ASEAN KEY DESTINATIONS
Rice prices continue to fall
As buyers swoop in to purchase Thai rice at garage-sale prices, Cambodian exporters are dealing with lower than usual rates, and the results are being felt all the way down the supply chain to the farmers themselves.
New figures from rice industry publication Oryza show that the cost for Cambodia’s jasmine rice has declined sharply in recent months, in tandem with falling prices in Thailand brought on by that country’s failed rice-pledging scheme.
“This is a concern for everyone in the rice industry now,” said Khan Kunthy, CEO of Battambang Rice Investment Company, adding that sales have also dropped.
Kunthy said that export volume for the first few months of this year was largely based on orders from 2013.
“There is no good sign of orders for this new year yet,” he said.
In 2011, Thai Prime Minister Yingluck Shinawatra vowed to pay farmers above market rates for their rice.
But stockpiles have accumulated to record levels, flooding the global market with new quantities of supply and driving down prices.
Thai officials estimate that there are 15 to 18 million tons of stockpiled rice. Oryza reported that the Thai government planned to offload at least one million tons per month from January to March.
Thai hom mali rice is now at $955 per ton, a decline of 17 per cent compared to the price in December last year, when it stood at $1,163.
The latest figures from Oryza show that, at the end of February, Cambodia’s jasmine rice cost $885 per ton, a 7 per cent decrease from $950 per ton in December.
“We have no other choice besides lowering our rice price, even if we have to put up with the loss if prices went even lower than they are now, or no one will buy from us,” Kunthy, of Battambang Rice Investment Company, said.
Kunthy, who runs a newly established rice milling operation, is also under pressure to repay the bank for a loan he took out to help set up the mill.
Lim Bun Heng, owner of Loran Company, one of the country’s largest rice exporters, said declines in Cambodia’s jasmine variety will squeeze margins for all involved.
“Cheaper prices of milled rice also mean cheaper prices of paddy rice that the miller will buy from farmers too,” Bun Heng said, adding that “we cannot buy expensive paddy rice and sell it at a lower price”.
Export volumes are also decreasing as buyers look for cheap stockpiled product. Bun Heng said his company experienced a 30 per cent decrease in exports over the first two months of this year.
“The Thais are selling their rice very cheap, so the buyers are switching to Thailand,” he said.
Last year was a time of enormous gains for the rice industry, as export volumes doubled. But the rice scheme has upended the global market, setting back not just Thailand, which used to be the world’s largest exporter, but its neighbours, too.
In January of 2012, Cambodia exported 9,700 tons of rice. Exports for the same period in 2013 jumped to 25,700 tons. But in January, the pace slackened, with only 21,500 tons sent out of the country.
Exporters and rice millers should keep their fragrant rice paddy and wait until the supply in the global market declines, advised Srey Chanty, an independent economist who focuses on agriculture issues.
“I think in the next three or four months, the fragrant rice price will bounce back to normal,” he said.
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