Bangkok Post
Writer: Reuters News agency
Capital Rice Ltd, Thailand's third-largest rice
exporter, is shifting some of its business to Cambodia as the Thai
market shrinks because of government intervention that has diverted
grain into state stockpiles or made it too expensive to ship.
"We have built a medium-sized milling house in Cambodia, expecting
to start processing rice and export by the first quarter of this year,"
Wanlop Pichpongsa, the deputy managing director, told Reuters.
For the moment, Capital's plans for Cambodia are modest: this year it
expects to export around 30,000 tonnes of rice, whereas in normal years
it used to handle around 20% of exports from Thailand or some 2 million
tonnes.
But it shipped only around 1 million tonnes in 2012, when overall Thai exports fell sharply due to the intervention.
Capital's move illustrates a growing trend: Asia Golden Rice Co. Ltd,
Thailand's second-largest exporter, set up shop in Cambodia early last
year and others are sourcing rice from rival countries such as Vietnam
and Pakistan, shipping it direct to customers from there.
"We can't deny that the intervention scheme has forced us to move to
Cambodia as rice there is much cheaper than at home," Wallop said.
"We're not ignoring the rice business at home but it will get smaller
anyway if the government continues its intervention," he said, adding
Capital was concentrating in Thailand on premium-grade fragrant rice,
which was still selling.
The government won an election in July 2011 with a promise to pay
15,000 baht a tonne for paddy and buy every grain of rice from the
millions of farmers in the country if that proved necessary to raise
their income.
As a result, Thai prices rose but, against the government's
expectations, that failed to lift world prices significantly. Thailand
was priced out of the export market.
India, absent from the market after a food scare in 2007, returned in
September 2011 and stole Thailand's crown as the world's top exporter
in 2012, shipping an estimated 10.3 million tonnes against 6.9 million
for Thailand, according to the Commerce Ministry.
Thailand's benchmark rice was offered for export this week at $565
per tonne, way above rice from rival Asian countries at $390-$425 a
tonne.
Cambodian paddy is trading at around 6,000 baht a tonne, giving an
export price of $390 per tonne, a level that allows it to compete with
India, Vietnam and Pakistan.
"Our aim is to export largely to Europe under the EBA privilege," Wallop said.
The EBA – standing for "Everything But Arms" – is a European Union
initiative under which a zero percent import tariff is granted to poor
countries.
Cambodia wants to become a leading rice exporter in the next few
years, aiming to ship 1 million tonnes in 2016. It exported 800,000
tonnes in 2012, according to the United States Department of Agriculture
(USDA).
Until recently exporters had been sceptical of that ambition because
of the absence of adequate mills and ports. But industry officials are
giving it more credence as Thai exporters bring in investment and
expertise.
China, a big ally, is also providing support, helping Cambodia develop irrigations systems, for example, and building mills.
Capital and other exporters are also looking at other prospects as
Southeast Asia moves towards closer economic cooperation and "frontier
markets" start to open up.
"We're interested in expanding into Myanmar as well. However, we have
to wait for more clarity on Myanmar's investment law, especially as
regards agriculture," Wanlop said.
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