Chips are up with new cassava scheme

Sanguan Wongse Industries Co, a major producer and exporter of tapioca starch, is confident that government efforts to promote an integrated tapioca industry in Nakhon Ratchasima will ensure manufacturers a steady supply of cassava roots.

A programme that begins today features co-operation between the Agriculture, Energy and Industry ministries, manufacturers and planters in promoting the province as a main cassava source for the animal feed and alternative energy sectors.

A guaranteed steady supply will enable the company to maintain annual production at 250,000 tonnes, said Thidarat Tantiwong, the managing director.

"More importantly, stable production and reasonable prices will prevent our buyers from shifting to other kinds of flour," she said.

The competitiveness of Thai tapioca flour took a big hit this month, when the price soared to US$600 a tonne, prompting users to turn to other ingredients, especially corn flour, which is cheaper at about $500 a tonne.

"The paper and sweetener sectors have opted to use tapioca flour because of its low price, but if our products are more expensive, users will choose other products," said Ms Thidarat.

The price of tapioca starch declined somewhat last week, but production of field corn is expected to increase, pulling down the price of that crop. This year's cassava output will also suffer from drought and mealy bug infestation.

A local industry study forecasts the coming season's output at only 21 million tonnes, down 4.55% from the previous crop and 30% from the 2008-09 season.

"Falling output is expected to intensify competition for supply among manufacturers for tapioca products _ starch, pellets and chips," said Ms Thidarat.

About half of last year's total crop of 22 million tonnes of cassava was acquired by the starch industry and the rest used in chips and pellets for animal feed. This year's shortage will be exacerbated by strong demand from a new major user, ethanol plants.

Of the 30 million tonnes of cassava roots produced in 2008-09, only 2.42 million went to ethanol plants, and the volume will be much lower this year. The price of roots soared to more than 3 baht a kilogramme in recent months, dropping back to 2.20 last week as the new harvest began.

To obtain more of the supply, Ms Thidarat said tapioca flour producers would offer a higher price to planters, 2.50 baht. The Northeast is a major hub for the flour industry, home to 80 of the country's 148 factories that together shipped 2.5 million tonnes of native and modified starch last year.

The Agriculture Ministry said the integrated industry programme would ensure satisfactory prices for farmers under the contract-farming model. Besides a guaranteed price, the estimated 1,000 planters participating will receive assistance including dissemination of high-productivity strains and management training.

"This is a long-term project aimed at promoting a sustainable cassava industry in which planters can earn sufficient income and manufacturers can conduct their business," said Ms Thidarat.

The programme will turn Nakhon Ratchasima, Thailand's biggest cassava production base with about 25% of output, into a prototype supply destination for the food and fuel industries.

It will also attract new investment from Sanguan Wongse in the form of a 200-million-baht biomass power plant that uses waste from the flour production process.