Fruition

Trade

Despite the poor progress of reaching Hun Sen's goal, it is noted that Chinese banks might just be willing to plough is some cash ($70 million?). PPP (27-08): 

'Son Kunthor, president of the Cambodian state-owned Rural Development Bank, told the Post that his Chinese counterpart proposed the establishment of $70 million in loans for rice milling, which would enable the production of between 270,000-450,000 tonnes of unmilled rice'. 

The bad news: 

'“This is their plan. We don’t know how much about it or if it will come to fruition, because first there are some conditions the government needs to ensure,” he [Son Kunthor] said'.

Hope to fulfil the dream is now heaped on Indonesia. An MoU was signed between Cambodia and Indonesia which would see 100,000 tonnes of rice head to Indonesia (PPP, 29-08). But ..., there's no timeframe, nor an exact amount. A respondent to the article questions the price to be received (higher than that of Vietnamese sourced rice?) as well as the shipping possibilities:

'how the rice will go to the port of loading ? as no vessel with rice was ever loaded in Sikhanoukville by any cambodian exporter . are these 2 gentlemen [Cambodia’s Minister of Commerce and Indonesia’s Trade Minister] on the photo asking themselves these questions'. 

Probably not. 

On the other end the Jakarta Post reports the signing on a non-binding agreement. An agreement meant as encouragement for Indonesian businesses to set up shop in Cambodia. It mentions the company Galuh Prabu Trijaya with extensive interests in fertilizer supplies. 

However background info on the company is scarce. Alibaba suggests 

'We are sole distributor of rice origin from Cambodian competitive price with Jasmine type and else We have hulled rice the best quality'. 

Quite.

Then the Jakarta Post (31-08) actually has an achievement to present:  

'Khy Thay Corporation, a Cambodian rice miller, said it was ready to ship up to 20,000 tons of rice to Indonesia starting this year and to buy Indonesian agriculture machinery valued at $380 million'.

Khy Thay? 

'Khy Thay is a family company established in 1930, which buys rice from farmers and sells it, husked or unhusked, to Thailand and Vietnam. The company oversees a farmers’ association with 1.2 million members, each of whom owns about a hectare of land'.

Hmmm, 1.2 million? Now I remember this figure. 

'Prabu Galuh Trijaya is the Indonesian partner of the Khay Thay Corporation'. 

But thinking practically: 

'Vietnam might try to squeeze out Cambodia, following its deal with Indonesia, by cutting short its sack supply,” Ika [ Prabu Galuh’s director] said, “This is a big opportunity for any Indonesian company to supply the sacks or even build sack plants here.”'

Finally back to China: 

'Cambodia expects to export around 300,000 tonnes of milled rice to China per year, Minister of Commerce Cham Prasidh said during the 44th ASEAN Economic Ministers Meeting in Siem Reap'. 

No idea as to when the expectations will be fulfilled, as reported by the PPP (30-08). 

Reality check.As an annually occurring event? The Phnom Penh Post (21-08) report Drought hits Cambodia. And then adds rice exports:

'The report [Econony and Finance Ministry’s review on the promotion of paddy production and rice exports during 2010-2011] listed expectations for 2012 to reach only 180,000 tonnes, equal to 18 per cent of the Kingdom’s 2015 export target of one million tonnes'. 

Reasons? Only a vague reference to drought-like conditions in the west of the country ...

Price surge?

ODI have forecast near-record level global rice production brought about by better monsoons over the Indian sub-continent. this may well imply lower prices, if ....

A sidenote on the price crisis. The Independent (01-09) notes that Barclays Bank made 500 million pounds on the futures market in the past years. Another company involved, Glencore, was quoted 

'... describing the global food crisis and price rises as a "good" business opportunity'. 

An official bank response: 

'The bank defended its actions, pointing out that trading in so-called futures contracts – an agreement to buy or sell a certain quantity of a product, at a given price on an agreed date – helped parties such as farmers and bakers to hedge against the risk of rising or falling prices. "Our clients include investment companies, food producers and consumers who, among other things, seek our help to manage risks"'. 

And whoops: 

'Barclays Capital analysts admitted in a note to clients in February that speculation did push up prices. Barclays said: "The second key driver is that commodity investors have begun allocating to commodities again after beginning 2012 heavily underexposed to the sector."'. 

A few days later (sept 5) the Independent quotes OXFAM as believing that climate change could well lead to more cereal price spikes in the future. Surprisingly all agencies quoted are calling for more investment in production. And here I was believing that strategic reserves would be the answer ... Now where did I read that rice prices were stable  for most of the year because of reserves/stockpiling in Thailand, India and China ...

Well, not in the following:

'The Asian Development Bank yesterday pointed out that Asean nations could help avoid world rice-price shocks by reducing export restrictions, placing less emphasis on self-sufficiency, retooling Thailand's rice-pledging programme and expanding coordinated rice policies with India and Pakistan.

Thailand is projected to return as the world's top rice exporter, but its pledging scheme, which guarantees farmers a higher-than-market price for their crops, provides disincentives to its exporters, resulting in the steady decline of rice-export revenues since late last year. As of May 28, exports were down by 43.1 per cent or 2.86 million tonnes, according to the ADB's working paper'. 

As reported in the Nation (31-08). 

Anyway, Cambodia has nothing to fear, come price surge and all; at least that was noted in the PPP (11-09): 

'Nina Brandstrup, FAO representative in Cambodia, said the high level should not be considered too dramatic'. 

And 

'“On balance, we are pleased that the food index remains stable, and expect it to turn down in the near future,” Peter Brimble, ADB deputy country director for Cambodia and senior country economist, said'. 

Oh well, so much for the concern about rising prices.

Follow the lead
Rice pledging. The Thai government seems to be convinced that it has signed deals worth 7.3 million tonnes (the Nation, 13-09). Only 4 million tonnes to get rid of, apparently. No word on the price agreed, so it is only guessing how much the scheme is actually costing the Thai taxpayer. 
The same source also reports the need to refinance the scheme. The Bangkok Post (13-09) simulataneously notes that the rice has been sold, but exporters believe that only 0,2 million tonnes have actually been sold. Suggestions are that if there were done deals these were at below market prices.

Meanwhile. Opposition in Thailand blames the government for falling agricultural prices (Nation, 23-08). Prices of rubber, palm oil fruit and coconuts have dropped considerably without the government able to do anything about it. 
That's how the economy usually works. 
The opposition though refrain from comment on the rice pledging; obviously farmers are getting better returns. The losses will befall to the government. But that is entirely a different matter.

Back on the ranch. The Bangkok Post (17-08) has an interesting article on a recent study of rural debt. Household debt levels are increasing 6% per annum, partly being driven by the government rice pledging scheme which is leading farmers to take out more credit to pay for farm inputs. As the lender is often informal, post-harvest there is often is a mis-match between achieved pluses minus the outstanding plus interest.

'The survey showed the government's agriculture measures did nothing to improve farmers' lives'.

So much for the heralded government input.

Wrapping up session

The ADB also contends that Laos will become a rice exporting nation, report by the Vientiane Times (7-09): 

'The Asean and Global Rice Situation and Outlook, which was released on the ADB's website recently, shows that Laos will be able to shift its status from rice importer to a minor rice exporter over the next 10 years, if it can maintain the growth rate of rice production above the growth rate of consumption'.

Hybrid rice; SL Agritech wants to expand from the Philippines big time. Their partner in Thailand would be Capital Rice to which SL Agritech will bequeath hybrid technology apparently without anything in return (source). 
Capital Rice make no mention of the link, but I do see that Capital are wanting in on the Cambodian market.

Nuts. Cashews. PPP (24-08) reports on cashew selling, by pointing out that Vietnam demands more nuts. Somehow demand is believed to be up, but prices are down. Not economics? Or poor reporting? 

Winners and losers

Losing out
Far from a happy new year, Thailand's rice exporters are expecting tough times. The Bangkok Post reported on the the third of January how the nation will be facing increased competition from none other than Vietnam and Cambodia:

'He [Chookiat Ophaswongse, honorary president of the Thai Exporters Association (TREA)] said Hom Mali rice also faced competition from Cambodian fragrant rice, which is sold at over $800 a tonne [as opposed to $1100 for Hom Mali]. The Cambodian rice has a comparable quality to Thai rice in terms of aroma and appearance'.

Adding to their woes, Thailand has 'lost' a couple of million tonnes of rice. The Bangkok Post (6 January 2012) reports that the Thai government is short of 5 million tonnes which they had expected to be part of the 10 million tonnes mortgage scheme. As exporters and millers are also reporting low stocks, the question is where is all the rice? Supposedly intelligent answers can be forwarded to the Thai government.

And on the horizon, possible lower prices? An indication that high commodity prices may not sustain is given by Bloomberg (12-01-2011) which reports on dropping global prices for corn, wheat and soy. Will rice follow? Logic says yes, as farmers respond positively to price incentives, demand stagnates and governments worldwide announce increased stocks. With the exception of Thailand that is ...

Winners?
Cambodia on the other hand seems to churning out major strides in both production as well as export.
Rice output from Cambodia has increased despite wide-spread flooding. An upturn of 2% is on the cards according to the Phnom Penh Post (26-12-2011). The same publication (13 January 2012) reported rising milled rice exports from 40,000 tonnes in 2010 to 100,000 in 2011.
An example? TTY Corporation which has long been an investor in Cambodia's rural sector, seems to have cornered the China-Cambodia rice trade after receiving permission to export up to 200,000 tonnes during 2012. So states the Phnom Penh Post (30-12-2011). In the age of free trade when one nation is seeking to access virtually every natural resource available, why ponder about such tedious things as official approval?

And more is in the pipeline. In the Phnom Penh Post (2 January 2011) a report that Hainan Agpro Inc intends to invest

'$500 million in Cambodia's agriculture sector'.

Though these intentions seem to be limited to revving up the rice export potential of Cambodia, the company 'supported' by the local government of Hainan own expertise seems to be limited to tropical fruits.

Business as usual
Short of reporters, Thailand's Nation (27-12-2011) gives up space for Bayer CropScience to comment on the recent floods whereby they expect their fungicides to sell better. It also wants to help out: '

The company has offered a programme in the Central area whereby it recommends a certain chemical spraying method, which has been proved to increase yield by at least 10 per cent. The programme will encourage farmers to use the right quantity of chemical spray at the right time'.

But will they make a profit? Tying in with their cooperation, but not related to recent floods the company hopes to produce new hybrids with aasistance by the IRRI.

'The aim of the programme is to improve rice quality and yield'.

And is not to make a profit?

Payback? Commercial success for Philippines premier hybrid rice company, SL Agritech, could see it list on Manila's bourse. Businessworldonline notes the cash reaped will retire debts and assist foreign expansion. Hopefully they can count on the Philippine's continued subsidies, it certainly enhances their business model. Note how they count on Cambodia as a promising breeding ground ground for their venture ...

Just another note of caution. Lays, globally known for it's range of potato chips, is being sued by the brave Julie Gengo as lays seem to be claiming all their ingredients are 'natural' which in their belief includes GM soy and corn. Are rice hybrids natural?

Process

High output
A curious message in the Phnom Penh Post (18-10-2011) announces the intention of one of Cambodia's largest companies to establish a

'high-output rice seed factory'

Unfortunately the article fails to explain what actually the intentions of the investors are. Of course to earn money, but how can a factory produce rice seed? Will the rice seed be produced at a high-output or is meant that the marketed rice seed ensure higher production?

The article tends to the former. But alas, as most main-stream press reports, it believes that higher productivity is an end, rather than a possible way to an end. More importantly are higher returns to farmers. Especially in the case of hybrid seed, higher productivity is off-set by higher costs and lower prices for inferior produce.

Lifting the veil
The Singapore investor mentioned in the article, Smah Prum Royal International Pte Ltd, is a rather unknown identity. It seems to be a rather recently established company with sole focus of investing in Cambodia's rice mill sector, which seems at odds with the announced seed factory.

A press release obtained from PSC Corporation Ltd reveals that it has a stake of 25% in Smah Prum, as do Leap Forward, while Meng Tai will have a 22.5% share.

Meng Tai, a Thai company based in Ubon Ratchathani has considerable experience in rice milling and seems a solid partner. PSC looks more like an investor group (PSC has previously invested in a lottery in Cambodia ...). Leap Forward seems an unknown identity.

And the remaining shares? They are owned by none other than Singapore Agritech Investment Holdings, which has a sleek web page ('sowing seeds of change') packed with good intentions:

'We help farmers or corporates that venture into the upstream in farming to implements sustainable and healthy foods, while making our world green'.

CEO is Loius Kek, who was also the director of Malaynesia Resources (now defunct?) which together with Sunland Agritech (sounds similar?) sought to bring hybrid rice to Cambodia in 2008 (see report from side column or pages from GRAIN and CAAI News). The site also seems to have no access to reports or company information .... To be continued?

A final last minute note, today (19-10-2011) PSC notes that it has terminated it's investment in Smah Prum due to a lack of a definitive agreement in Cambodia! Weird?

Trade
Again, quite a bit of newsfeed concerning trade and investment in rice in Cambodia. For instance:

• Chinese firm seeks rice from the Kingdom (Phnom Penh Post, July 14, 2011). Slight problem, the company is seeking rice to supply it's Guangdong mills, whereas Cambodia would prefer to export milled rice.

• A month later, a deal later. This time, Chinese company COFCO will import 1,000 tons (Phnom Penh Post, 25 August 2011). The same article also notes that for exports to China to be a success the Cambodian government reaction is required:

  'Plans for a Cambodian rice-testing laboratory, required by Chinese inspectors to allow Cambodian imports, are also under way.Agriculture, Forestry and Fisheries Minister Chan Sarun and Chinese Commerce Minister Chen Jian signed a memorandum of understanding last Saturday confirming the two nations’ co-operation on a testing laboratory'.

• The Cambodian "conglomerate" Canadia is building a $8 million processing plant (Phnom Penh Post, 26 July 2011) .
  

World prices for rice are continuing to gain
Bloomberg puts it down to Thailand's polls which brought a rural friendly government in the saddle which promises to give price guarantees for rice to farmers, thereby bringing all sales to a hold as millers and storers hope to see price guarantee rewards.
Thailand is counting on it's higher quality to be able to sell, whatever the price. That might seem folly, price elasticity would determine that higher prices lead to lower demand. Additionally there will be undercutting from other producers as well as promoting other nations rice programmes as well as encouraging illegal rice imports from Burma, Lao and Cambodia.
Already I read that in north Lao, farmers are shifting their cash crops from maize to rice. Then in the Phnom Penh Post (August 3, 2011) an article implies that Thailand's policy will undercut Cambodia's own policy of exporting processed rice.

An even more recent article in the Phnom Penh Post (26 August 2011) suggests the Thai rice industry is actually interested in investing in Cambodia's rice sector. So as to undercut their own position.

Enter the carabao
Then on the subject of hybrid rice, SL Agritech, one of Southeast Asia's hybrid rice leaders, seems to be contemplating entering Cambodia:

'“We are looking at starting the shipment of seeds to Cambodia and to start planting there in the fourth quarter,” SL Agritech President Henry Lim Bon Liong said in a telephone interview.
Under the joint venture, he said seeds will be given by SL Agritech to be used for the plantation, while its partner firm will provide the labor and land in Cambodia.
He said that for every produce sold there, SL Agritech will be paid with royalties'.

Oddly they seem to ignore current market conditions which hardly give any space for hybrid rice.

Elsewhere

Over the past few months, there is not much to report on Cambodian affairs, it seems that conform market freedom and lack of incentives for companies, not one seems interested.

Vanuatu
That does not mean that outside of Cambodia the story is the same. China is heavily promoting hybrid rice as it seeks to reward it's friends (but neglects Cambodia). One of the strangest is where China announces to set up shop in Vanuatu. Having worked there myself, a long time ago (it must have been more than 20 years ....), it's odd that China would be willing to invest and that Vanuatu willing to receive.
No rice cultivation takes place and consumption takes place in the urban centers. The urban centers profit from a good supply chain from NZ and Australia which ensure relatively cheap imports. However the rural poor are also interested in consuming rice so one would think that being able to produce themselves would solve this problem. However inter-island transportation fees are often more expensive than those from overseas so if there 1 large scale project no doubt this would fail to provide cheap rice for all.
What would be required is getting farmers to grow rice for their own sustainability, thereby eliminating transport fees. But in such a system there's little need for hybrid, if anything the opposite ...

Tripling income for SL Agritech?
The company SL Agritech (from the Philippines) is becoming more aggressive in acquiring market share. Besides going public and reaping cash for further expansion, they have now announced that they will export seeds to Vietnam, distribution to be undertaken by Dai Thanh Agritech. It seems though that this company may well be a subsidiary of SL Agritech (there were until recently no mentions made of this company according to Google), which despite the company SL going public is not transparent in it's operations.
The SL Agritech CEO (Henry Lim) in another article while commenting on the Vietnamese exports, claims:

'It has been proven that farmers planting hybrid seeds will not only double or triple their harvest but will also dramatically increase their income compared to their production when they plant the traditional inbred seeds variety'.

Possibly referring to Philippines as research in Vietnam has disproven both claims ..., but heh, how else can you sell hybrids if not by promising heaven and earth?

Superiority
From China news (uncovered by Greenpeace) that companies promoting hybrid have inadvertently also begun to promote GM hybrids as well, a claim denied.
Even Yuan Longping, China's 'father' of hybrid rice, focuses on caution with GM, as any possible consumer adversity still needs to be tested.

'But Huang Dafang, a member of the bio-safety committee affiliated to the MOA, insists GM crops have proven safety in previous animal testing.
"We are technically advantageous in hybrid rice planting. The genetically-modified technology could ensure China's superiority in food production," said Huang'.

Everyone seems in a hurry.

In a separate article a lawyer is reported to have tried to access info on GM rice trials in China. Naturally the courts blocked the request as the info was a 'state secret' ...; that's until the public find out for themselves (see contaminated milk scandal ...).

There goes the profits ...
GM-ed rice gets Bayer in trouble in the US resulting in it having to pay damages of $48 million, which it will fight. They definitely believe that that the product is what consumers want, so they will give it to them without even notifying the customers ... Power to the company!

Economics Today: no hybrids for tomorrow?

From the April 2010 issue of Economics Today (title page 'Danger! Hybrid Rice'), two articles which look at hybrid rice in general and it's significance to Cambodia.

The first article entitled

'Hybrid Seed. A Ponzi Scheme for Farmers'

draws on my own experience as well as that of GRAIN, so it's obvious which direction the article takes. Though the title is slightly misleading, the article ends by citing GRAIN's Rivera:

'It's a choice farmers ultimately have to make'.

Even though technology and markets will probably drive farmers the way companies will want them to go. The article itself I've copied and uploaded (PDF version: 1.3 MB).

Furthermore an interview with Winfried (of DED and CEDAC), who is also asked to comment on hybrids. Overall a bit disconcerting if you are a hybrid rice seeder trader. The interview is also available online (PDF: 0.7 MB).

The start of the end?

A Filipino publication, Businessworldonline, mentions that SL Agritech will start to grow hybrid rice in Cambodia soon:

' "For our hybrid seeds, we are going to plant them in Cambodia… late this year. We will supply them with seeds," SL Agritech president Henry Lim Bon Liong said in a recent phone interview. ...
"In the future, we can also do contract growing [premium rice] in Cambodia and export it because the cost of production there is lower," Mr. Lim said, adding that producing rice in Cambodia costs half than in the Philippines'.

SL Agritech is essentially a Filipino company with a big share in the nation's hybrid rice (seed) production and distribution. Them mentioning coming to Cambodia is for sure to be taken serious, though ultimately to make things work for them they will need to grease the wheels, find farmers willing to work for them, find land (not so easy) and pay well. My thinking? It's going to be tough.