Rice exports flounder

A worker cleans milled rice before it is bagged in Phnom Penh. (Pha Lina/Phnom Penh Post)

Tuesday, 14 February 2012
Sieam Bunthy and Don Weinland
The Phnom Penh Post

Cambodia's milled-rice exports struggled to compete on international markets as increased supply from India forced down regional prices, experts and officials said yesterday.

The Kingdom has continued to fill orders made in 2011, but industry insiders said new orders for the grain fell in January. Higher energy and milling costs in Cambodia could further stymie new orders for milled rice in February.

Tim Purcell, director of Agricultural Development International, confirmed that orders for milled rice fell last month.

“Compared to the last quarter of last year, January saw a significant drop in orders,” he said yesterday, adding that increased stock in India had driven down prices in the region.

Although the falling figures present concerns for the future of the sector, January’s decrease was largely seasonal, Purcell said. Supply was high as regional producers wrap up their harvest season. The trend could continue this month, he said.

Despite marked increases in exports in 2011, the sector could fail if prices remain higher than competitors, Kalyan Mey, advisor to Cambodia’s Supreme National Economic Council, said during an unofficial roundtable discussion on the country’s rice policies.

“If [the European Union] was to impose tariffs, we would deteriorate much more,” he said, referring to the preferential tax treatment that allows Cambodia tariff-free rice exports to Europe.

To compete with export giants such as India, Thailand and Vietnam, Cambodian exporters and traders must cooperate to form an economy of scale, Kalyan Mey said.

Four of Cambodia’s top rice exporters have said they saw a significant decrease in forward orders in January, according to an industry source who spoke on condition of anonymity.

Access to credit for purchasing large quantities of paddy rice is limited, as is capital for upgrading the countries milling facilities, Phou Puy, president of the Federation of Cambodian Rice Millers Associations, said yesterday.

The Rural Development Bank has said US$600 million is needed in the sector to buy, process and transport 1 million tonnes of milled rice, a figure Prime Minister Hun Sen has set as an export goal for 2015.

The bank loaned $36 million to the sector in 2010 and 2011.

Cambodia’s rice production has been a huge success, given its meagre beginnings in the early 90s, Purcell said. The country went from importing about 200,000 tonnes of milled rice in 1994 to exporting 330,000 tonnes of paddy the following year, he said.

Milled rice exports have also seen dramatic increases, from 12,440 in 2009 to 173,00 tonnes last year. “The achievements in the past 15 years have been quite amazing,” Purcell said.