The government will use the untapped funds of an emergency rice loan package to support struggling corn farmers who have protested the low market prices for their crop this season, state officials said yesterday.
Kao Thach, CEO of the government-backed Rural Development Bank (RDB), said the bank will distribute the remaining funds from a $27 million rice loan package to corn traders so that they can offer higher prices on the corn they purchase from smallholder farmers.
“We will provide loans to corn traders so that they can collect the corn from farmers as well as to ensure better corn prices,” he said.
Thach said the loans would be provided using the same formula that RDB used for the rice sector, which offered loans at a low annual interest rate of 7 percent while requiring only rice paddy as collateral.
“The loans will be offered based on using corn in storage as collateral,” he said. “However, the interest rate will be less than 7 percent – maybe from 5-6 percent.”
Thach insisted that the disbursement of loans to corn traders would not interfere with the emergency loan package’s original purpose.
“As the seasons of rice harvesting and corn harvesting are different, we can use this budget to help our corn industry, especially as rice millers have not utilised the full package.”
He said just $3.5 million of the original $27 million package has been disbursed to rice millers, while another $50 million could be made available, if needed.
“The loans will be available following a board meeting tomorrow [Tuesday] to set the interest rate, which must then be finalised by the Ministry of Economy and Finance,” he said.
Thach’s announcement followed an emergency meeting yesterday between government and private sector representatives in response to protests in Battambang province over the weekend, where farmers blocked roads demanding that authorities help them to negotiate better prices for their harvested corn.
Kim Hout, director of Battambang province’s commerce department, said the protests came after traders began offering 3 baht per kilo for corn (about $0.09), down from 3.9 baht just weeks earlier. He said the price decrease was due to the early harvest of corn, which resulted in an unusually high moisture content.
“The farmers harvested too early this year because of heavy rains, so the moisture content exceeded 30 percent, which led to lower prices,” he explained.
Thach said RDB’s loan package would be sufficient to cover the main area of corn cultivation in northwestern Cambodia, which produces an estimated 1 million tonnes of corn a year. He said the loans would be suitable for long-term investments such as silos and warehouses, which require five to seven-year terms.
Minister of Commerce Pan Sorasak said the availability of storage facilities was crucial to ensuring better prices.
“With the support of the RDB we can promote the building of silos and warehouses, which can be used to store corn when the price is low,” he said, encouraging the sector to develop more contract farming in the coming season.
Lao Sunchea, director of the Sala Krao Cassava Cooperative in Pailin province, which pools local smallholder farmer resources for cassava and corn production, said the RDB’s loan package should help to improve the market for its members.
“If the RDB issues loans to help corn traders I think farmers will be happy and it could resolve the problem as corn traders currently do not have sufficient budgets to buy corn from farmers,” he said.
