Draft_Preliminary report on Organic Rice Post harvest

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1 | Page Lao People’s Democratic Republic Peace Independence Democracy Unity Prosperity Preliminary Report on Organic Rice Post Harvest Value Chain in Sangthong District, Vientiane Capital, Lao PDR Written by Phetsoulaphonh N. Choulatida, Organic Rice Post harvest Researcher in IRRI and UPLB Under supervision of Prof. Dr. Rowena DT. Baconguis, Agricultural Extension Education specialist. College of Public Affairs, University of Philippines, Los Baños (UPLB). Dr. Martin Gummert, Senior scientist-Post harvest Development in IRRI- Philippines. Grain Quality, Nutrition, and Postharvest Center (GQNPC) September 2010

Transcript of Draft_Preliminary report on Organic Rice Post harvest

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Lao People’s Democratic Republic

Peace Independence Democracy Unity Prosperity

Preliminary Report on

Organic Rice Post Harvest Value Chain in Sangthong District, Vientiane Capital, Lao PDR

Written by Phetsoulaphonh N. Choulatida,

Organic Rice Post harvest Researcher in IRRI and UPLB

Under supervision of Prof. Dr. Rowena DT. Baconguis, Agricultural Extension Education specialist.

College of Public Affairs, University of Philippines, Los Baños (UPLB).

Dr. Martin Gummert, Senior scientist-Post harvest Development in IRRI-Philippines. Grain Quality, Nutrition, and Postharvest Center (GQNPC)

September 2010

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Acknowledgements

This report was written by Mr. Phetsoulaphonh N. Choulatida the graduate student from University of Philippines Los Baños in conjunction with IRRI-Philippines. It is the outcome of 45 days of administering research in Lao PDR especially organic rice farming zone of Sangthong district which cover ten villages of the Promotion of Organic Rice project (ProRice).

The mission is a part of masteral degree thesis of mine to support the organic rice post harvest value chain development in Lao PDR and ensure that the outcome from this research will be applicable by all stakeholders who are working on rice commodity chain namely PROFIL/ProRice and EMRIP.

I myself wish to acknowledge the assistances provided by Mrs. Khamtay VONGXAYA, National Agriculture and Forestry Institute (NAFRI), Mr. Phetmalavone VILAYPHUMY, Student from Faculty of Agriculture, Miss. May INTHALANGSY, Provincial Agriculture and Forestry Extension Service (PAFES), Mr. Sythuan SALAVONGSY, District Agriculture and Forestry Extension Service (DAFES), and also I am very thankful to Dr. Rowena DT. Baconguis from UPLB and Dr. Martin Gummert from IRRI for high valuable suggestions and strongly supports my research mission.

The author personally gives an overwhelming thanks to Sir Andrew Wilson, Director of EMRIP and Sir Bouthsakone INTHALANGSEE, the PROFIL project manager for financing my team (enumerators) in Laos and advisor from UPLB. September 15, 2010

Phetsoulaphonh N. Choulatida ADB Scholar, MS Research on organic rice

Philippines: +639165758012

Lao PDR: +8562055641055

[email protected]

www.laosorganic.com

©2011, All rights Reserved

ເພັດສຸລະພົນ ຈຸລະຖິດາ

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Table of content Acronyms and abbreviations page 1. Introduction………………………………………………………………… 5 2. Objectives………………………………………………………………….. 5 3. Duration……………………………………………………………………. 6 4. Methodologies……………………………………………………………... 6 5. Expected results…………………………………………………………... 6 6. Research outcomes………………………………………………………. 6 6.1. Overview and socio-economic of Sangthong district……………….. 6 6.2. History and status of ProRice in Sangthong…………………………. 7 6.3. Organic rice post harvest supply chain in Lao PDR………………… 8 6.3.1. Certification and traceability system………………………………... 9 6.3.2. Organic rice farmer’s post harvest management…………………. 9 6.3.3. Village collectors and purchasing system………………………….. 11 6.3.4. Green Field Miller Group (GFMG)………………………………….. 13 6.3.4.1. SomPhone rice mill………………………………………………… 14 6.3.4.2. SomHong rice mill………………………………………………….. 15 6.3.4.3. Southath rice mill…………………………………………………… 17 6.3.4.4. DaoPaKay rice mill…………………………………………………. 17 6.3.5. Rice and food processing manufacturers………………………….. 18 6.3.5.1. State Food Stuff Enterprise (SFSE)……………………………… 18 6.3.5.2. Lao Farmer’ Products (LFP)………………………………………. 19 6.4. Grains quality payment and its calculation…………………………… 20 6.5. Revenues, costs and profit per unit in value chain of 1 kilogram of glutinous rice………………………………………………………………….

24

6.6. Findings………………………………………………………………….. 24 6.7. Recommendations for future post harvest development…………… 25 6.8. Conclusion………………………………………………………………. 26 References……………………………………………………………………. 27

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Acronyms and Abbreviations ACT Agriculture Certification of Thailand CADC Clean Agriculture and Development Center DAFES District Agriculture and Forestry Extension Service DoA Department of Agriculture EMRIP Enhancing Milled Rice Production in Lao PDR EU European Union GFMG Green Field Miller Group GQNPC Grain Quality, Nutrition and Postharvest Center FAO Food and Agriculture Organization ICS Internal Control System ICS-SU Internal Control System-Support Unit IRRI International Rice Research Institute Lao PDR Lao People’s Democratic Republic LCB Lao Certification Body LFP Lao Farmer’s Products LWU Lao Women Union MC Moisture Content NAFRI National Agriculture and Forestry Research Institute NGOs Non Government Organizations ODOP One District One Product PAFES Provincial Agriculture and Forestry Extension Service PMCA Participatory Market Chain Approach PROFIL Promotion of Organic Agriculture and Marketing in Lao PDR ProRice Promotion of Organic Rice SFSE State Food Stuff Enterprise co.,ltd SNV Netherlands Development Organization UPLB University of Philippines Los Baños

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1. Introduction

Rice is the single most important agriculture product of Lao PDR. Currently, the country has an existing certification method for organic rice farmers. There had been efforts in the past to explore foreign markets in Switzerland through Fair-Trade. Despite the organic production methods, the farmers are unable to sell in organic market of Switzerland because of the failure to meet the international quality standards demanded by foreign markets.

As a result of this, organic rice farmers are deprived of the opportunity to participate in the organic market which pays higher than the ordinary rice market.

However, both the farmers and the millers do not understand the necessity of adopting good post harvest practices. This study explores in detail the post harvest system by describing the processes and measuring the parameters for quality organic rice production attributed to post harvest namely, moisture content and traceability, milling recovery, head rice recovery and discoloration to provide stakeholders an understanding of losses due to poor post harvest practices.

The grain post-harvest has long been traditionally practiced by Lao farmers. Nowadays, the usual activities after sickling of the paddy are: sun drying, threshing with mechanized thresher, storing in a granary, and milling with husker-polisher. All of these activities affect the quality of white rice after milling.

The rice production is not only for self-consumption, but intended increasingly more to commercial purpose. In consequence, there are more requirements for higher quality of white rice grains to meet customers’ demand.

Therefore, initial survey will be conducted at organic zone with 197 farmers, four Green Field Millers, and two food manufacturers like Lao Farmer’s Product and another is State Food Stuff Enterprise in order to understand the process flow of organic paddy rice from farmers to processors. 2. Objectives

This study is aimed to understand the present organic rice postharvest performance and the situation of processed rice quality and traceability of organic certified rice. To arrive at this objective, all stages of the post-harvest will assessed to determine the most important factors influencing milling quality: whether drying, threshing, storage, milling, sorting, packaging…

It has been so far identified that drying would be the most determinant factor for grain milling quality. Regarding the traditional drying practice, there are also plenty of questions being raised: what is the current technique of drying practiced by farmers of ten target villages? How does this practice affect the milling quality and payment quality mechanism…? Helping farmers to improve rice milling quality will help them to meet customers’ requirements.

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This will increase marketability of the product as well as better income of the farmers. 3. Duration Research was conducted in Laos from April 22, 2010 to June 11, 2010. 4. Methodologies

The study was conducted in Sangthong district, Vientiane Capital, Lao PDR. Sangthong District is one of the 47 poorest districts in Laos and lays North-west of Vientiane Capital, around 55 Kilometers from downtown Vientiane. The study surveyed with covering in the ten villages namely, Hai Tai, NasaoNang, Pakthep, Natarn, Nalard, Natiem, Namieng, TaoHai, Nahoipang, and Hai Nua. And other processors in Vientiane downtown there are four Green Field Millers, 10 village marketers, one Lao Farmer Product manufacturer, State Food Stuff Enterprise, and Lanxang Development & Service Import-Export State Company.

Surveys were conducted with three sets of questionnaires one for organic certified farmers, one for village marketers, while millers and processors have the same questionnaire due to rice processing can be done some processing part by millers and another by companies or exporter agencies.

Each questionnaire was tested in a village that is not target villages to ensure all of issues what we want are able to answer by interviewees and enumerators facilitate confidently.

Representatives of all stakeholders in the rice supply chain were interviewed, involved in discussions, visited, and samples were taken for data analyzing to quantify statements about the quality of their rice.

5. Expected results

The study is expected to result in the data is crucial for my master’s thesis research as required by graduate school on milling quality improvement of organic rice.

In addition, full thesis report will be available on August, 2011 after editing by all committee members. 6. Research outcome

6.1. Overview and socio-economic of Sangthong district: The Sangthong district is under governance system of Vientiane municipality, it is the one of 47 poorest districts in Lao PDR. The total land area covered 80,000 hectares therein 210 hectares of roads, 38,673 hectares of agricultural cultivation area, and 41,117 hectares of forestry. There is 55 Kilometers of the distance from Vientiane municipality. The Sangthong has five Kumban village clusters which consists of 17 villages where located along Mekong River and another side attached to National forest protected area that can be a good buffer zone for organic cultivation area. A custom checkpoint was established and located between Kokhae village and Ampher Sangkhom district, Kingdom of Thailand.

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Population is totaling of 27,683 people; 13,628 females and 5,777

families. It has always been so people are industrial in agriculture production; their major occupation is crops cultivation (rice is dominantly among of farmers) and livestock, small scale of business, and handicraft as sub occupation respectively.

The Sangthong district has 6,900 hectares of total rainfed rice growing

area. In 2007 – 2008, consequence of climate change 454.4 hectares were submerged by flooding disaster and 6,445.6 hectares were saved at that time. Total rice yield is 22,793 tons equivalent to and average yield of 3.79 tons per hectare. Besides, there are 3,510 hectares of irrigated rice growing area, total yield is 2,035 tons or 4.2 tons per hectares average yield. Most of the people popularize raising animals; there are 3,273 heads of water buffaloes, 16,431 cattle, 2,066 goats, 4, 072 pigs, and 110,818 poultries (PAFES, 2009).

6.2. History and Status of the ProRice in Sangthong: Rice is staple food that Lao people consume each meal. In average, one person enjoys eating rice 170 Kgs per year (Schiller, 2006) and glutinous rice is real Lao eating experience and seen as a symbol of country. Initially, six provinces in Lao PDR were survey from North to South for project site selection in accordance with organic rice criteria such as:- site should be a rainfed rice area, it is still retaining of bio-diversity, plenty of livestock (water buffaloes, and cattle), it has natural buffer (Mountains, river), location has high number of poor families and under development zone. By the end of project site study, Sangthong was selected because of infrastructure is limited, road is poor access during raining season. In addition, it is such an original place in appearance of an aromatic glutinous rice namely HomSangthong or locally name called TiaKonDam (According to interviewing of Mr. Somsack Kethongsa, the former ProRice project manager.).

In 2006, ProRice was launched and implemented activities to help small-scale farmers producing rice to transfer into organic farming. The project has applied a participatory market chain approach (PMCA) with the objective to create the conditions for farmers being able to access the premium price.

By the same year, 123 potential rice varieties were evaluated for seed

selection in Napok station-Rice and Cash crop Research Center. ProRice aimed to gain four characteristics from seed multiplication like long grain aromatic glutinous rice, oval aromatic glutinous rice, purplish-blue rice, and long grain aromatic non-glutinous rice. In 2007, 73 rice varieties were selected, out of 58 aromatic glutinous rice, out of six aromatic non-glutinous rice, and out of nine purplish-blue rice varieties.

In Sangthong, there are three different types of rice farming systems:-

1. Rainfed rice cultivation, farmers are preferable to grow in the lowland

area. Seed bed start from June of each year but not away it depends on rain comes early or lately, transplanting is done in July till August, and harvesting in October till November. Therefore, Organic Rice

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farming favours this type of rice growing because they can avoid contamination from water sources.

2. Upland rice cultivation, farmers grow in the sloped land, no need for seedbed preparation but direct seed dropping is required in July and harvesting in October in every year.

3. Irrigated rice cultivation, seedbed is done in November, transplanting in

December, and harvesting in April.

6.3. Organic Rice Post Harvest Supply Chain in Lao PDR: In helping farmers to gain better incomes from rice production, the promotion of organic rice production is strongly recommended by local government in Sangthong district in order to support one district one product (ODOP). For an integrating the rice farmer into markets or the value chain, it is important to upgrading his understanding whole process as a chain actor. They will build long term alliances with buyers and then farmers become crop specialists with a clear market orientation.

Source: survey, 2010

The organic rice value chain is a chain of activities and stakeholders that begins with the production of rice through organic production technologies, following specific organic standards for production, processing and handling. Thereby added value is produced and maintained within the chain. This favors in particular the farmer’s level as the farmer is linked to the market through this closed chain. They can be short and long value chains,

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depending on the stakeholders involved, but more importantly, the distance of the market to the producer.

Key actors in organic rice post harvest supply chain consists of five chain actors likely farmers, village collectors, rice millers, food processors, and consumers including domestic markets. For foreign markets, exporters are additional stakeholders. As lined out in party decree no. 09/PB.CP in 2004 on establishment of village and village development cluster. Since 2006 till now, the project was successful in organizing an organic rice growers group which consists of 10 subgroups/villages; there are 574 members, village collectors have 10 groups, the Green Field Miller Group has four rice mills as members, the food processing group has two companies, domestic consumers have nine groups (wet markets, silk handicraft, garments, schools, government agencies, institutes, beer company, middle men, and people) and potential foreign consumers are living in five (France, Belgium, Switzerland, Germany, and Vietnam).

6.3.1. Certification and Traceability system: Certification is the heart of organic farming practice; Standard Division is a new establishment in Department of Agriculture which it has an equivalent function to CADC. ICS-SI is under CADC provides a ICS training package to village ICS and assists farmers, millers, food processors in preparing certification application and document record as a requirement of LCB. But LCB will inspect traceability system of village ICS, randomly inspect farmers, millers, processors and definitely issue organic certification to clients who comply all findings of inspectors and follow the organic standard. Rice post harvest facilities have to be inspected once year aiming to control whether processing facilities are operated according to organic standard. By the year of 2009, of the Green Field Miller group only Somesack was certified as organic rice miller. SomePhone rice mill was not certified organic, but it has the potential to produce organic because he operated under a subcontract with certified food processors and State Food Stuff Enterprise was also certified organic processor. Lao Farmer Product has planned to get certification in 2010. There are 395 rice growers and 270 hectares of rice farm area certified organic (ACT, 2008). As reported by Mr. Bouthskone Inthalangsee, PROFIL manager, 24 farmers growing purplish-blue rice have been certified by ACT for EU standard and 250 farmers are also certified by LCB during the crop year 2009. The inspection constituted a significantly higher cost, project subsidies for inspection cost for farmers and millers during project life cycle and market are not established yet.

6.3.2. Organic Rice Farmer’s post harvest management: Getting the best paddy quality is main objective of rice mills and food processors. So, rice growers should be aware of how production affects grain quality and what factors of rice farming system affect quality including seed varieties, land preparation, weed control, pest management, and nutrition supply that affect to grain filling. Harvest and post harvest techniques are not considered important among Lao producers, average post harvest loses in rice farming range

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between 13 to 15 percent of total rice production (FAO, 1995). In case of Sangthong, it is hard to avoid high percentage of postharvest loses due to poor post harvest management practices but it might take time to develop techniques, and policy on quality payment mechanism to boost farmers care more postharvest development that is one option. Looking back to current postharvest practices of organic rice growers in Sangthong district, three main varieties are grown commercial namely HomSangthong glutinous rice, HomSavanh non-glutinous rice, and Purplish-blue rice (those are medium duration varieties) but HomNangNuan non-glutonous rice is long duration variety, these are recognized and submitted for registration in the National Technology and Science Institute as a variety suitable for organic production. Understanding duration of rice varieties may help farmers be able to plan exact date of harvest; manual harvest is usual practical method in Sangthong. In current rice farming, farmers start harvesting rice when maturity can be visible in the panicles and 45% of the leaves become yellowish. Drainage will be done 15-20 days before anticipated harvest date and then maturity is increasing to 75% because of limited family labor cutting the crop often starts when the moisture content is still higher than 22% (recommendation in the harvest standard) If there is sufficient labor harvesting is done at 85%-90% or 22% moisture content. If the crop is too much dried standing in field, the stickiness decreases gradually, it causes high percent of broken rice (interviewed Mr. Bounpheng, Haitai village technician and chair of farmer group).

Most of the harvesting is done in November and December; it depends on varieties and planting time. The weather during harvesting stage is foggy at 5:00-7:00 am and it is windy in the late afternoon around 15:00 – 16:00 pm. After cutting, farmers leaved the cut panicles on the top of straws in the field for the purpose of sun drying. In case of showers or rain, farmers make a small bundle and tilt panicles to the ground in angle of 30 degree to reduce rewetting of paddy; it takes 4-5 days of sun drying in field. If there is no raining at that time, cut panicles are spread on the field and it takes 2-3 days for sun drying.

In the meantime, grains in the field reach harvest moisture at 22%, and

many individual grains exposed to sun may dry below 15% during the day but in the night time is high humid grains reabsorbed moisture reaching 15%-45% (Kunze, 2008). Paddy quality is reducing by fissuring due to rapid drying in heat of the sun and rewetting of paddy grains at the night, dawn or when it is foggy.

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After an average of 2-4 days of sun drying in field, the cut panicles are tied and removed immediately for pilling on dried ground on an elevated site beside rice field, the purpose of piling is to wait for machinery thresher. Labor requirement for manual threshing is one month per hectare using two family laborers. Sangthong farmers started using machinery thresher since 1998. The mechanic threshing service providers are located in Sangthong district, they are one chain actor in the organic rice value chain, and a post harvest facility inspected by village ICS before providing services to organic farmers. Before threshing the organic rice paddy, they have to clean threshing machine using three sacks of conventionally grown paddy, the rests are considered organic. For the threshing fees, for every 10 sacks, one sack is paid to the mechanic threshing service provider (1 sack of poly propylene is equivalent of 60 kg and 1 jute sack equals 80 kg). Transportation of the paddy sacks to the granary is included in the services of thresher provider.

6.3.3. Village collectors and purchasing system: It is hard to measure the total amount of paddy sold from farmers because farmers themselves sell paddy gradually when they need money to pay back loan bank, support children education, health treatment, other basic needs in their own family, or because farmers want to sell in higher price during July to October that is the right time they take into consideration. Village collectors are formed by ProRice in cooperation with SNV in order to be representatives of farmers for bargaining paddy price with rice mills and other buyers. The village collector is on the committee in each village’s organic farmer group and s(he) is the officer who is in charge of marketing in the rice value chain. They are functioning very well since 2006 until now that we perceived success in when premium price was paid to farmers in 2008. After harvesting, most farmers urgently need money to return loans bank. A big quantity of organic paddy is therefore sold during December to February every early in the year. Village collectors play the role to contact buyers like GFMG, SFSE, LFP engaged in organic markets. Unfortunately, paddy price at that time is quite low. The purchasing system follows organic standards; village collectors check the total yield of certified farmers in closed collaboration with ICS to ensure organic purity. Grain quality checking is done

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ahead before distributing organic labeled bags (poly propylene) to certified farmers. Picture below is the purchasing system that is done by committee. Fortunately, in this year’s crop farmers produced well dried paddy and they did not need to use the flat-bad dryers that project installed in 2008 at Natiem and Pialath. They were not used any more because it did not rain or shower during the harvesting time but the fat-bed dryer will be used in some years if there is rainfall during harvest time (interviewed all ten village marketers).

SFSE is very concerned about paddy moisture and a digital moisture tester was used to detect the moisture content in each bag. At moisture content below 16% paddy will be bought and after cash payment is made will proceed to transportation. For this year’s crop, farmer’s post harvest practices are well performed in every village because of well dried paddy is acceptable by SFSE. But even if farmer produce good quality of paddy, the price is not differentiated according to quality, low quality, organic paddy, and ordinary paddy and farmers never get price incentive in 2009. This will be hinder, grain quality development and organic promotion in future. We have seen that so many certified farmers sold paddy unsystematically through illegal inside and outside collectors.

Nowadays, PROFIL/ProRice openly gives so many buyers right? To

purchase organic rice from Sangthong farmers, no one is best farmer’s partner, meaning to say farmers produce good quality rice and they save environment and comply organic standard but they benefit nothing if compare to conventional rice because they don’t get a price intensive. Therefore, the buyers should be fair and given a better price. To achieve success, the best way is, quality payment policy should set up and apply effective and organic market channels in the postharvest chain need to be strengthened. Traders would only be able to give farmers a higher price if they themselves can get higher prices in the markets.

While interviewing 10 village collectors, notebooks and organic vouchers/receipts were checked. The purpose of organic vouchers is to reimburse premium price from exported markets. For this year’s crop, SFSE holds higher percentage of organic paddy (compare to another). Buying excludes non-glutinous rice; GFMG bought 66% but SFSE bought 69% of glutinous rice and 84% of purplish-blue rice.

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Table.1 systematic organic purchase in Sangthong

Village Sold paddy in crop 2009 (ton)

Sold to whom HomSangthong glutinous rice

HomSavan Non-glutinous rice

Purplish-blue rice

HaiTay 2 0.8 0.36 GFMG

6 1.5 0.66 SFSE

NasaoNang 12 10 3 SFSE

Pakthep 35 20 3 SFSE

Natarn 50 0 10 SFSE

Natiem 62.4 34.4 3.2 GFMG

15.6 8.6 0.8 SFSE

Nalard 4.5 2.5 1.5 SFSE

Namieng 0 3 2.5 SFSE

TaoHai 15 5 0 SFSE

NahoyPang 0 1 0 SFSE

HaiNua 5 1.5 1 SFSE

TOTAL 207.5 88.3 26.02

Source: Survey, 2010 The organic purchasing system is implemented without contract farming scheme, initially buyers had a meeting with farmers and gave a tentative price. On the other hand farmer group don’t want to sign contract because they thought paddy price is not stabilized.

6.3.4. Green Field Rice Miller Group (GFMG): Uplifting livelihood of the poor farmers in Sangthong by supporting only farmer side is not enough. ProRice has worked along the whole organic rice value chain, and four rice millers were identified as potential farmers’ partners since project was started in 2006 aiming to market organic paddy from rice growers in Sangthong. Table.2: GFMG production capacity in average.

Rice Mill

No.of

Rice mill

Milling

capacity

Tons/day

Operation

hour per

day

Milling

recovery

%

Whole grain

in white rice

%

Broken rice %

Large Small

Some Phone 2 10 8 60 40 16 4

Some Hong 1 (1) 6 6 60 40 15 5

Southath 1 (1) 6 8 66 40 18 8

DaoPaKay 1 3 6 58 38 14 6

Source: survey, 2010 Ideally, milling operation could produce between 700-720 Kg white rice from each ton of paddy, meaning to say 70-72% of milling recovery (Gummert, 2007). In case of the type of GFMG rice mills is almost the same like original Thai rice milling machine; it is compact rice mill, GFMG can produce 580-600 Kgs of white rice per ton, it depends on the type of mill used, operator skills, equipment maintenance status and the quality of the raw material how quality do you have. Figure below is a flow chart of rice mill machine.

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Source: Gummert, 2007. Provided that the quality of the paddy is good and the rice mill is equipped with a grader the Thai rice milling line used by GFMG produces good quality milled rice with a milling recovery close to standardized international grades. If GFMG wish to export milled rice, a drum grader is required to add into Thai milling line for producing milled rice grade-A.

6.3.4.1. SomPhone Rice Mill: Mr. Somphone Bouttavong was started rice milling business since 1994, his rice mill located in 13 North road, HouaKoua village, unit 05, house no. 069, Naxaythong district, Vientiane capital. He joined organic group in 2006. This rice mill has two rice mill machines; the major equipment in first milling line consists of pre-cleaner, rubber roller husker, paddy separator, three cleaners (sorters/ husk separators), three stone polishers, two graders, bagging station, moisture meter, and compressor for pressurized air. And Second rice mill has same milling line but there are additional equipment like de-stone, Chinese rubber roller husker with 2 tons/hr capacity, and paddy separator. Problem in the mill with respect to organic rice production, this rainfed crop season, paddy price for glutinous rice at farm gate is 2.500 kip/Kg, 2.800 kip/Kg for non-glutinous and purplish-blue rice. Some of the organic farmers sold paddy and transported 30 km to this rice mill, they got additional price 100 kip per Kg. In 2009, he bought organic paddy from farmers in amounts of 32 tons, 18 tons, and 23 tons of glutinous, non-glutinous, and purplish-blue rice respectively (no consideration as organic because it’s unsystematic, don’t

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pass the regulation of an organic supply chain). The rice mill owner purchases also conventional paddy from Vientiane and Savannakhet provinces, 370 tons were collected for this crop season. The products are brown rice, graded rice, white rice mix (whole grain and broken rice used without grader), large broken rice, small broken rice, rice bran, and husk. SomPhone rice mill exported 22 tons of milled rice to France in 2004 and his main domestic markets are polytechnic college and government institute. Further market channels could target Southeast Asian markets, traders in Singapore and Malaysia were contacting his rice mill and milled rice samples were taken for analysis. Table.3 Market channels of SomPhone rice mill

No. Targeted consumers Types of milled rice Sold (ton/month)

1 Wet market/retail shop Conventional rice 17

2 Pakpasak college Conventional rice 6

3 Government institute Conventional rice 21

Total 44

Source: Survey, 2010 According to rice milling operation services, certification status can be organic because the SomePhone rice mill has subcontract with Lao Farmer Product and State Food Stuff Enterprise, both of food processing companies are holding organic and fair-trade certification that’s why this rice mill was inspected frequently by Agricultural Certification of Thailand, Lao Certification Body, and Bio Control System as requirement of EU market. Milling fee is 300 kip/Kg for brown rice and 100 kip/Kg for polished rice (rice mill owner will gain profit from rice bran and broken rice). Problem on post harvest, Market in France was cut since 2005 due to grain quality is poor; there are too many mixed fractions (small brokens, large brokens, whole grain)

6.3.4.2. SomHong Rice Mill: The rice mill owned by Mrs. Sengmany Opathana, it started operating in the year of 2000 and joint organic rice project in 2006. This rice mill domiciles in Nathom village, unit 20, house no. 182, Saythany district, Vientiane municipality. In milling line, major equipment has pre-cleaner, rubber roller husker, three cleaners (husk separators), three stone polishers, grader, and bagging station. Fat-bed dryer was set up, the purchase order for a second rice mill is being processed and storage capacity is increased. This rice mill purchases organic paddies from HaiTai, Pakthep, NaSaoNang, Natiem, and Natarn villages in amounts of 120 tons of glutinous rice, 150 tons of non-glutinous rice, and 10 tons of purplish-blue rice. Another 540 tons per year is conventional rice. Luckily, this rice mill is a certified organic processor and its products can sell as organic commodity.

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The products are typically packaging plastic enclosure and unpackaged products. For packaged plastic enclosure products, these are organic:- aromatic glutinous rice, non-glutinous rice, non-glutinous brown rice, purplish-Blue rice, mixed purplish-blue rice and white rice. Unpackaged or ordinary products are conventional white rice mix (brokens), broken rice, rice bran, and husk. This rice mill markets and distributes mainly wet markets, garment, retail shop, and minimart. It has experienced to export 4 tons in 2007 and 7 tons in 2008 of purplish-blue rice to CLARO fair-trade, Switzerland. Table.4 Market channels of SomHong rice mill

No. Targeted consumers Types of milled rice Sold (ton/month)

1 Tang-Fair minimart/Lao-ITECC Organic 2

2 Silk-Handicraft Shop Organic 0.24

3 Kongtup-trade cooperation shop Organic 0.4

4 Thongkhankham retail shop Organic brown and purplish-Blue rice

0.5

5 Thatluang market Conventional rice 0.96

6 DongDok Market Conventional rice 10

7 Keomixay garment Conventional rice 10

8 DaoHeuang Market (Pakse) Conventional rice 8

9 Organic weekend market Organic 1

Total 33.5 (organic = 4.14)

Source: Survey, 2010 For organic rice, about 4.14 tons per month is demanding be domestic markets. Organic pricing system is based on the monthly fluctuation of conventional price plus adding cost of rice packaging of 2.000 kip for each kilogram; glutinous rice costs 8.000 kip per kg, 10.000 kip per kg of non-glutinous rice, and 15.000 kip per kg of purplish-blue rice (1 US$ = 8.276 Lao kip). Key issues on post harvest development, milled rice packaging in plastic enclosures can’t control insects (black bugs) longer than three months and plastic material is poor quality, and opearators are not able to use vacuum packaging systems is not able used properly. And fumigation is not applied in the process.

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6.3.4.3. Southath Rice Mill: This rice mill is located in DonNoon village, Saythany district, Vientiane municipality. In 2006, this rice mill was invited to a joint investment with the project and added in GFMG definitely. The major equipment of Southath rice mill consists of pre-cleaner, disk husker, two cleaners (husk separators) and two stone polishers. Nowaday rice mill infrastructure is improved; the owner bought one more rice mill machine with the same capacity as existing one. As further improvement, the owner is really interested to set up a rice packaging system; it is economically feasible for long term business development.

He has a good relationship with farmers in HaiTai and Hai nua villages by the year 2009, 60 tons of glutinous paddy rice were sold to his rice mill. And 640 tons of conventional paddy are regularly purchased in Vientiane municipality. Southath rice mill does not really participate in organic certification yet because of organic riskiness is still evaluated for investment. Therefore, organic rice is rejected due to rice mill is not organic manufacturer.

The products are:- white rice mix between whole grain and brokens, small broken rice, rice bran, and husk. Mainly market channel are namely wet markets (Thongkhankham, Thatluang, DonNoon markets), middleman, school, garment, and direct consumers. Table.5 Market channels of Southath rice mill

No. Targeted consumers Types of milled rice Sold (ton/month)

1 Middleman Glutinous rice 2

2 Phonsavan Ethnic school Glutinous rice 3

3 Don Garment Glutinous rice 4

4 Thongkhankham market Glutinous and non-glutinous rice

50

5 Thatluang market Glutinous and non-glutinous rice

50

6 DonNoon Market Glutinous and non-glutinous rice

50

7 Lao and foreign civilians Glutinous rice 1

Total 160

Source: Survey, 2010

In each year, rice price fluctuate between 6.000-6.500 kip/Kg for glutinous rice and between 7.000-7.500 kip/Kg for non-glutinous rice (1 US$ = 8.276 Lao kip). Persistent problem in the crop year of 2009, is that around 10 tons of purchased paddy getting wet and second drying was done at rice mill in using sun drying on mat.

6.3.4.4. DaoPakay Rice Mill: Located in NonKilek village, unit 36, Sikottabong district,

Vientiane capital, DaoPakay Rice Mill stared milling operating in 1998 and joined the organic project in 2006. However, the rice mill is not yet ready for certification. The main equipment in the mill are a pre-cleaner, rubber roller husker, three cleaners (sorters/husk separators), three stone polishers, grader, and bagging station.

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This rice mill also did not purchase paddies from 10 target villages of ProRice, but instead got them from outsides the project site. The rice mill owner had a long term relationship and trust building involvement in Sangthong district thru the main paddy collection in Pialath, Nahoy, pakton, and Kokpeuang villages. Seasonally paddy purchase was at 550 tons for conventional rice only. Common products from the mill are graded rice, white rice mix (whole grain and broken rice when used without grader), long broken rice, small broken rice, rice bran, and husk. The owner markets at her rice mill because of the high population density rate and therefore, middle-men and Lao civilians approach her easily because it of her mill’s location which is close to the main national road of the city. Table.6 Market channels of DaoPakay rice mill

No. Targeted consumers Types of milled rice Sold (ton/month)

1 Middle-men Glutinous and non-glutinous rice

2

2 Lao civilians Glutinous and non-glutinous rice

29

Total 31

Source: Survey, 2010 There is an average of 30 tons of a paddy harvested and this causes problems in post harvest operations since the harvest had to be re-dried during each harvesting season using manual drying pad.

6.3.5. Rice and food processing manufactures: 6.3.5.1. State Food Stuff Enterprise (SFSE):

SFSE is located in Sihom village, Chanthabuly district, Vientiane capital. It was a new chain actor in organic rice value chain in 2009 but even then, it had various potentials in the export markets. The SFSE is currently working on food processing of instant sealed rice, vegetables, and livestock. This company purchased organic paddy through organic village collectors appointed by ProRice. All organic intakes flow from HaiTai, HaiNua, NaSaoNang, PakThep, Nalard, Natiem, and TaoHai villages. 40 tons of glutinous rice, 2 tons of purplish-blue rice, and 61 tons of non-glutinous rice are purchased and milled in SomePhone rice mill. Machine sorting is also performed there.

Milled rice certified as organic were sold at the same price of ordinary

rice because organic market is not established yet for SFSE. In order to meet market demand, SFSE collected 2.020 tons of conventional paddy a year from everywhere in the country.

The packaging equipment of the mill included a moisture meter, seal bagging and vacuum machines. The products have two sizes of sealed rice pack, 2 kgs and 5 kgs respectively. Target markets were beverage companies, NGOs, and government institutes. Export market was Vietnam only. During Vietnam New Year, the Vietnamese bought a lot of glutinous rice,

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least 1 kg per family, which indicated that that glutinous rice can make good business for SFSE.

Table.7 Market channels of SFSE

No. Targeted consumers Types of milled rice Sold (ton/month)

1 Government institute Glutinous rice 500 tons a year

2 FAO (Food for Work) Glutinous rice 435 tons a year

3 Lao Beer Co.,LTD Non-glutinous rice 800 tons a year

4 Vietnam Glutinous rice 200 tons a year

Total 1.935

Source: Survey, 2010 Further market opportunities, there are currently three possibilities for

imported markets. China wants to import around 30.000 tons of rice per year. EU is currently helping buy 15.000 tons Lao rice a year and Africa is negotiating the procurement of 400.000 tons of rice per year. However, ProRice may not be able to meet the demand of these markets scales and EMRIP must consider market sharing with ProRice.

6.3.5.2. Lao Farmer’ Product (LFP): LFP has plenty of experiences for international markets especially in transactions with the French market. A few years ago, by supporting and buying chemical-free rice free in Xiengkhuang province. It developed Khao Kai Noy rice is cheap which eventually became well-known in the EU market In 2009, LFP joined in organic rice production and marketing and LFP it became a new market that Sangthong farmers had increasing interest on due to tits potentials to provide the quantity and quality of products in order to meet premium price demands. That same year, LFP did not buy paddy from Sangthong district yet planned to buy crop estimating to around 400 tons of rice, 200 tons of non-glutinous rice, 130 tons of glutinous rice, and 70 tons of purplish-blue rice by 2010-2011 (interviewed Mr. Thou Bountarath, Director of LFP). The packaging system of LFP consisted of machine sorting, manual sorting facility, heat pasteurization equipment, and vacuum apparartus. Paddy from farmers were directly transported to SomePhone rice mill for milling and machine sorting. Milled rice still contaminated discolored grains and manual sorting has to be done at LFP at 8 kgs/person/day. Heat pasteurization in the electric heater will operate four hours at 50 °C because we need 12% of final moisture content.

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After this, dusts and dockage will be removed using electric blowing machine and vacuum and will be the final phase of the procedure. In term of shipping approaches, LFP senior staff had a strong capability to carry out operation. There are seven necessary documents for exporting commodity that we have to complete such as namely, customs declaration form, food and drug certificate, Phytosanitary certificate, invoice, packing list, bill of lading, and certificate of origin. LFP also has access to mainly four export markets like France, Belgium, Switzerland, and Germany. Table.8 Market channels of LFP

No. Targeted consumers Types of milled rice Sold (ton/month)

1 France Glutinous and non-glutinous rice

36 tons/year

2 Belgium Glutinous and non-glutinous rice

18 tons/year

3 Switzerland Glutinous and non-glutinous rice

5 tons/year

4 Germany Glutinous and non-glutinous rice

15 tons/year

Total 74

Source: Survey, 2010

There are still some problems that LFP has to resolve in terms of the quality of their products, especially since mixed grains are more recommended by international consumers.

6.4. Grain quality payment and its calculation: Yield is the characteristic of rice most noticeable to farmers but

when the product of the milled rice reaches the market, quality becomes the key determinant of its saleability. Thus, benefit should be shared to all chain actors (farmers, millers, processors, etc) in order to meet quality requirement of advanced markets. In case of Sangthong organic farmers, most buyers (GFMG, SFSE, LFP, etc) check moisture content of paddy. It is equivalent or lower than 17% then they decide to buy from farmers. However, price was determined without considering gradient percentage of moisture content. This means that at the current pricing scheme, producers lose money when they further dry the paddy since they remove water from the grains. Moisture content may be determined using the following formula:

Formula calculates final weight at MCf moisture content:

mf = mi

MCMC

f

i

100

100

Where mi: initial weight,

MCf: Final moisture content, MCi: Initial moisture content

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Table. 9 Calculating weight and price move in function of moisture content (case of HomSangthong glutinous rice)

Moisture content 17% 16% 15% 14% 13% 12% 11%

Paddy weight after drying (basis 1 Kg at 17%) 1 0.99 0.97 0.96 0.95 0.94 0.93

Price should be paid (kip/kg) 2,500 2,530 2,560 2,590 2,620 2,650 2,681

Constant price (kip) 2,500 2,500 2,500 2,500 2,500 2,500 2,500

Current loss (kip) 0 30 60 90 120 150 181

Source: Survey, 2010 Note: Farmers do not only loose by selling less weight but also by paying more or spending more time on drying. An additional incentive should cover that additional cost component. The optimum grain moisture content depends on desired storage duration, when paddy grain reaches more than 18% of MC, grain will deteriorate rapidly. Therefore, 14% to 9% MC is ideal for long term storage. MC rate higher than 14% will require re-drying of paddy at rice mill. To encourage farmers in grain quality development, prices should be set in accordance with their performances as real weight of well-dried paddy, meaning, compensation must compensate for weight loss during drying activities (see table.9). Table.10 shows that in case of paddy at 17% MC during storage, water removal causes grain respiration. It is estimated that around 49,919 kgs is lost but will be compensated by milling recovery percentage which is increasingly significant. In the case of, SFSE they have subcontracted Somphone ricemill which charges 100 kip/kg as milling fee including small broken and bran. The cost-revenue ratio is 1.11 for SFSE and 1.12 for GFMG, meaning each 100 kip invested in the business will generate a gross profit of 11 kips and 12 kips respectively which is a very small profit in the rice businesses. Also, the maximum volume that traders (SFSE and GFMG) can buy paddy at 17% of MC from farmers should not be higher than 2,814 kip/kg and 2,853 kip/kg respectively.

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Table.10 simple cost-profit calculation for SFSE and GFMG (glutinous rice).

1. Cost Unit price Quantity

(Kg) SFSE (Kip) Unit price

Quantity (Kg)

GFMG (Kip)

Purchased paddy cost 2,500Kip/kg 1,431,000 3,577,500,000 2,500Kip/kg 644,000 1,610,000,000

Weight losing cost 300 Kip/kg 49,919 300 Kip/kg 22,465

Transport cost 100 Kip/kg 1,431,000 143,100,000 100 Kip/kg 644,000 64,400,000

Milling cost 100 Kip/kg 1,381,081 138,108,100 300 Kip/kg 621,535 186,460,500

Total 3,858,708,100 1,860,860,500

2. Revenue Unit price Quantity

(Kg) SFSE (Kip) Unit price

Quantity (Kg)

GFMG (Kip)

Head rice (40%) 5,800Kip/kg 552,432 3,204,105,600 5,800Kip/kg 248,614 1,441,961,200

Large broken (16%) 5,000Kip/kg 220,973 1,104,865,000 5,000Kip/kg 99,446 497,230,000

Small broken (4%) 3,000Kip/kg 5,524 3,000Kip/kg 24,861 74,583,000

Bran (8%) 1,500Kip/kg 110,486 1,500Kip/kg 49,723 74,584,500

Total 4,308,970,600 2,088,358,700

3. Profit 450,262,500 227,498,200

4. Cost-revenue ratio 1.11668737 1.122254301

5. Break-even price for buying paddy from farmers 2,814.648847 2,853.258075

Source: Survey, 2010 According to paddy price in 2009, non-glutinous and purplish-blue rice were almost the same price and very costly at 2,800 kip/kg, and so although farmers preferred growing these kinds of rice, market was limited. Compensation for weight loss during drying should be the basis of pricing in order to improve quality of paddy (see Table. 11). Table. 11 Calculating weight and price move in function of moisture content (case of HomSavanh non-glutinous and purplish-blue rice)

Moisture content 17% 16% 15% 14% 13% 12% 11%

Paddy weight after drying (basis 1 Kg at 17%) 1 0.99 0.97 0.96 0.95 0.94 0.93

Price should be paid (kip/kg) 2800 2833 2867 2901 2935 2968 3002

Constant price (kip) 2800 2800 2800 2800 2800 2800 2800

Current loss (kip) 00 33 67 101 135 168 202

Source: Survey, 2010 Glutinous rice, non-glutinous and purplish-blue rice are sold at premium prices in European market but domestic market is not able to give even at least 500 kip/kg of price incentive (see Table.12). Overseas, buyers can buy for as much as 3,741 kip/kg and 3,779 kip/kg at 17% of MC as normal price and thus rice milling operations are profitable. In some villages, farmers produce rice with 14%-13% MC and milling recovery still generates profit. The cost-revenue ratio is as high as 1.31 (1.30 for SFSE and GFMG), meaning that for every 100 kip invested, the rice business can create 31 kip and 30 kip of gross benefit.

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Table.12 simply calculate cost-profit for SFSE and GFMG(Non-glutinous rice).

1. Cost Unit price Quantity SFSE Unit price Quantity GFMG

Purchased paddy cost 2,800kip/kg 531,000 1,486,800,000 2,800kip/kg 352,000 985,600,000

Weight losing cost 300kip/kg 18,523 300kip/kg 12,279

Transport cost 100kip/kg 531,000 53,100,000 100kip/kg 352,000 35,200,000

Milling cost 100kip/kg 512,477 51,247,700 100kip/kg 339,721 101,916,300

Total 1,591,147,700 1,122,716,300

2. Revenue Unit price Quantity SFSE Unit price Quantity GFMG

Head rice (40%) 7,800kip/kg 204,991 1,598,929,800 7,800kip/kg 135,888 1,059,926,400

Large broken (16%) 6,000kip/kg 81,996 491,976,000 6,000kip/kg 54,355 326,130,000

Small broken (4%) 3,000kip/kg 20,499 3,000kip/kg 13,589 40,767,000

Bran (8%) 1,500kip/kg 40,998 1,500kip/kg 27,178 40,767,000

Total 2,090,905,800 1,467,590,400

3. Profit 499,758,100 344,874,100

4. Cost-revenue ratio 1.314086555 1.307178314

5. Break-even price for buying paddy from farmers 3,741.16403 3,779.755966

Source: Survey, 2010

The best way to improve the organic quality paddy is to give organic certified farmers a price incentive to dry paddy in time and properly limit moisture content to 14% or less. The best way to do this is to introduce a farm gate price that gives farmers incentives for selling better quality paddy. Table.13 Given better price for good quality from other countries.

Products Quality Price (US$)

Cambodia Philippines Vietnam

Paddy Wet (MC>14%) 0.18 0.28 0.22

Dry (14% MC) 0.20 0.36 0.25

Milled rice 25% broken/poor quality 0.30 0.55 0.40

5% broken/good quality 0.50 1.05 0.46

Source: IRRC, 2009 High moisture paddies (above 14%MC) are bought at lower price by traders (see Table.13). Traders would normally measure moisture content with commercial/digital moisture tester. A price is agreed upon by traders and farmers depending on the prevailing price (normally price is referred to the price set by the National Food Authority in the case of the Philippines). In other areas, some traders take advantage of smallholders farmers by dictating the price of paddy especially in areas where postharvest facilities are lacking and market information on paddy prices are not available to the farmers. Farmers who are indebted to the traders are oftentimes not able to negotiate process properly.

In Cambodia and Vietnam, paddy with high moisture content also fetches a low price in the market because the traders would still need to dry the paddy before it can be milled at high quality output and stored longer without further deterioration. Properly dried paddy especially with use of mechanical dryers would have a premium price in some areas in Vietnam as milled rice output from mechanically-dried paddy would have high head rice yield compared to sun dried paddy.

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6.5. Revenues, costs and profit per unit in value chain of 1 kilogram of glutinous rice (HomSangThong): After data have been calculated, insight of rice post harvest value chain can start the analysis. In diagram below, it may evident that the farmer is incurred high cost in practicing good grains quality but there is no additional profit return from this activity and you can see that farmer has little profits, while the traders or millers or processors have little costs and relatively high profits from this organic rice value chain excluding of export market. It suggests that cost and margins are shared unequally in this post harvest chain and could be an intervention point for a PROFIL/ProRice project. One such intervention might be scaling up business volume of farmer, facilitating export market to traders, millers, or processors and lastly policy of quality payment will follow gradually when traders benefit from this chain.

Source: Survey, 2010

In relating Table.10, rice farmer’ profit is declined from cutting until collecting due to some investment is taken costly in term of hiring laborers for cutting, taking time for sun drying, and using mechanical threshing service from local providers, it denoted that there is no percentage of added cost from farm gate. Meanwhile, appearance of added value is significantly increased from traders. From now we can understood obviously, the flat-bed dryers that ProRice installed in two villages are not used because there is unpaid for good quality that’s why sun drying is taken place, it is cheaper than mechanical dryer.

6.6. Findings: Other difficulties may be caused by the following farm conditions:

Small holder farmers who simply wait for buyers to come;

Lack in resources for investment;

Practice of selling of paddy after harvest in order to return loans from banks , microfinance institutions, etc;

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Farmer dependence on low price offered by buyers (GFMG, SFSE, LFP, etc);

Practice of saving paddy and selling to potential buyers who give higher prices;

Selling of considerable amount of organic paddy through unsystematic market channel;

Poor understanding post harvest management;

Poor system of updating farmers on market trends;

Poor bargaining capabilities among farmers (GFMG, SFSE, LFP)

Lack of premium price for organic rice;

Low prices despite good quality of harvest;

Lack of farm equipment and ignorance of using the flat-bed dryers;

Lack of post harvest training among farmers on how to produce good quality of paddy;

Some exported markets quit business with GFMG;

Poor quality of harvest relative to standard requirement of advanced markets;

Unstable paddy price in Lao.PDR

6.7. Recommendations for future post harvest development:

In harvesting the grain, moisture content must be limited between 20-25% (wet basis). The rice crop should be cut when 80-85% of the grains have become straw (i.e. yellow) because once the rice is harvested, the quality of the grains starts deteriorating. The objective of proper postharvest management is to slow down this deterioration. Grain must therefore be dried within 24 hours after harvesting to limit MC at 14%-18%. Eighteen percent MC is safe for less than 2 weeks of storage but 14% or less is ideal.

Also, preventing the grains from heating up is imperative because heat that causes discoloration. Panicles inside the straw heaps must be cut if plants are stored temporarily in the field and storing wet grains in bags for extended periods must be avoided.

Similarly, avoid field drying. When rice crop is left in the field to dry, the grains go through permanent drying (during the day) and re-wetting (at night, during rainfall) cycles. This causes the already dried grain to crack while mechanical dryers are preferable because they produce better quality than sun drying.

Provide training for food processors, millers and farmers to make them understand the benefits of producing and getting better quality.

Village marketing committees already formed by the ProRice project should provide farmers with better bargaining power and better access to post-harvest technology services and marketing facilities.

The best way to improve the paddy quality is to give farmers a price incentive to those who can maintain well-dried paddy in time and limit MC to 14% or less. Grain and seed stored at moisture contents above 14% may experience the growth of molds, rapid loss of viability and a reduction in eating quality.

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The cost-revenue ratio for the SFSE and GFMG is also above 1 which

means that the investments would earn rather than lose.

Another priority should be to upgrade the mill for better quality and milling recovery for the local markets because The Thai rice milling line used by GFMG produces good quality milled rice with a milling recovery close to standardized international grades. If GFMG wish to export milled rice, it must secure a drum grader.

Good quality seeds are important to avoid varietal mixtures as strongly recommended by international markets. Also, potential varieties with grain shape and size that passes market standard must be developed.

Packaging is conducted to achieve attractive appearance of the product, prevent moisture adsorption and protect grain from pests.

Vacuum pouches for export and for products with a longer shelf life.

Insect control of organic rice suggests using carbon dioxide (CO2) when vacuum is not available. The most suitable packaging materials for this purpose are plastic bags.

6.8. Conclusions: Sangthong farmers can produce good quality paddy with below 15% MC using manual harvesting and sun drying methods. However these methods require around 30 laborers per day per hectare. Families who cannot provide such labor are not able to produce quality paddy. In terms of post harvest activity, the mechanism dryers that ProRice installed in Natiem and Pialath farmers are not used because there are no price incentives for using mechanically dried paddy. In the other hand, sun-drying is always cheaper and that the penalty for lower quality and it is not big enough to make farmers use dryers. Although organic production is used to achieve the best quality products, there remains a gap in term of pricing. In some villages, farmers of organic rice are unable to negotiate prices with traders. Despite the difficulties, the advantage of using organic rice is in its potential export market and increasing market demand. Thus, grains quality and postharvest development must be imperative for all stakeholders.

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References ACT, 2008. Inspection report of project with ICS: Organic rice production

group in Sangthong district, Vientiane, Lao PDR. GDS, 2005. Value Chain Analysis of Strategic Sectors in Lao Draft 1 prepared for the World Bank: Integrated Value Chain Analysis of Selected Strategic Sectors in Lao People’s Democratic Republic. GUMMERT, M. 2007. Draft mission report: Technical and Economic

Assessment of four rice mills to produce exportable organic rice based on international standard.

INTHALANGSEE, B.2009. The certification process in organic rice production: The case of Sangthong district, Vientiane capital, Lao PDR. KHEMMARATH, S. 2008. Final report on assessment of postharvest process

in the “Green Field” rice production area of Sangthong. KUNZE, O.R.2008. The effect of drying on grains quality: moisture

readsorption causes fissured rice grains. M4P, 2008. Making value chains, work better for the poor. A toolbook for

practioners of value chain analysis. PHOUTHAVONG, X.2010. The benefits of organic rice farming into poverty

reduction at seven villages, Sangthong district, Lao PDR. SCHILLER, J.M. 2006. Rice in Laos, IRRI- International Rice Research

Institute. THO, H.T.P. 2009. Collective action of organic rice and vegetable producer

groups in Vientiane, Lao PDR.