Futures market for tapioca
Thailand’s traditional tapioca trading process
Structure of the cassava market
in Thailand
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Thai tapioca products are mostly traded
through spot trading, where buyers directly transact with sellers,
either using cash or credit. Middlemen maintain an active role
in bringing raw materials from growers to processors. Middlemen
here can be small-scale entrepreneurs, who transform raw roots
into cassava chips before further supplying them to pelleting
factories, who in turn manufacture tapioca pellets for export.
These factories may export tapioca pellets by themselves or
further provide them to export agents, or middlemen. Therefore,
it could be said that a large part of Thai tapioca trade and
distribution is held by middlemen. On account of price fluctuation,
uncertainty of production and harvest and loose trade regulations,
some parties may take unfair advantage, for instance through
price spinning - depressing raw material prices in a hope of
higher profits. In the end, growers are usually have the most
trouble, unless the government helps them out, possibly by introducing
an intervention program, which is generally regarded as a short-term
solution.
Typical flaws of the traditional trading process are as follows:
a. Competition in the market has not yet been reached, so prices
from bargaining may not truly reflect the quality of the commodities
traded.
b. Distribution distances remain long
and are intervened in by many middlemen, so higher marketing
costs are inevitable and growers consequently sell their produce
at lower prices.
c. Inadequate emphasis is given to product
standardization, thus making growers pay little attention
to quality classifications.
d. Information on cultivation, harvests,
transactions etc. is not managed or widely propagated in such
a way that growers can plan their production in response to
market demand. As a result, prices remain volatile.
As a result, the Thai Commerce Ministry is poised to set up
a futures market, a new alternative for the trade of Thai
agricultural products, so as to reduce risks caused by price
fluctuation, control market monopoly and provide a resourceful
center where all relevant information will be within reach
of traders and growers alike.
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