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Logo of Phnom Penh Post newspaper Phnom Penh Post - Lower global demand hits rice prices, threatening incomes

Lower global demand hits rice prices, threatening incomes

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14_story205.jpg

Cambodia's rice farmers may see their incomes drop as the price of rice

falls on lower international demand, amid a worsening global economic

crisis

Photo by: Heng Chivoan

A woman farms rice in Takeo province. Lower rice prices may depress the incomes of Cambodia's farmers. 

RICE prices have dropped 30 percent from its peak in March due to falling demand and the slowing global economy, local analysts say, potentially pushing more Cambodian rice farmers below the poverty line.

"The high price of foods and the decrease in global oil prices has caused the cost of rice to fall, forcing farmers to sell their rice at a lower price," said Yang Saing Koma, president of agricultural research organisation CEDAC, adding that the lost profits would have a marked impact on rural living standards.

Winfried Scheewe, CEDAC's marketing adviser, said that the falling prices, which reflected global trends, could make the commodity more affordable for Cambodia's poor, but would impact rural people who depend on rice for their living.

"Presently, rice prices are falling while farmers are starting to harvest their crops," he said. "This makes us afraid for this year and we are not sure whether things will continue dropping next year, since other commodity prices, such as fish and meat, are still high." He added that the actions of the government in April and May - when spiralling rice prices forced a ban on rice exports - had successfully stabilised the market.  

Independent economist Sok Sinna said that the drop in prices derived from recent decreases in global demand and the after-effects of the global financial crisis, dismissing ideas that the distribution of rice by the Asian Development Bank  and the UN's World Food Program  has depressed domestic demand for the staple.

"The recent drop in rice prices is not connected to the ADB's rice donation. We are just helping the poor who can't afford rice because of recent high prices," said Vong Sandap, deputy secretary general in the Ministry of Economy and  Finance and project director of Cambodia's Emergency Food Assistance program.

Rom Sareoun, 50, a representative of the Organic Rice Producers Association in Kampong Thom's Kampong Thmor commune, said rice brokers played an important role in the determination of rice prices.

But she said he hoped prices would soon be on the increase.

"We hope that our rice will be sold at a high price when we harvest. However, it makes us disappointed that rice brokers have reduced the price of our rice," she told the Post Tuesday.

"The government should have a program to buy our rice harvests at a higher price than the brokers to keep market prices stable."

But Som Vann, 60, an organic rice producer in Doungtong commune, Kampot province, said that rice brokers are taking advantage of the low prices, buying up rice from farmers and waiting for prices to increase before selling.

"We have lost our profits, but the brokers are the people who are making profits by doing businesses on us. They have money so they just buy our rice to stockpile and then sell it for a high price."

Yang Saing Koma said organic rice producers were in an advantageous position since they do not have to spend money on chemical fertilisers, widening their profit margins.

To encourage more farmers to produce organic rice, CEDAC has prepared a budget to buy rice at a higher price than what the market is offering, he said.

"We have proposed to borrow US$1.5 million from OLKO Credit of Holland to buy 4,000 tonnes of organic rice and 300 tonnes of regular rice from farmers to stockpile our supply, so that when the rice price increases we can export it to foreign countries," he said.

"We hope that rice prices will start increasing again in mid-2009."

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