Falling Prices Threaten Rice Farmers

Cambodian farmers say that despite good harvests, they are facing loan defaults.
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A rice shop in Phnom Penh, Jan. 7, 2012.
A rice shop in Phnom Penh, Jan. 7, 2012.

Paddy farmers in Cambodia are facing financial ruin as the price of rice has plummeted in recent weeks, potentially leaving them unable to repay their loans, sources said.

Rice purchases from neighboring countries—which make up the majority of Cambodia’s rice export market—have slowed, triggering a price drop to 800 riel (U.S. $0.20) per kilogram from 820 riel (U.S. $0.21) two weeks ago, according to a broker who buys rice directly from villagers for international sales.

“The reason for the rice price decrease is that Thai and Vietnamese buyers have stopped purchasing,” said Chantha, who sells rice to clients in the two countries.

Vietnam and Thailand are the world’s top two exporters of the grain. Their exports have also fallen due to thin demand and bountiful harvest.

She said that the decreased demand has caused an oversupply of rice in Cambodia, but that local buyers lack the resources to purchase more of the crop from farmers, further affecting the price.

The negative market conditions have left farmers like Sam Sithon fearful that they will be unable to cover their costs, let along turn a profit on this season’s crop.

“I have 20 hectares (50 acres) of rice,” she said. “Since the price is so low, I’m very concerned that I won’t be able to make up for our expenditures on gasoline and fertilizers.”

Sam Sithon, who lives in the Kompong Svay district of central Kampong Thom province, said she had taken out a 10 million riel (U.S. $2,500) loan from the bank as an investment on her summer rice crop after recovering from recent floods which ravaged her land.

She said that her family, and several others, had no option to go into any other kind of business besides rice farming.

And while she is likely to harvest a plentiful three to four tons of rice per hectare this year at her farm in Komrob Bay village, the price drop has devastated her household’s finances.

“My family has been seriously affected. We are getting poorer and poorer, and we don’t have enough money to repay the bank,” she said.

“Some families have had to leave their homes and land or sell their animals as way to pay off their loans.”

Profit unlikely

Another farmer in the area named Kunthea said that she would only be able to turn a profit if she sells her rice for more than 1,000 riel (U.S. $0.25) a kilogram.

“We won’t get any profit if the price of rice remains as low as 800 riel,” she said.

“Everything is very expensive right now. Gasoline, fertilizer—even the bags to package the rice.”

The bank in Kompong Svay district had already confiscated the houses and land of several villagers, she said.

In February, Cambodia’s Ministry of Economy and Finance said it would guarantee U.S. $25 million as collateral for loans to rice millers, who often lack the capital to purchase large quantities of paddy rice or build processing plants, the Phnom Penh Post reported.

Rice millers also fall short on the collateral needed to secure loans from commercial banks.

The government guarantee against defaults in the rice sector is part of plan to boost production and bring Cambodia closer to Prime Minister Hun Sen’s goal of exporting 1 million tons of milled rice by 2015.

Experts and officials said last month that falling rice prices had exposed the high costs of Cambodian milled rice production and its uncompetitiveness on international markets.

Reported by Tin Zakariya for RFA’s Khmer service. Translated by Sarada Tang. Written in English by Joshua Lipes.





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