The state-owned Agricultural and Rural Development Bank of Cambodia (ARDB) announced that it has reserved a large number of financial packages of working capital loans for rice millers and exporters to buy paddy from farmers during the upcoming harvest season, in a bid to push up the price of the crop.
The statement comes in response to mounting concerns over falling prices of standard-grade paddy in the provinces bordering Vietnam, from 900 riel ($0.22) per kg in late May, to just 650 riel now.
The bank last month noted that it had ignited a push in 2016 to provide much-needed working capital financing to rice mills and other processing companies, as well as milled-rice exporters to purchase paddy from the field during the 2021 harvest seasons.
“Under the close scrutiny of the Royal Government and the Ministry of Economy and Finance, we’ve been providing working credit to support rice mills, processing companies and milled-rice exporters to stock up on paddy from farmers during each season, accepting rice stocks as collateral, in accordance with government policy,” it said.
ARDB director-general Kao Thach could not be reached for comment on August 2.
In Cambodia, two crops of rice are typically grown per year. The monsoon-season (or long-cycle) crop is generally planted in late May through to July and harvested in December, whereas the dry-season (or short-cycle) crop is planted in November and collected in January-February of the following year, according to the UN Food and Agriculture Organisation.
The Kingdom’s rice millers often lack the capital to purchase large quantities of paddy or build rice processing plants. They also fall short on the collateral needed in order to secure loans from commercial banks and other financial institutions.
On August 2, Cambodia Rice Federation (CRF) president Song Saran pointed out that the declines in domestic prices of paddy are occurring in tandem with the significant falls in milled-rice rates on the international market.
Even so, CRF members refuse to wrangle discounts off farmers’ asking prices, he asserted.
He expressed gratitude to ARDB for the loans ahead of the dry-season harvest, telling The Post: “We’re buying dry-season paddy every day, of white-rice cultivars, and all federation members go out of their way to buy it at market price.”
Dry-season milled rice exported to Thailand and Vietnam fetches just over $380 per tonne, from $560 before, he said without providing a timeframe.
“Paddy prices are falling, and that’s because in the rice market mechanism, we cannot subsidise prices in excess of market value. We need to rethink ways in which farmers could reduce costs or increase productivity rather than increasing the price beyond the existing market” boundaries, Saran said.
Chan Pich, general manager of rice miller and exporter Signatures of Asia Co Ltd, a CRF member, said his company plans to buy 100,000 tonnes of paddy this year, with a portion of the funds expected to come from ARDB loans.
“In general, ARDB operates well in lending for paddy stocks, working quickly and with a sufficient budget when we need it. We can always borrow from ARDB,” he said.