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China Rice Deal Gets More Urgent

Igor Kossov / Khmer Times Share:
Cambodia is trying to export more rice to China but regional competition is increasing. Photo: Chris Graham/AusAID

PHNOM PENH (Khmer Times) – Cambodia’s need to secure China as a rice export destination is becoming increasingly urgent, with China’s multiple pending agreements with other countries in Southeast and South Asia, said industry insider David Van. 

China recently signed a deal with Thailand for 1 million tons of rice, with another million in a pending agreement before the end of the year, according to Mr. Van, a senior advisor with the Bower Group. He added China would also sign a deal with Laos for 300,000 tons. It also plans to import more non-Basmati rice from India. 

“We have tougher competition for the China market,” Mr. Van told Khmer Times. “As the Chinese vice president stated candidly earlier this year at the last China-GMS meeting, Cambodian rice is too expensive and still relatively ‘unknown.’”

China is the world’s largest rice importer, taking in 4 million tons every year and the amount keeps growing. Negotiations are ongoing to reestablish an import quota from Cambodia after last year’s 100,000 ton quota expired in April. 

The Cambodian Ministry of Agriculture and the Chinese Chamber of Commerce weren’t immediately available for comment on Thursday.

Need To Diversify

China is the biggest single rice importer from Cambodia, but the combined EU countries still account for most of Cambodia’s export market, according to the Secretariat of One Window Service for Rice Export Formality.

Cambodian exporters are worried about the EU’s free trade deal with Vietnam, which would eliminate Cambodia’s tariff-free advantage. They say that Cambodia needs to up its exports to China and other regional players, including Malaysia. 

The Kingdom’s low margins and high shipment costs make it difficult to turn a profit, especially with non-fragrant rice, according to Song Saran, head of Amru Rice, a top exporting company. Mr. Saran said that between 60 and 70 percent of Cambodian exports to China consist of long grain white rice. 

“We are concerned about the supply chain. We spend a lot on fertilizer and our production and harvest cost is very high,” said Mr. Saran. “Other challenges are electricity and milling costs. And another challenge is logistics, because we have high costs in freight from our ports.”

Currency Issues

The recent fall of many Asian currencies, including the Chinese yuan, Thai baht and Vietnamese dong against the dollar may further eat away at Cambodia’s status as an exporter.
 
“Our competitiveness will erode,” if the pattern persists,” said Chan Sophal, director of the Centre for Policy Studies and agricultural economist.

Focus on Branding 

Mr. Van said Cambodia had failed at its goal to produce 1 million tons of rice by this year and has to focus on more realistic goals that actually take its high value jasmine rice to the regional market. 

“I’d rather focus on developing and branding our own high value jasmine or fragrant rice, where the margin would be far more sufficient,” he said. 

Cambodia produces award-winning Phka Rumduol rice, which is similar to Thailand’s jasmine rice. According to the UN’s Food and Agriculture Organization, fragrant rice fetches some of the highest prices in the world. 

As of March, Thai fragrant rice was worth $1,082 a+ ton, while non-fragrant varieties ranged from $300 to $600 per ton.

Cambodia must do a better job of promoting its native variety to the global market, Ngin Chhay, chief of the rice department at the Ministry of Agriculture, Forestry and Fisheries, has previously said.
 

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