As the demand for organic rice in European and United States markets keeps growing, many local rice millers and exporters are moving quickly and signing contract farming deals to supply them with the premium product.
Sung Saran, the CEO of Amru Rice (Cambodia), a leading rice miller and exporter, has been exporting organic rice to the European market since 2013 and told Khmer Times yesterday that his company signed contracts with 12 agriculture cooperatives on July 11 in Preah Vihear province.
Agro Angkor, a subsidiary of Amru Rice, signed contracts on July 12 with six cooperatives in the same province, a move aimed at boosting exports while market demand rises.
Mr. Saran said both companies had signed deals with a total of 18 cooperatives from seven districts in 20 communes in Preah Vihear. The contract farming deals signed were to supply 5,000 tons of organic white rice and 4,000 tons of organic jasmine rice.
“The contract farming deals cover the seasonal crops in 2016 and 2017. The price is guaranteed to be the market price plus a premium of 10 to 25 percent, depending on the quality,” he said. “Amru will provide support to cooperatives in export promotion, branding, investment security and support farmers with machinery, audit certification and certification of organic quality standards.”
There are higher profit margins in the export of organic rice, with prices more stable than non-organic rice in the marketplace. The average price per kilogram for organic rice is 1,650 riel ($0.41), 50 percent more than the 1,100 riel per kilogram for non-organic ones.
Mr. Saran said his company exported about 900 tons of milled organic and brown organic rice last year and planned to export approximately 3,000 tons of milled organic and brown organic rice this year. He added that he hopes exports will rise two-fold next year to 6,000 tons of milled organic and brown organic rice.
Poeung Tryda, the director of agriculture at Preah Vihear, said the province had three private rice millers working with contract farmers of organic rice. He said his department was acting as the coordinator between the companies and cooperatives to help them and the farmers set up cooperatives, to structure their work and their farming techniques to comply with organic standards.
“We are happy to see that private companies are coming to work with the farmers – this is complying with ministry policy of having more markets for the farmers, especially with contract farming as it guarantees the price for the farmers. That’s a good move and we are open to other companies,” Mr. Tryda said.
Mr. Tryda said his province has about 8,770 hectares of organic rice being farmed and is able to produce about 2.7 tons per hectare. Last year, he said, the province had a surplus of 139,000 tons for export.
Chan Sokheang, the Chairman of Signatures of Asia, another local rice miller and exporter, told Khmer Times yesterday that his company was in talks and close to reaching an agreement with a few cooperatives in Preah Vihear province.
“We plan to sign with two or three cooperatives and now we are at the stage of discussions and preparations to reach an agreement,” Mr. Sokheang said.
He said that of the three cooperatives in Preah Vihear he is working with, two could have the potential to meet his company’s requirements.
“My companies only produce and export organic white grain rice, while some of those cooperatives have organic fragrant rice. I think we cannot start to work on this project this year, but we are speeding things up to get contracts with them within this year and then we can start next year to change the type of rice grown,” hesaid.
“Now we see that demand in Europe is increasing very much and they even gave a big order to my company, but I do not have enough to supply them. That’s why we are working directly with farmers now.” Mr. Sokheang, added that when the deals are signed, his company can produce between 2,000 and 3,000 tons of organic rice per year. He said that apart from Preah Vihear province, his company has also been studying Siem Reap, Banteay Meanchey, Oddar Meanchey, Pursat, Kampong Speu, Koh Kong and Stung Treng provinces. Ieng Sophalet, a spokesman at the Ministry of Agriculture, Forestry and Fisheries, told Khmer Times in May that contract farming was one way of boosting farmers’ incomes. “Many farmers only have a landlord, and some of them don’t have the capital to buy things like fertilizer and seeds, but with contact farming they receive a budget to buy seeds and fertilizer,” he said.
“Importantly, when their products are harvested, the farmers already have a market for their products. Contract farming is a win-win policy for farmers and traders.” Mr. Sophalet said the agriculture ministry is encouraging all farmers to consider contract farming.