One of the personalities involved in Cambodia’s rice trade, entrepreneur Hun Lak, says Cambodia needs more coordination between suppliers in order to commit to sufficient rice tonnage that will attract serious international buyers.
Hun Lak, who serves as managing director at Mekong Oryza, says the appropriate concept for long term sustainability in the agrculture business is to include all aspects of the value chain from “Seed to Shelf”.
Hun Lak recently returned from a visit to Taiwan where he toured high-tech rice growing operations, as well as China to look for buyers of Cambodian rice.
He said rice technology in Taiwan was both high tech and high yield by Asian standards.
“China is the big potential market for future Cambodian rice exports with big volume demand and lower transportation and shipment charges because of its proximity to Cambodia,” he said.
Hun Lak is one of the personalities behind the formation of a ARPEC, the Alliance of Rice Producers and Exporters of Cambodia, a new rice producer’s and exporter’s institution which is in the process of coordinating the diverse efforts of rice growers, millers and exporters to promote Cambodian rice around the world.
Hun Lak says ARPEC advocates a clustering concept and has attracted membership from such diverse stakeholders as nine provincial rice millers associations from across Cambodia, some individual rice mills, logistics firms, micro finance institutions and fertilizer distributors.
He said ARPEC hoped to break down existing barriers among the various stakeholders and streamline efforts to create an environment of common purpose to meet Prime Minister Hun Sen’s goal of a million tons of Cambodian rice exports in 2015.
“In order to realise the prerequisites to handle big volume, consistent quality and supply stability demanded by international market, ARPEC should concentrate on technical improvement and coordinating its members’ financial reserves to handle huge cash flow required in the near future to buy and stock up enormous tonnage of paddy rice in order that local rice mills will be able to consistently export substantial quantities of milled rice all year round,” he said.
“I can envisage more and more orders will come to Cambodia if we can maintain quality and offer stable and competitive pricing to large international rice buyers.”
Hun Lak said ARPEC would serve its members and buyers with an emphasis on delivering assured quality rice and at competitive prices that resulted from savings derived from consolidated supply chain logistics.
“We are already a rice exporting company, but what we want to do is to vertically integrate our activities, from seeding to milling, and eventually to export warehousing. Right now we have decided on a twin track approach. The first track is to start commissioning expert service providers to put up seed nurseries, silos and mills using our own resources. The second track is to look for joint venture partners,” he said.
Last year, Mekong Oryza shipped out mainly to European and Russian markets by barging bulk rice down the Mekong River to Ho Chi Minh City and thence to European and Russian ports. Some of the rice went out via Sihanoukville by sea containers.
“This year, we have already entered the China market, starting June 2012. We foresee a prospective market in Indonesia next year as well.”
Hun Lak said there were a few large rice milling projects currently underway in Cambodia.
“One is located inside Sihanoukville Port, another in Kampot Province near the new sea port, one other in Takeo Province not far from Vietnam border and several along Road 51 between National Road No 5 and No 4. Most are slated for completion by the year 2013.”
He said even with the additional modern rice mills, more financing capital and investments were needed to secure the paddy rice and pure seeds for the farmers to grow the best quality rice.
“This is still a big issue and we need to concentrate our efforts to overcome this bottleneck.”
“With all these big capacity mills coming on-stream, another challenge is consistency in paddy procurement. Once we mention procurement, we touch on another potential business opportunity: which is the silo to get the wet paddy, dry and store them and wait until the market price is right and then just sell it to the local rice mill. That’s one aspect of value chain: to buy paddy, store, and then sell them locally,” Hun Lak said.
He said a pilot project would soon be underway, from seedling down to farming techniques, milling process and logistics flow, with its mission to elevate the image of quality Cambodian rice variety.
“The whole rice supply chain for Cambodia’s rice business must be based on pure seeds and the first generation of seed would provide you the best quality,” he said, adding that the quality and yield would degrade during subsequent generation of seeds.
He said an organisation involved in the development of Cambodian rice seeds call CARDI had publicly announced that they could not cope with expected seed demands in the near future.
“They only supply at maximum, 20 to 30 per cent of the domestic seed supply required. The miller goes and bids for the seeds and gives it to the farmer on a contract agreement whom has to sell back the output to the miller at prevailing market rate.”
Hun Lak said that some derived products from a first run of milled rice could command a premium price in the domestic market than the export market.
“That’s why so many rice millers don’t export. Selling into the domestic market enables quick cash and lesser headaches and costs in export documentation and stringent quality inspection to meet export standards,” he said.