Siem Reap Rice Fields, Cambodia.
Photo: @ ND Strupler

Rice production in South-East Asia under economic pressure

A new agri benchmark report analyses economic challenges to agricultural operations in key rice regions in South-East Asia.

Production systems in South-East Asia are very labour-intensive. Even if important steps are already mechanised, e.g. in Thai farms, more than 200 labour hours per hectare are used in rice production. By comparison, European wheat producers need only c. 10 labour hours per hectare. Due to economic growth in the industrial and service sector, wages in the South-East Asian regions investigated here have risen sharply in recent years. As a result, farmers as employers face the challenge of remaining competitive in the labour markets.

To evaluate the extent of the problem, an agri benchmark study published in November 2014 compares the hourly profit from rice production with the current wages. Wages are highest in typical Thai farms at c. USD 3.50/h, and lowest at around USD 0.35/h in typical farms in Cambodia and Myanmar. This corresponds to current wages in the industrial and service sector in the regions studied. As it can be assumed that non-agricultural wages will continue to rise as in the past, increasing labour productivity in rice cultivation will be an important challenge for the future, and possibly the most important.

Among other ways, labour productivity can be increased by putting out labour-intensive activities to contractors who use machinery instead of manual labour.

Appeal of other cash crops rising

The question whether rice is always the most economically attractive crop is currently concerning farmers and experts in many countries in South-East Asia. The debate is also reflected in the results of the agri benchmark report. For example, for a typical Vietnamese farm, maize cultivation is roughly just as profitable as two crops of rice (in the region there are three harvests a year). As maize cultivation – in contrast to rice – is currently still predominantly done manually, costs are still relatively high. If more machinery is used in future, this lowers production costs for maize cultivation, and the competitiveness of maize compared to rice rises further.

More information: 

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(Johann Heinrich von Thünen-Institut /ile)