New initiatives target barriers stifling growth in rice industry

Content image - Phnom Penh Post
Commerce minister Pan Sorasak (second left) at the launch of the rice brands on June 23. Heng Chivoan

Agriculture remains the main source of income for many Cambodians living in rural areas, now more than ever in the context of the Covid-19 pandemic. Agriculture is considered a major player in sustaining people’s livelihoods and was minimally affected by the crisis. In 2021, agriculture contributed about 24.4 per cent of the Kingdom’s gross domestic product (GDP).

At the June 23 inauguration of the collective trademark of Sen Kra’op (SKO) fragrant rice and Damnoeb Sbai Mongkul (DSMK), a premium glutinous – or sticky – rice, Ministry of Agriculture, Forestry and Fisheries director-general for agriculture Ngin Chhay said that although the rice sector has grown significantly, trends of global change have posed a number of challenges.

 

“There is a shortage of quality rice seeds for cultivation due to limited private sector investment in the seed industry. Some farmers are unaware of the proper cultivation of these seeds,” he said.

He added other challenges included a lack of irrigation systems, farmers’ use of incorrect fertilisers and pesticides and the high prices of fertiliser, electricity and transportation. Production is not yet concentrated by seed, which means different varieties are sometimes milled together or mixed in wholesale and retail locations. This affects the overall quality of Cambodia’s luxury rice varieties.

At a time when the world is experiencing an unprecedented number of crises, including as the spread of Covid-19 and the ongoing conflict between Russia and Ukraine, protracted inflation has thrown the world into a food crisis. This is an opportunity for Cambodia, an agricultural country, to increase production for export.

Rice, dubbed “white gold” by the government, has seen steady year-on-year export growth, so signs are promising that Cambodia will become a major exporter of milled rice in the region and supply the world market.

According to a report from the ministry, in the first half of 2022, 1,733,157 tonnes of paddy rice with a value of $336,232,458 was exported to Vietnam, by far the largest market for Cambodian rice exports. This was an increase of 2.38 per cent from the 1,692,813 tonnes recorded in the corresponding period last year.

Exports to China (168,280 tonnes), the EU (98,624 tonnes) and four ASEAN destinations (28,680 tonnes) also increased from the 2021 figures.

 

Minister of Commerce Pan Sorasak said that his ministry is not just looking to boost exports, but is trying to help smallholder farmers prepare themselves for the new markets. This will help them to grow their own incomes, he added.

“In addition to promoting our products, the ministry has stepped up efforts to expand rice markets in key countries such as China, and those in the European Union and ASEAN,” he said.

Hun Lak, chairman of the Cambodia Rice Federation (CRF), the Kingdom’s apex rice industry body, said that some farmers face difficulties in selling their rice at harvest time due

to not having a clear idea of market demand. In turn, exporters often do not receive clear information from the growers.

“The establishment of the SKO and DSMK collective rice brands aims to benefit us in the medium and long term. It will allow us to reduce the information gap between market demand and production between exporters, mills and farmers,” he said.

CRF secretary-general Lun Yeng told The Post that in the last three years, milled rice exports have been almost stagnant due to a number of obstacles, such as the EU imposing tariffs early in 2019 for three years. Despite this year’s growth, exports to the EU from 2019 to 2022 fell by about 30 per cent.

He added that at the same time, by the end of 2019, the Covid-19 pandemic had stretched the world’s supply chains to breaking point. He gave a clear example: a 20 foot container of rice that cost $1,000 to transport in 2019 had jumped to as much as $15,000.

“Not only are rates going up, supply is also insufficient. In 2020 and 2021, we needed 400 to 500 containers a week, but were only able to secure between 200 and 250,” he said.

He added that the price of fertilisers was also starting to rise, affecting farmers’ production costs, while milled rice was selling for lower prices due to shipping costs and the blockage of many existing milled rice stocks in rice producing nations.

“In the beginning of this year, the outbreak of the conflict in Ukraine drove up fuel prices, which pushed up farmers’ ploughing and harvesting costs, while milled rice prices in international markets changed very little,” he said.

Despite these precarious conditions, the rice sector is moving forward with its plans, thanks largely to timely intervention by the government, in the form of credit policy, conditional concessions and tax exemption policies.

Nhem Chanthou, a farmer living in Boeung Khnar commune, Bakan district, Pursat province, produces and grows SKO fragrant rice, under the guidance of the Cambodia-Australia Agricultural Value Chain (CAVAC) programme. He said the farmers in his commune have turned to cultivating the variety because there is high demand for it, and it is easy to maintain.

“This means a better income for us at harvest time. In the past, we grew cheaper varieties which were sometimes sold to Vietnamese traders for less than 1,000 riel [$0.25] per kg. They set the prices, according to how much they needed. We turned to this fragrant variety in 2020, and since then we earn more as there is a clear demand for our quality rice,” he said.

Em Phalla, a farmer living in Samrong commune, Prey Chhor district, Kampong Cham province, said that in his commune, farmers currently grow IR51 and IR-64 non-basmati rice because the time to harvest is shorter (95 days) and the yields are higher. Most farmers get between 750 and 800 riel per kg for their product.

He said that experts had advised them to grow paddy rice that has a strong market, such as the SKO and DSMK varieties.

“We would like to try to these varieties if they produce a good abundant yield and have a high market price. Currently, our IR rice sells at a low price which fluctuates according to the brokers,” he said.

The SKO and DMSK collective rice brands have been hailed by the rice industry. It was expected that they would enable farmers to produce enough to keep pace with demand from exporters, as well as win over more international buyers.