Flood News
Following up on last blog entry, it seems China are now prepared to allow Cambodian rice imports. Phnom Penh Post ( 24 May 2012):
'After more than a year of speculation on Cambodian rice exports to China, a rice exporter this week said China has granted the Kingdom permission to ship milled rice northward.
Despite a growing stack of quasi-agreements for exports, regulatory issues have plagued the prospects of tapping one of the region’s biggest markets for rice.
A green light for exports to China would be a boon for a sector that has heard little positive news this year.
“All the administrative problems are removed. It is really good news,” Sok Hach, president of Golden Rice (Cambodia) Co Ltd, said in an email.
He declined to say how the agreement was met or when exports would start'.
The article continues with:
'The price of shipping rice to Europe climbed by 50 per cent between February and April, the Post reported last week.
A continued increase in oil prices presaged no end to further jumps in logistics costs.
Regulatory issues aside, Sok Hach said Cambodia still faced tough price competition.
Even if the Kingdom’s processing and logistics costs were on par with exporting giants such as Vietnam and Thailand, China would probably import no more than 100,000 tonnes from Cambodia this year, he said.
A Chinese delegation last week signed a memorandum of understanding with Cambodia’s Power Partner Profit Group for 500,000 tonnes of milled rice, or half of Prime Minister Hun Sen’s 2015 export goal.
The MoU was one of several such informal agreements, none of which have yet to yield true exports'.
Two birds in the bush?
A slow outlook (Phnom Penh Post, 17 May 2012) is how the balance is made of Cambodia's rice exports.
'Rapidly increasing logistics costs and low regional rice prices would hinder Cambodia’s rice-export target this year, with one expert saying that milled-rice exports could fall to half of last year’s shipments....But as oil prices rise, euro zone buyers are looking into their own backyards.
Even with tax-free treatment, Cambodian rice was more expensive this month than rice from Italy, Europe’s biggest rice producer, Khmer Foods Co general director Kim Savuth said yesterday.
Adding to the fuel cost was the end of a pricing war between shipping companies in the region, Kim Savuth added'.
Other problems must be surfacing as well, especially as the euro continues to weaken.
The article also includes the yet to become famous one-liner:
'Golden Rice Co Ltd Sok Hach said paperwork problems had held up the 48-tonne shipment, but that Cambodian rice would soon “flood the Chinese market”'.
And that is exactly the government strategy. A report
claims that the Ministry of Agriculture believe the export will pick
up and previous mention goals will be attained. The logic fails me:
'He [Minister of Agriculture] acknowledged, however, that low rice prices in the region had led to a relatively slow start during the first quarter of the year and did not offer export figures for the three-month period'.
Surely weak consumer
demand results in lower prices. Economics is that lower prices lead to
more demand!
And what is the flood? Another Phnom Penh Post article
highlighting China investment in Cambodia, includes a deal worth $100
million had been signed. It also included the following:
'Soma signed a 20,000-tonne agreement with Yunnan Provincial Overseas Investment in June [2011], the Post reported.
However no direct rice exports to China followed, and officials said a recent trial run failed to pass Chinese inspections'.
And the title of the article is
'China quick to act on trade promise'
A funny sideline is if you look up Soma farm news on their website you receive the following news:
'Setup was confusing because I was not familiar with Yahoo Sitemap and the mambot did not explain it clearly enough for me.
There is only one field to fill-in on the mambot: "YahooSiteMap Key"
If you hover over the that word, you get a popup example of the YahooSiteMape Key. The example shows a number like this "d08ed6cg02tt988c".
Then sign up for Yahoo Site Explorer at: https://siteexplorer.search.yahoo.com/mysites.
Put in your website's URL. Then hit "Authenticate". This will display some key numbers. Choose the short number that looks like the example you get from your mambot when you hovered over "YahooSiteMap Key."
In yahoo you will see:
"If you have problem with downloading the authentication key, please create a text file named as y_key_e727fd6a45f03ea1.html, put this string d08ed6cg02tt988c into the file." The short number "d08ed6cg02tt988c" is the key you need for your mambot. Go back to your mambot and put in the key'.
!!!? Has been on the webiste for nearly a year!
A report
on a new rice mill (Phnom Penh Post, 16 May 2012) results in a little
discussion. Sticking point is whether $6 million investment for milling
20 tons a year is worthwhile ...
(answer: not)
[One
problem I can see coming, with Thailand on the verge of following
prices downwards is whether or not the local traders in Cambodia may
have purchased at too high prices? A debt crisis?]
Other trade's
Cambodia is not the only country in the region hoping for better export opportunities. A report on the Lao News Agency website highlights the achievements of Lao World Company:
'The model rice mill with International Standard certificate (ISO) 9001 of Lao World Company invested by Thai entrepreneur was worth of almost USD 100 million.In the first four months of this year, approximately 600 tonnes were exported.The volume of rice export compared to last year's figure increased to 1,000 tonnes, she said, adding that the Lao rice is a potential competition in overseas market. However the paddy rice supplying to the rice mill is still limited that has been a current problem.The main market is 15 European countries such as France, New Zealand [!?], Holland and Germany'.
Meanwhile Laos is being mentioned as a potential source of maize for the burgeoning animal feed industry of Thailand, according to the Bangkok Post (April 16, 2012):
'To alleviate the shortages, the cabinet yesterday approved a proposal
from the Commerce Ministry to import 30,000 tonnes of maize from Laos to supply small feedmills'.
Amusing at the same time (April 17 2012) the Phnom Penh Post reports:
'A Thai ban on Cambodian corn and other agricultural products led to a 65 per cent year-on-year drop in the Kingdom’s corn exports during the first two months of the year, officials claimed yesterday'.
The logic fails me, once more I'm afraid.
FAO.org has an overview of current export rice prices. It's odd to see a substantial increase in price (by around 10%) in Thailand while prices in other countries have dropped ...
Bloomberg though briefs on a report from the UN:
'In Asia-Pacific, food price volatility remains a “threat” with retail rice costs in many countries 10 percent to 30 percent higher than in 2011 ...'.
FAO also are counting on the global output of rice to rise by 1.7%, while exports will decrease by nearly the same factor; more countries are becoming self-sufficient.
The biggest and what not
With Thailand and Vietnam vying to be the globes largest rice-exporter, odds are now that India may well slot the top position. Businessweek quotes IRRI sources as they predict that India is gaining a good price differential (Indian rupee is a poor performer, yea) over it's competitors as well as having good harvests enabling India to take up opportunities left by rice export stalwart Thailand.
As the Thailand rice pledge scheme seems to be unravelling the Thai government are rolling out new tactics (The Nation, April 13, 2012). One would to get local competitors to cooperate so as to create
'a trading system to stabilise prices in the world market'.
It's a wonder that these ideas sprung up with international prices on the downbound train. As prices go up, there tends to be no need for cooperation ...
The Bangkok Post (April 28,2012) reports how the pledging scheme is fuelling corruption.
'According to Anant Dalodom, president of the Horticultural Science Society of Thailand, some Thai farmers are being exploited, as was often the case in the past."Rice farmers in many areas transport their paddy to rice mills but government officials refuse to immediately issue vouchers, citing a lack of personnel even though the Commerce Ministry specified that the vouchers will be issued within three days," Dr Anant said'.
And that is just one of the problems. Mention is made of rigging of scales, moisture content meters and estimates of foreign content.
More specifically the Hom Mali trick. This strain of fragrant rice can only be grown in certain provinces of Northeastern Thailand. So officials/traders buy the rice cheap and truck it to these provinces and reap the nearly 100% price differential!
Just another example of why governments should stick to governing not doing business.
By the way, the same publisher on the 21st of May 2012 reports that possible losses to the rice pledging scheme may amount to $2 billion!
And of course the private sector is not happy. Again the Bangkok Post reports (23 May 2012) on how the Thai government is unable to push through rice export deals without huge losses (a deal failure with Bangladesh is cited). And if willing to cut cheaper deals it will encroach on the private sector:
'"It's wrong for the government to become a large rice exporter because with the administration transparency is lower than the private sector. The only companies that would remain are those with good connections and a willingness to pay under the table. This is a dangerous precedent for the rice industry and would end free trade for the sector," he [Chookiat Ophaswongse, honourary president of Thai Rice Exporters Association] said'.
In a Special Report (23 April 2012) by the Bangkok Post it once again signals the disasters up ahea:
'Experts are sounding warnings again about the government's rice mortgage policy, saying the scheme is ruining the local and overseas markets for Thai rice while creating a huge and unnecessary debt burden for the state'.
however proponents declare it to be conerstone of their policies to target poorer farmers. The debate though should be whether the destructive government involvement could not be substituted with pure transfers of cash rather than such an elaborate scheme ...
Other Cambodian interest
A site with current up to date info on rice prices in Cambodia is the site by Mekongoryza. Interesting it shows for instance that Cambodian rice prices are above those of Vietnam.
A report from the Philippines:
'Cambodia Gets PH Rice Seeds
By MARVYN N. BENANINGApril 19, 2012, 4:07pmCambodia will soon get hybrid rice seeds from the Philippine Rice Research Institute (PhilRice) for mass cultivation.Sources at the Department of Agriculture (DA) revealed on Monday afternoon that Cambodia relies on traditional varieties and does not use synthetic fertilizers and the introduction of PhilRice hybrid rice seeds would raise its current average rice output at 2.5 metric tons (MT) per hectare.The average Philppine rice output is 3.74 MT per hectare. However, Cambodia has a population of about eight million but its rice growing area is about the same as that of the Philippines.Agriculture Secretary Proceso J. Alcala said that Cambodia is willing to supply part of the country’s rice requirements at prices much better than those offered by Thailand and Vietnam.Philippine Confederation of Grains Association (Philcongrains) president Herculano Co. said many Cambodian farmers rely on Vietnam rice mills to process their palay'.
What's wrong? Seeds may not be the answer to the problem, but economics. Lower yields translate in higher returns? It's possible. But not what you want to hear when pushing your hybrid seeds.
