Rice stocks unsold on soft exports

Written by Chun Sophal and Hor Hab

Tuesday, 13 January 2009 Phnom Penh Post

Last year's rice harvest is ready for market, but local rice associations say cutthroat competition in international trade is leaving them with vast stocks of unsold padd. Photo by: Tracey Shelton A rice vendor sits with her stock in Phnom Penh. LAST year's bountiful rice harvest is proving a mixed blessing for the agriculture sector, with thousands of tonnes of surplus grain sitting unsold in storehouses, local millers say, blaming the rice glut on softening demand in export markets. For farmers, the lack of buyers is leaving them unable to buy seed for the coming season, they say. "We might face a shortage of capital if we cannot sell the old stock," said Tes Ethda, president of the National Rice Millers Association of Cambodia, a private company and representative of the state-owned Green Trade company. He said on Sunday that Green Trade has about 20,000 tonnes of unsold husk rice in storage. Like many millers' associations last year, Green Trade borrowed US$5 million from the government to buy about 50,000 tonnes of rice in order to avoid a shortage in Cambodian markets, he said. But the move was perhaps premature, with millers now risking defaulting on their loans as the export market bottoms out. "We cannot build a strong local rice market if we cannot export milled rice," said Tes Ethda. "We don't expect to earn a profit because of the high interest rate [on the loan]. We cannot compete," he added. "We are trying to find money to pay back the government." He said Green Trade has been exporting 1,000 tonnes to France at about $470 per tonne, and is now seeking additional buyers. We might face a shortage of capital if we cannot sell the old stock. "We need at least $500 million to $600 million to buy husk rice surplus from farmers, which is estimated at about three million tonnes each year," Tes Ethda said. Pheng Kong, second vice president of the Federation of the Cambodian Rice Millers Association, said that in the face of the glut, farmers were having to sell raw paddy at a discount to Thailand and Vietnam. He said the government has extended a $15 million one-year loan to his association to buy up Cambodian rice, but that more is needed if the millers were going to prevent too much raw paddy surplus from being sold to foreign buyers at a discount. "We are asking for more long-term loans from the government to install a drying machine in our rice mills to produce high-quality rice for export," Pheng Kong said. This year, Cambodia produced 6.8 million tonnes of husk rice and 1.8 million tonnes of milled rice. Yang Saing Koma, president of the Cambodia Center for Agriculture and Development in Agriculture, said on Sunday that the market has been flooded by the new harvest. "Rice prices are lower than farmers expected, but that might motivate them to grow better-quality rice," Yang Saing Koma said. "I think it will take two or three years for Cambodia to strengthen its rice sector," Yang Saing Koma said. New markets Cambodia has been looking to diversify its rice exports and signed agreements with Senegal late last year. Song Hong, president of the Cambodia Rice Millers Association in Battambang, said the planned export of 3,000 tonnes of milled rice to Senegal is still under negotiation. He said a delegation from Senegal will arrive at the end of this month to discuss the plan. If the negotiation is successful, Cambodia will export 10,000 tonnes to the African country each month. Prime Minister Hun Sen told villagers in Pursat province on Saturday that about three million tonnes of unmilled rice were exported this year and that the country has the potential to export four to five million tonnes. He said Vietnam and Thailand exported about 10 million tonnes. Agriculture is at the top of the government's priority list, Hun Sen said, adding that vast tracts of land remain arid in Cambodia due to poor irrigation, pests and outdated farming techniques. "We have the capacity to export about three million tonnes of unmilled rice or two million tonnes of milled rice, so if we expand our irrigation to enable farmers to grow rice twice a year ... we will boost exports. ADDITIONAL REPORTING BY NGUON SOVAN