Government wants banks to lend more cash to millers to gather rice

Sok Chan

Harvest season of the premium fragrant rice scheduled to start early this month

The government is urging commercial banks to loan more money to rice millers including exporters so they can afford to collect the crop from farmers during the upcoming harvest season of premium fragrant rice.

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The season is scheduled to start early this month.

From early November, farmers start harvesting the premium fragrant rice, including Phka Rumduol, Phka Mali, and Phka Rumdeng and other varieties. These are the best paddy rice crops in Cambodia.

More than $250 million is needed to absorb the 800,000 tonnes of rice in the upcoming harvest season, while the government’s emergency loan can provide only $50 million to give to rice millers for working capital, says Kao Thach, chief executive officer (CEO) of the state-own Rural Development Bank (RDB).

Kao adds the RDB’s $50 million has already been released for the first harvest season – the  Sen Kro Ob variety and other white rice in July until October this year.

He says during the first harvest of white rice and fragrant rice variety – Sen Kro Ob which lasts from July to October – rice millers could cope with about 1 million tonnes of paddy rice, worth about $350million. This number only includes the potential of 34 rice millers who are members of the RDB.

They are located in Battambang, Banteay Meanchey, Pursat, Prey Veng, Kampong Thom and Kampong Cham. He adds farmers can sell their rice for $275 to $300 per tonne.

“RDB’s $50 million loan had been provided to the rice millers during the harvest of the Sen Kro Ob variety which ended in October,” Kao adds.

“In total, counting the RDB loan, some commercial bank loans and the rice millers’ working capital, they could absorb 1 million tonnes of Sen Kro Ob rice costing around $350 million.”

He says November marks the start of another harvest season for the premium fragrant rice and adds rice millers are always encountering working capital issues during the mid-harvest and post-harvest period because they run out of cash. Furthermore, some commercial banks are not keen on providing loans to agriculture.

“If the commercial banks can give another $250 million,  we can stock 800,000 tonnes of rice for milling to export. From experience, we have learned after the harvest we have no rice to mill for export, so we cannot export for the whole year,” says Kao.

“With a post-harvest of premium fragrant rice, we can have a stockpile of 800,000 tonnes of paddy rice for milling, so we get 1 million tonnes of milled rice. Now the issue is the need for working capital to buy rice. The loans we have are not enough to absorb more paddy rice.”

A report from the Ministry of Agriculture, Forestry and Fisheries shows that as of October this year the yield of the rainy season rice this year is more than 1.385million tonnes from 352,323 hectares of harvested land, a decrease of about 313, 679 tonnes from the same period last year.

Based on this figure, it is assumed that the total yield of the rainy season rice this year will be likely lower than last year because cultivated land this year is more than  2.645 million hectares while it was 2.68 million hectares in 2018.

In addition to that, harvested land fell to 73,924 hectares and the yield fell to 54 kilogrammes per hectare because of more droughts and floods compared with last year.

The report adds there was a drought from mid-July until mid-August despite it being the traditional rainy season. After the drought, farmers were hit by floods that delayed cultivation, decreasing yields.

An official from the Agriculture Ministry says that the yield will be changed because more than 2 million hectares of paddy rice will be harvested from early November.

RDB’s CEO confirmed that the infrastructure support such as warehouses and silos can absorb 800,000 tonnes of paddy rice separate from non-RDB warehouses and silos used by other rice millers across the country.

He adds the government fund to support rice millers to build silos and warehouses will be enough to store the crop during the harvest season. Kao says that RDB’s loan is to build warehouses and silos in Kampong Thom, Takeo and Prey Veng and Battambang.

Song Saran
Cambodia Rice Federation

The warehouse in Kampong Thom can stock 100,000 tonnes, Takeo 100,000 tonnes, Prey Veng 50,000 tonnes and Battambang 200,000 tonnes. Silos in the five provinces can dry 1,500 tonnes per day at each location.

Song Saran, president of the Cambodia Rice Federation, says the CRF’s 327 members are preparing to purchase the paddy rice in the new harvest season in 2019 because it will be coming in November and December.

“We have a warehouse and a silo, so we can do 1 million tonnes of paddy rice. Thus, if we have enough funds, fast transport and good logistics and harvest, we can do it. The floods damaged roads, but it was a small issue, so we hope the transport is better than before,” he adds.

“I think we can collect 1 million tonnes in the rainy season for the fragrant rice and some white rice. We need about $300 to $400 million for the big harvest in November,” Saran adds.

“The harvest of the premium fragrant rice has a three month period, so we need around $100 million monthly to collect it. Our rice millers and members have some money but not enough, so we ask the banks to continue giving loans to the rice millers in a timely fashion.”

So Phonnary, executive vice-president and chief operations officer of Acleda Bank, says Acleda will not be strict about loans to customers in the agriculture sector if they fulfil the requirements of the bank.

She adds that Acleda’s total loan portfolio to agriculture is 19.32 per cent of its budget, amounting to $695 million among the total loan portfolio $3.59 billion as of August 2019.

Agriculture loans mostly go on crops, livestock, fisheries, milled rice and rice exports, among other items.

Kao Thach, CEO of the Rural Development Bank

She adds the bank started lending $12 million to 180 loan receivers in the industry as of August this year and that  non-performing loans amounted to 1.9 per cent in this sector.

So says that if the customer’s history is good, the bank is not reluctant to offer a loan. However, she adds that all loans have to meet certain criteria and conditions. “If they meet the condition,” she says.

“We have more than 152,799 customers in the agriculture sector. Of which 180 customers are in the rice mills and rice exports business,” she adds. “Our loan is given to all customers, either small, medium or large scale farmers.”

She says the period for repaying a loan is based on the season – from three months to six months and also nine months to one year. “Our loans to the agriculture sector is not strict because the customers meet our requirements,” So says.

For the RDB, any rice millers – both small and medium-sized – who want funds from the government, must have a warehouse to store rice and use the stock as collateral to get funds to buy more rice.

“We provide all kind of rice millers who can stock and mill,” he adds. He says a small rice miller’s role is to collect the rice and mill it then sell it in the local market.

Chan Pich, general manager of Signature of Asia, says that currently all rice millers including his company are ready to purchase the premium fragrant rice which is due to be ready from November to January.

He adds that the yield for the paddy rice this year is difficult to predict because of the floods and droughts.

“Now we see an improvement in the price of rice as the government invests in silos for rice millers, so the silos can contain more rice. Silos are not an issue. This year, the price of rice will be the same as last year, or higher,” he adds.

According to the latest report from the Ministry of Agriculture, during the first nine months of the year, Cambodia’s exports of milled rice grew by a moderate 2.3 per cent to about 398,586 tonnes compared with the same period last year.

The same report notes that China was the largest buyer of Cambodian milled rice, importing 157,793 tonnes from January to September. This is equal to 40 per cent of Cambodia’s milled rice exports. China is followed by France and Gabon, with 53,723 tonnes and 21,682 tonnes respectively.

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