashew Nuts Stung Treng takes part in the Business Expo and Trade in Long Beach, California, United States in November 2023. HCST Last year the Cambodian government came out with the National Cashew Policy 2022-2027 which has three primary aims in realizing the government’s drive to propel Cambodia to the forefront of cashew production and exports. The first is to step up production, second, enhance quality and thirdly widen the market in both the national and international arenas. Although relations with the market players in Vietnam have been favourable to Cambodia, infrastructure inadequacy led to instability in RCN prices. Buyers in Vietnam were purchasing fresh nuts in bulk, drying them and storing them in warehouses till prices improved and fetched handsome profits. Cambodia has a kernel market that is miniscule with only 5 percent being processed domestically. Nevertheless, the CAC has been making aggressive efforts to push its processed products on the international stage with participation in global events like the Cambodia Business Expo and Trade Conference in California in the United States of America in November 2023. Earlier in October 2023, CAC displayed their wares at a prestigious South Korean food expo thanks to the Ministry of Commerce. The event, 18th in the series, was hosted by the Gwangju Tourism Organisation in Gwangju City. In the age of digital technology, CAC has been making commendable efforts to ensure its all-important social media presence. It runs a Telegram group around the clock and all through the week to address the problems of farmers. They merely have to click a photo and post in the group for solutions to be offered. In case of more serious problems, there may even be an outreach programme. Graph shows exports of raw cashew nuts for the last five years. CAC Entrepreneurs woes “We have a long-term plan to provide training farmers to get more production yield and transform them from normal farmers into agriculture business farmers and increase value-added services,” said Suy Kokthean, Vice President, Cashew Nut Association of Cambodia to Khmer Times. He said they also planned to conduct research and develop new cashew varieties that are resistant to climate change. He intends to help processors adhere to food safety specifications and develop new products with better packaging and marketing. His objective is also to build up more agriculture cooperatives (AC) and engage them along with the private sectors to work together. Another goal is to establish community warehouses to ensure the availability of RCNs the whole year round in Cambodia. Another pressing need is to increase the number of processing plants for Cambodia to gain more value additions from cashew nuts. Kampong Thom province is being turned into a cashew nut industrial zone for both production and processing. Cambodia’s RCN gained international recognition in recent years when the CAC participated in the World Cashew Conference in Dubai and Cashew Rendezvous in Vietnam. Cashew nut farmers are granted tax incentives in both farmland and production income taxes. During a recent dialogue with the private sectors, the government announced tax incentives to cashew processors and traders for two more years, he added. Dith Tina (centre) Minister of Agriculture, Forestry and Fisheries with Handcrafted Cashew Nuts Stung Treng staff. HCST Also, the Council for the Development of Cambodia (CDC) announced that anyone investing in a processing plant in the Kingdom would be eligible for a qualified investment project (QIP) granting tax exemption for import and export as well as tax on profits for a nine-year period. The new investment law and other government policies have also ensured additional incentives for the industry. Efforts of the CAC are underway in several areas to improve the quality of cashew nuts in the world. The association provides a variety of training programmes to cashew farmers year after year. The training includes technical support, farm visits and demo farms. Apart from technical support and training, CAC is also offering marketing support to cashew traders. One of the important objectives is attracting cooperatives to invest in Cambodia. The association is working with international partners to provide support to both farmers and processors. Another key role the association plays is facilitating and coordinating the farming contract between the Singaporean company CSNC Agriculture with farmers, agriculture cooperatives and small producers. There has been a resultant spurt in factories being set up in Kampong Thom Province like Top Planning Japan Co Ltd, CSNC Agriculture, among others. Inadequate capital Entrepreneur Phal Phearom founder of Cashew Village bemoans the lack of adequate working capital as the primary problem facing cashew producers in Cambodia. He mentioned two banks that have been designated by the government but he is not very encouraged by the amount of support that is forthcoming from them. As a member of Cambodia’s cashew federation, he said he has to work very hard to overcome the obstacles. According to him, while expanding his factory, he had to apply for standard certification with absolutely no help from the government. He cited capital as the main impediment he is facing to increase cashew production for export purposes. Takayuki Imahashi has defined his goals for the year 2024 in expanding his factory to hit a production volume of 3,000 tonnes a year. By 2025-26, he aims to reach a volume of 20,000 tonnes annually. For 2024, Takayuki has set his targets for 100 tonnes to Europe and Japan each and 200 tonnes to China. The business planning officer for Mirarth Agro Tech Co Ltd regrets the lack of processing facilities not just for cashew nuts but all food items. He also decried the extremely poor management skills of food processing and sanitation. There are also no skilled workers or experienced entrepreneurs. Takayuki pointed out however that the Department of Agro-Industry (MAFF) has good quality control training with good criteria. They cooperate with both the international NGOs as well as private companies and act very professionally. While the Ministry of Commerce has a cashew policy, its focus is more on production rather than processing. He felt the need for some sort of an industrial policy on cashew. Another requirement he feels necessary is to make the working group cooperate with the government and private companies, particularly those with expertise in marketing, technology and finance. Organic markets “Kamya’s long-term objective is to invest in cashew processing and become a main exporter of Cambodian cashew products. Our focus will remain on high-end organic markets,” said Andreas Groetschel, Founder & Owner, Kamya AgriTrade, the first and only company to export a full container of certified organic cashew kernels. He explained that to increase volumes and maintain quality there will need to be close cooperation with organic producers, smallholders and cooperatives. Groetschel intends to achieve this by strengthening long-term contracts and profit sharing. “There are many obstacles to quickly increase volumes, in particular in the organic sector. But we believe that the quality of our Cambodian cashews is convincing our international buyers and the final customers,” he added. Groetschel feels that the government was a bit slow in recognizing the potential of the cashew sector. He recalled a project in which Vietnam would pump in $50 million to boost RCN exports to Vietnam. While it was good for the Vietnamese processors, it had a negative impact on the local industry in Cambodia. Even now Vietnamese traders enjoy better access to funding, an integral part of cashew value chains. Due to a general lack of awareness about Cambodian cashews, international buyers are largely in the dark about the huge volumes being produced in Cambodia. However, he happily points out that it is changing rapidly especially with the World Cashew Conference in Siem Reap presenting a great opportunity for the Cambodian cashew producers and processors to connect with the outside world. He lauded the CAC and the government for this great achievement in bringing this event to the country this year. “In theory, there are now ‘cheaper’ loans for SMEs, provided by the SME Bank for investments in cashew processing. I have not heard from anybody being approved for such a loan. I might have of course talked to the wrong people!” he said. There is also a problem of efficiency as margins in cashew processing can be very small. Large amounts are needed apart from good machinery and trained people. Vietnam still has an advantage here, however, Cambodia is definitely catching up. CAC efforts hailed “I believe there are factors like lack of skills and knowledge, funds, market access and importantly encouragement and support that led Cambodian RCNs not being processed in the country,” said Chakrya Muth, Founder and Chairwoman, Handcrafted Cashew Nuts Stung Treng (HCST). She was hopeful that the government’s cashew policy would become a game-changer for the scenario. She also lauded the CAC’s commendable efforts with comprehensive training programmes like smart agriculture, climate-resilient practices and processing techniques and market network. She heaped praise on CAC for trying to lobby the government to provide funds for processors. The reason RCNs are not being manufactured and processed in Cambodia is very simple, the number of manufacturers here is very limited, said Brian Reingold, marketing strategist, Aidan’s Cashew Butter. The government of Cambodia is making great efforts to increase production in the cashew sector with incentives to help both the farmers and manufacturers. The CAC is working with several different groups to increase not just the production of cashews but also the number of manufacturing facilities within the country. The pandemic may have set it back but only temporarily, and it has certainly rebounded in the past year. Conditions are favourable for the industry with both the climate and the government’s push to incentivize cashew growth. The persistent problem of inadequate working capital has not been helped by unfavourable loan conditions by local banks for processors, despite attractive interest rates. CAC itself is a non-profit, independent voluntary organization barely meeting its administrative costs with its meagre budget. But in terms of its achievements, CAC has compiled a very impressive repertoire from data collection and workshops to loan assistance. Despite major strides towards seizing the top cashew production crown, Cambodia’s cashew industry is still handicapped by varying challenges. Growing inflation in local commodities has resulted in low competitiveness in foreign markets. Other problems persist like shortage of skilled labour, inability to keep up with technology advancements, soaring costs of logistics and inadequate tax incentives.