Seeds of hope in Cambodia

Asia Golden Rice diversifying to help it meet challenges of tougher global trade.

Published: 16/01/2012
Writer: Walailak Keeratipipatpong
Bangkok Post

Asia Golden Rice Co, Thailand's second-largest rice exporter, has mapped out a 1.5-billion-baht rice investment in Cambodia in a bid to expand regionally.

The plan includes modern, fully equipped milling and processing plants with a capacity to process up to one million tonnes of rice per year, and is considered a milestone investment in rice industry of Cambodia, the world's sixth largest rice exporter.

"Rice farming in Cambodia shows promising growth. The country produces about eight million tonnes of paddy a year and a lot of it has been secured by Vietnam for re-export," said Asia Golden Rice (AGR) president Sombat Chalermwutinan.

The investment is in the form of a joint venture between AGR and a leading Cambodian business group, which he asked not to be named for now.

The facilities will take about 18 months to build in the southern province of Kampot, which is also the location of a cement plant run by Thailand's top industrial conglomerate, Siam Cement Group.

Mr Sombat said the joint venture was also considering further activities including contract farming to ensure steady supplies locally.

The co-operation will help both countries to improve the rice industry and strengthen the region as a major supplier in the global rice trade. Countries in Southeast Asia are forecast to account for half of the global rice trade volume of 31.85 million tonnes in 2012, according to the US Department of Agriculture.

However, Mr Sombat forecast that Thailand's rice exports this year would decline to about 8 million tonnes from 10.5 million in 2011, reflecting the lingering effects of severe damage to farmland in the floods late last year.He also said that Thai rice in recent years had faced much tougher competition with products from Vietnam, Pakistan, Brazil and India.

The return of India in particular could have a big influence on exports of Thai rice this year. India has been active in the market with the plan to ship 2 million tonnes of rice in the first quarter of 2012, leaving exporters wondering whether New Delhi will extend the plan.

Mr Sombat said Thai exporters had adopted a wait-and-see strategy to see if India would continue exporting the grain.

"Considering its ample stock of over 30 million tonnes of rice, I assume that this could lead to a difficult year for Thai rice industry," he said. "Thai exporters are afraid of the competitive prices of India's rice which is also sold in the same markets as Thai rice."

The average export prices for Indian 5% grade white rice are about US$435-445 a tonne, much lower than of the $574 quoted for the same grade of Thai rice. Parboiled rice from India is also a threat considering its competitive price at $415-425, far lower than $595 a tonne sold by Thai exporters.

Besides India, Brazil has emerged as another strong rival in parboiled rice and it tends to contend in the same markets as Thai exporters, in particular in African countries.

Even exports of Hom Mali rice, the country's most prestigious fragrant grain, are now being challenged by fragrant rice from Vietnam and Cambodia, according to Mr Sombat.

Given all of these factors, local exporters believe trade will be stagnant for a few months but would be more active in the second half of the year after India's rice export policy becomes clearer, he said.

Amid all the uncertainty, Mr Sombat said it was hard for the company to set an export target but he vowed that AGR would maintain the 18% market share it had last year. Ranked just behind STC Group, AGR exported about 1.9 million tonnes of rice in 2011, with its main markets in Asia, Africa, the Middle East and Europe.

Despite stiff business conditions anticipated this year, the company still sees rice as a promising industry in the long term. Hence, it has a budget of 500 million baht for several plans to improve current facilities such as milling and processing plants in addition to adding new lighters for transport.

Diversifying to value-added products such as rice bran oil is also part of the company's strategy.

Mr Sombat said that the company was considering building three rice bran oil plants in areas close to its network of mills in Ang Thong, Ayutthaya and Chachoengsao.

Its fifth mill, in Phanom Thuan district of Kanchanaburi, is being built at a cost of 600 million baht and will be in operational by the middle of this year. It will add 1,000 tonnes of capacity to the 8,000 tonnes of daily production, marking AGR as the largest rice processor in Thailand.

AGR last year also teamed up with Singha Corporation to distribute packed rice under the Pundee label, which he said has received a warm welcome in Thailand's packed rice market worth over 50 billion baht.