Many challenges face sector including poor quality of some paddies
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The target of exporting 1 million tonnes of rice is top of the agenda for the third mandate of the Cambodia Rice Federation (CRF) from 2019 to 2022.
The 1-million-tonne target was set up by the government in 2015, but it has failed to achieve it so far, with exports amounting to just 626,225 tonnes last year.
There are many challenges causing the failure, including the inconsistent paddy quality and poor post-harvest handling. Inadequate access to finance forces local millers to compete for paddy rice with buyers from Thailand and Vietnam. The irregular supply of paddy fields, high operation costs (electricity, logistics, transportation, and seaport access), poor market information services and insufficient technology platforms for data management and knowledge dissemination among other problems have also been behind the deficit.
On top of that, globalisation, digitalisation and protectionism present tough challenges that negatively affect low-income producers and farmers.
CRF’s new vision
“Though challenges are upfront, the CRF’s new vision is to bring global recognition to Cambodian rice and work towards the 1-million-tonne goal,” says newly elected CRF’s president Song Saran. “We will set up policies and action plans to achieve this target and place Cambodian rice on the global map.
“We must also work to ensure sustainability, equality and responsible farming principles in the industry. To this end, we will issue policies and action plans for the next three- and five-year periods,” says Song, who is also the chief executive officer of Amru Rice.
To reach the goal and scale-up production of Cambodian rice millers and farmers, Song says the CRF has laid out six main points.
First, promoting contract farming, creating new markets through innovation of new products and maintaining existing markets both local and international.
Second, improving competitiveness by reducing input costs, logistics and port charges.
Third, enhancing the investment in research and development for value-added chains from rice husks to damaged rice.
Fourth, securing loans for working capital for rice millers and farmers with other non-collateral loan products such as invoicing financing, warehouse receipts and stock financing.
Fifth, partnering with the Ministry of Agriculture to research and develop new marketable seeds for the China, Europe, and Asian markets and making them available for rice milers and farmers.
Sixth, promoting access to high-tech farming.
“We will do a six-month task review and evaluation with the members to monitor the action plan – what works and what does not work – and discuss finding solutions,” Song adds.
He says the federation will adhere to the “Public-Private Producer Partnership” to direct benefits to all rice millers and farmers by achieving competitiveness, hi-tech smart farming, “agripreneurs”, diversified markets and ease of access to finance.
“In the CRF’s third mandate, we must work closely with multi-stakeholders from related government agencies, non-government agencies, local and international institutions, agriculture cooperatives and the private sector (especially rice millers) working in coordination to improve the competitiveness of the rice value chain from farming to markets and to create the innovation for value-added products made by by-products from husk to damaged rice,” Song adds.
Milled rice exports through formal channels increased strongly after 2010, when the Royal Government of Cambodia issued a policy called the “Promotion of Paddy Production and Rice Exports”, from about 100,000 tonnes in 2010 to more than 625,000 tonnes in 2018, according to the Cambodia Trade Integration Strategy 2019-2023.
It says Cambodian paddy rice production has increased rapidly in the last decade, both because of an extension of the harvest area and improvements in the yield. Cambodia produced 10.4 million tonnes of paddy rice in 2017, up from 4 million tonnes in 2000. This increase is both because of an increase in the cultivated land (from 1.9 to 2.9 million hectares) and to improved yields (from 2.1 to 3.5 tonnes a hectare).
Song, however, foresees that the rice exports will see a slight increase or stabilise this year compared with last year. This is because Cambodia farmlands were affected by drought. Siem Reap, Pursat, Battambang and Banteay Meanchey, Kampong Thom, and Kampong Cham were regions badly affected.
For the first seven months of the year, the country’s exports of milled rice rose just 3.7 percent to reach 308,013 tonnes.
The exports are expected to reach 700,000 tonnes to 800,000 tonnes by the end of the year.
“To achieve 1 million tonnes of rice exports, CRF will work with agriculture communities and farmers to identify the farmlands (size, amount and seedling) to grow rice for export, and other farmlands to grow rice for domestic consumption,” says Song.
“We will study how many hectares of farmland to grow “Malys Angkor” (which includes varieties such as Phka Rumduol, Phka Rumdeng, Rumdeng, and Phka Romeat – premium fragrant varieties), and how many hectares to grow Sen Kro Ob – another fragrant variety – and how many hectares to grow the medium-length and long-grain varieties including brown rice, IR66, IR86, IR504 and Neang Minh, Chulsa.
“Having figured out the exact number of farmlands, varieties of paddy rice and the amount of paddy rice, it is easy to seek the market for the farmers and reach the target of exporting 1 million tonnes of rice by 2022.”
China main destination
China has become Cambodia’s main destination for milled rice in recent years, with total exports of almost 170,000 tonnes last year.
It purchased 123,361 tonnes from January to July this year, a 40 percent increase.
China agreed to increase the quota to 400,000 tonnes for 2019, up from last year’s 300,000 tonnes.
However, last year Cambodia did not fulfill the quota for the Chinese market, shipping only 170,000 tonnes of the 300,000 then allowed.
Rice industry insiders say that Cambodia would not meet the Chinese export quota of 400,000 tonnes of milled rice this year in an agreement signed with Cambodia.
China allows only its state-owned food processing company – China National Cereals, Oils and Foodstuffs Corporation (Cofco) – to import rice from Cambodia.
Only 26 local rice millers are selected to pass the sanitary and phytosanitary (pest-free) checks to export rice to China and some of them do not have rice-export permissions.
Among the 400,000 export quota of milled rice offered to Cambodia, China demands the premium and fragrant rice of around 100,000 to 200,000 tonnes.
China also has other rice suppliers such as Thailand, Vietnam and Myanmar. Therefore, the country studies the milled rice price before it decides from where to purchase.
China will suspend imports of milled rice from Cambodia if it knows the rice price is cheaper from Thailand and Vietnam. If the Cambodian rice is competitive compared with Vietnam and Thailand,
In addition to premium fragrant rice and fragrant rice, China also orders the white rice or IR variety.
Cambodian white rice is $60 a tonne more expensive than Vietnam, Thailand and Myanmar, so Cambodia loses out.
Because of this year’s drought Cambodia may not meet its quota for the Chinese market.
Song, however, says that in order to meet the quota that China offered to Cambodia, the CRF will work with its Chinese counterparts to negotiate and find a formula to try to achieve the target of 400,000 tonnes.
“We will lead a delegation to China to meet Cofco to discuss the issue soon. We will review the list of exporters and add more rice millers to the exporting list to China, seek rice seedlings to meet Chinese needs and we will hold a workshop and discuss with Chinese counterparts such as the Bank of China, Chinese companies, [local] governments and relevant stakeholders to push for the 400,000 tonnes of exports,” Song adds.
Negotiations with the EU
The CRF will also strengthen the existing market, especially the European Union (EU) market, even though exports have fallen recently. Before, the main markets were in Europe – where Cambodia enjoyed tariff-free market access from September 2009 to January 2019 – then increasingly so in China. In 2018, Cambodia exported 626,225 tonnes of milled rice, mainly fragrant rice (493,597 tonnes), followed by long-grain white rice and parboiled rice.
Now, rice exports to the EU have dropped around 20 percent after the European Commission (EC) imposed tariffs on rice imports from Cambodia. The EC is the executive arm of the EU, a trade group of 28 European nations. Cambodia rice exports to the EU were 51,552 tonnes from January to March. However, they were only 41,927 tonnes from April to June.
The EC has decided to re-introduce import duties that will be steadily reduced over three years from 2019 to 2021. During the first year, 175 euros ($199.5) per tonne will be levied, 150 euros ($171) in the second year and 125 euros ($142.5) in the last.
Song wants the CRF to have a dialogue with the EC and seek a partnership with it to support the agriculture sector in Cambodia. “We will try to negotiate with the European Union and ask them not to put the safeguard clause forward. They want the Cambodian farmers to have a better living standard and I think the EU also wants the private sector to help the farmers as well, so we will discuss this issue,” he adds.
“The CRF is a private institution and works with 1,000 agriculture communities of around 500,000 farmers who grow rice to export to the European Union. If we take a look at the rice industry, it is not related to politics.
“The CRF wants to discuss with the EU directly. We want to know them. We are concerned that when they combine trade with political issues, Cambodian farmers will suffer.
“Thus, we [the CRF] and the EU will discuss and study what we want and what the EU should give us.”
The CFR will also seek new markets including South Africa. However, the ASEAN region also likes Cambodia rice, so the CRF will also try to produce a variety of the crop to meet their needs.