Just three months since starting production, Cambodia’s largest sugar mill is sitting idle due to a shortage of its primary input sugarcane, a provincial Agriculture Ministry official said yesterday.
Poeung Trida, director of the Preah Vihear Agricultural Department, said Rui Feng (Cambodia) International Company’s mammoth $360 million sugar mill in Preah Vihear province halted production just 50 days into operation after exhausting its stockpile of sugarcane.
“The mill has postponed its production as there isn’t enough sugarcane to keep the production line going,” he said.
The government granted Rui Feng an 8,841-hectare economic land concession (ELC) in 2011 for cultivation of sugarcane, rubber and acacia. The Chinese-owned firm and its four sister companies collectively hold five separate ELC licences covering a total 40,000 hectares.
Rui Feng claims its mammoth factory, which opened in April, is capable of processing 20,000 tonnes of sugarcane per day, turning it into 2,000 tonnes of refined sugar for buyers in the EU, China and India.
However, Trida said the mill had not operated at capacity and estimated that it processed just 10,000 tonnes of sugarcane before shutting down its production line in June.
He said the company began operations using the harvest of sugarcane cultivated on 5,000 hectares. It would need to significantly expand the cultivation area if it hoped to produce sufficient sugarcane to keep its line operating year-round.
“In order to allow for year-round production, the company needs to encourage farmers to focus on sugarcane farming by showing them how profitable it can be,” he said.
Currently, Rui Feng pays its farmers $39 per tonne for sugarcane, according to Trida. However, the company has also looked into the possibility of increasing its supply by purchasing crops from other farms.
Kuy Yoeurn, an administrative manager for Rui Feng, said it was “normal” that the giant factory halted production just months into operations as this was its first production cycle and sugarcane is not harvested during the wet season.
“Normally, we expect the sugar mills to mostly operate during the dry season and for a duration of 90 days per production period,” he said.
“However, because this our first production period and it is currently the rainy season, we are not surprised that the factory only ran for 50 days.”
He said production would resume with the start of the next harvest season in January.
At its current rate of production, Rui Feng will not be able to break even on its large investment in the project, warned Mey Kalyan, senior advisor to the Supreme National Economic Council.
“It does not make sense for the mill to only be processing for a period of 50 days,” he said. “In order to create profit, the mill needs to process as much as possible throughout the year and not be affected by shortages of sugarcane or supplies of other raw materials.”
Trida agreed, arguing that “the company needs to guarantee its supply chain for at least three or four years if it wants its operations to run smoothly.”