The Ministry of Agriculture and Forestry said yesterday that they were investigating a possible secret agreement between middlemen or traders in the supply chain to manipulate the price of agriculture commodities, leaving farmers with no option but to sell their products at a lower price.

The announcement mentions traders – who procure commodities from individual farmers for big exporters – who were not abiding by free market principles and grouping together to set lower prices for commodities, limiting farmers’ bargaining powers and forcing them to sell at below-market rates.

“In this case, the Ministry of Agriculture and Forestry would like to inform all provincial departments to investigate this matter with the highest responsibility and react to this strictly in accordance with the law,” the announcement read.

Eang Sophallet, spokesman at the ministry, said traders had divided regions into zones, giving farmers no choice but to sell to that trader and at the trader’s asking price.

“Now, we are managing more action on the regulation,” he said shortly.

However, the ministry’s announcement did not mention any details with regards to whether any specific company or trader was involved in the investigation. It also did not specify the modus operandi of these traders to game the system.

The complicated supply chain – from farmer to processor and finally to the exporter – is one of the reasons traders get to take advantage of farmers.

Song Saran, executive director of rice exporter Amru Rice Cambodia, said that exporters would have to cut the supply chain and directly work with the farmers so that farmers could negotiate based on the actual export price of their product.

“Exporters need a large amount. We cannot buy the retail amount from individual farmers so that means they need to gather with each other for a big amount of paddy and have the ability to stock it properly,” he said.

But prices have been fluctuating for other reasons as well, such as increased supply in the international market from neighbouring countries, which has caused the prices of certain commodities, like rice, to fall.

Srey Chanthy, an independent economist, said that work needs to be done on bringing down the cost of production and strengthening market prices to make farmers less vulnerable to such price fluctuations.

“Price of our commodities is always fluctuating. Once there are more goods imported from neighbouring countries, the price falls down,” he said.

“In many cases, farmers always lose because they sell their products at low price, while they spend more on production costs,” Chanthy explained.

Chanthy added that if it was true that traders had formed such “cartels,” then it would not only affect the prices but also be damaging to farmers, who are already dealing with commodity price fluctuations.

Yang Saing Koma, president of Cambodian Center for Study and Development in Agriculture, said governmental institutions need to identify the points along the supply chain where this price manipulation is occurring and take action.

However, he added that one way to get around this was for the farmers to increase their negotiating ability by working in cohesion.

“We encourage farmer to gather in group, sell their goods as a group, and try to access to market information so that they will have more power to the negotiate prices with traders,” Koma said.