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Grain and Flour Market in Cambodia

08 May 201414 min reading
Wheat flour is consumed in Cambodia as bread, muffin, biscuit and fresh pasta (noodle). Almost 70% of the wheat flour consumption is met by the industrial production of two local mills in Phnom Penh. The remaining 30% is imported from Vietnam via legal or illegal ways. There are also small-scale rice flour producers but wheat flour production is dominant in the industrial market. Cambodia is one of the poorest countries in the Asian Continent and included in the category of “Least Developed Countries” by United Nations. Although the country still needs foreign aids, it tends to a steady growth in general. Rice is the most important agricultural product in the country and the main food source of Cambodian people. More than half of the total cultivated land in the country is reserved for rice production. Another grain product produced in the country is maize but maize production decreases generally together with turning of the rice farmers to the rice cultivation. Wheat is imported via legal or illegal ways. While the legal import is realized from Australia, Argentina, Canada, India and the U.S.; the largest source of the import is the neighboring country Vietnam. Wheat flour is consumed in Cambodia as bread, muffin, biscuit and fresh pasta (noodle). Almost 70% of the wheat flour consumption is met by the industrial production of two local mills in Phnom Penh. The remaining 30% is imported from Vietnam via legal or illegal ways. There are also small-scale rice flour producers but wheat flour production is dominant in the industrial market. GENERAL ECONOMIC OUTLOOK IN CAMBODIA 10 years before the global economic crisis in 2009, Cambodia was the 7th most rapidly growing economy of the world with the double-digit growth figures achieved by the country. Shrinking 2,5% in 2009, the economy grew 6% in 2010 and 7,1% in 2011 by recovering rapidly. The flood disaster in the region affected the production adversely in 17 of the 24 states. This situation caused a slowdown of the growth in the last quarter of 2011. The driving power behind the economic growth of the country is export. The textile export of the country is dependent on U.S. the economy grew 7,3% in 2012. The growth is estimated to be 7% in 2013 and will be 7,3% in 2014. Infrastructure and business investments are forecast to be the locomotive of economic growth in 2014-15 period. The increase in GDP is expected to be averagely 7,3% annually between 2015 and 2018. However; all these growth figures can be decisive as Cambodia is still one of the poorest countries in the Asian Continent and included in the category of “Least Developed Countries” by United Nations. In Cambodia, which is still in need of foreign aids, more than half of the government budget consists of the voluntary donations. Despite the strong growths in the textile and tourism industries, the country maintains its position as an agricultural country. AGRICULTURE IN CAMBODIA Agricultural industry is vital for Cambodia. 80% of the country population lives in the countryside and 75% of the labor force is employed in the agricultural industry. The development of the agriculture is one of the priorities of the government policies. Thanks to the intensive policies in the agricultural industry, the industry has gained a rapid growth performance and this rapid growth is foreseen to continue. Rice is the most important agricultural product in the country and the main food source of Cambodian people. More than half of the total cultivated land in the country is reserved for rice production. Agricultural industry grew 4,5% in 2010. Expansion of the paddy rice cultivation lands and increase of the yield obtained from paddy rice, destruction of the cultivated lands in neighboring countries Thailand and Vietnam due to the flood disaster and thus the increase in the demand for Cambodian agricultural products are shown as the major reasons of the growth in the industry. The main reason of that Cambodian agricultural industry is not developed adequately is the lack of a modernized seed industry. Almost all of the Cambodian farmers use traditional methods while growing paddy rice. There is only one seed factory (AQUIP Seed Company) in the country and it produces annually 2 thousand 600 tons of rice seed. On the other hand, the neighboring country Thailand has 85 seed factories and produces annually 50 thousand tons of paddy rice. Food and Agriculture Organization of the United Nations (FAO) and EU encouraged the Cambodian government for taking the necessary steps in order to develop the seed industry in the country. In this context, Cambodian government selected 10 varieties of rice seed and started the activities for the expansion of the industry with the support of the nongovernmental organizations, the EU and the UN Food and Agriculture Organization. Rubber is the second most important exported product after rice. GRAIN PRODUCTION AND CONSUMPTION Suitable for mainly rice and maize production due to the climatic features, Cambodia realizes grain production between 9 and 11 million tons annually. As it is mentioned above, rice is the main agricultural product in the country. According to the data of The United Nations Food and Agriculture Organization (FAO); realizing paddy rice cultivation on 1 million 994 thousand hectares in 2002, Cambodia expanded its cultivation lands and increased to 2 million 968 thousand hectares in 2011 and 3 million 7 thousand hectares in 2012. The country has also increased its paddy rice production over 100% in the last 10 years with the increase in cultivation area and yield. When production data on an annual basis by FAO is reviewed; it is seen that paddy rice production of Cambodia, which was 3 million 822 thousand tons in 2002, had a stable increase by reaching 6 million 264 thousand in 2006, 8 million 245 thousand tons in 2010, 9 million 290 thousand tons in 2012. FAO’s country report dated as 28 January 2014 points a record increase in the paddy rice production of Cambodia in 2013/14 season. The season is divided into two sections as wet and dry in parallel with the climate in Cambodia and the main wet season of the country for 2013/14 started at the beginning of December and continued until the end of February in some regions. According to the country report prepared by FAO by taking this season division as basis; the preliminary official estimates put the 2013 main season paddy crop at a record level of 7.3 million tons, up 1.7 percent on last year’s bumper output of the same season. The increase is mainly attributed to an estimated 3.3 percent expansion in plantings. However, heavy monsoon rains during September and October 2013 resulted in localized flooding across northern parts of the Mekong River Basin. According to the Ministry of Agriculture, Forestry and Fisheries (MAFF) the floods are estimated to have damaged close to 128 000 hectares of paddy crop (or 5 percent of the total cropped area for the main season), particularly in Battambang, Banteay Meanchay and Siem Reap, important rice growing provinces. Planting of the 2013/14 secondary dry season (irrigated) paddy crop is nearing completion. A preliminary official estimates, as of end-December, indicate that 472 483 have been planted under rice crop, some 4.6 percent below the area planted at the same period in 2013. The decrease in planted area is mainly a result of below average rains in December 2013. Official reports indicate adequate provision of seeds and yield promoting inputs which are expected to assist crop productivity. The aggregate 2013/14 rice output, including the ongoing main and secondary seasons, is officially forecast at a record level of 9.3 million tons, slightly above last year’s bumper level. Harvesting of the 2013 maize crop was completed by October 2013. Another important agricultural product in Cambodia is maize. Maize cultivation land and production amounts in the country have increased over 100% in the last 10 years. According to the data of FAO; maize cultivation area, which was 71 thousand hectares in 2002, reached to 30 thousand hectares in 2010 but remained at 215 thousand hectares in 2012 by decreasing in the following 2 years. Cambodia maize production, which was 148 thousand tons in 2002, reached to 924 thousand tons in 2009 and 950 thousand tons in 2012 in parallel with the expansion in cultivation area. 2013 maize harvest was completed by October 2013. According to the country report of FAO; latest official estimates point to a harvest of 911 127 tons, some 4 percent below last year’s level. The decrease in production is mainly attributed to a 6 percent decline in the planted area, as a result of farmers switching to rice crop. There is a decrease in area planted to maize for the third consecutive year in row. Overall, the cereal output for 2013 is estimated at 10.3 million tons. In Cambodia where there isn’t any wheat or barley production, total grain production realized in 2013 is estimated to be 10,3 million tons. FOREIGN TRADE IN CAMBODIA Foreign trade volume of Cambodia increased each year with its joining to ASEAN in 1999 and WTO in 2004 as a member. According to the data of ITC Trademap; the country has a surplus in the foreign trade. Realizing 4,36 million-dollar export in 2008, Cambodia increased this amount to 7,83 million dollars in 2012. However; as the country is dependent on import, import increases with export. Total import amount of the country, which was 4,41 million dollars in 208, reached to 7,06 million dollars in 2012. Major export goods of Cambodia are textile, wood, rubber, rice, fish, tobacco, shoes and major import goods are oil and oil products, cigarettes, gold, construction materials, machinery, motor vehicles and pharmaceutical products. Vietnam, China and Thailand are among the top three countries with which Cambodia makes trade. U.S. ranks first among the countries to which the country makes export most. Cambodia realized 2,033 million-dollar amount of total 7,838 million-dollar export to U.S. in 2012. Hong Kong, Singapore, United Kingdom and Germany follow U.S. in the export of Cambodia. The highest amount in import belongs to China. Cambodia realized 2,162 million-dollar amount of total 7,063 million-dollar import from China in 2012. Vietnam, Thailand, Taiwan, Hong Kong and Korea follow China in the import of Cambodia. THE PLACE OF GRAIN IN THE FOREIG TRADE Grain products export and import amounts realized by Cambodia are quite lower compared to many other countries. Rice export of the country has increased significantly in the last 10 years. According to FAO data; country’s rice export, which was 2.318 thousand tons on amount basis and 956 thousand dollars on value basis in 2005, increased to 5.536 thousand tons on amount basis and 3.147 thousand dollars on value basis in 2008 and to 174.045 thousand tons on amount basis and 107.917 thousand dollars on value basis with a significant increase in 2011 compared to the past years. However; when compared to the major rice exporters in the world, these figures are very low. Contrary to the rice export, import has an opposite trend and continues to decrease every year. Country’s rice import, which was 40 thousand tons in 2005, declined to 12 thousand tons level in 2011. FAO estimates that the country may reach a rice export level of approximately 1,4 million tons in 2014. In the country, some rice is exported formally but much of the milled rice and/or paddy pass through cross-border trade to Vietnam and Thailand. Rice prices generally stable or low. Wholesale prices of rice remained generally stable or declined in the recent months, with the beginning of the 2013 main wet season paddy harvest. Rice prices in Battambang market, which increased to near record levels in August 2013, have been decreasing since then. Prices are generally lower in Battambang, the main rice producing area of the country, located in the west bordering Thailand. Overall, prices were generally below their levels a year earlier. Contrary to the increase in the rice export of Cambodia, a significant decrease has been seen in the maize export especially in the recent years. Maize export of the country, which was 22 thousand tons in 2005, increased to 350 thousand tons in 2009. However; decreasing in the following years, the export remained at very low level of 5 thousand tons in 2011. FAO estimates that maize export will reach to the old levels again and increase to approximately 360 thousand tons in 2014. FAO expects that country’s total grain export to be realized by the country in 2014 won’t reach a record level of 1.8 million tons (8% more than the previous year). Another grain product that is prominent in the country’s import is wheat. Cambodia realizes a quantity of wheat import every year but the amount is very limited. According to FAO data; Cambodia’s wheat import, which was 24,5 thousand tons on amount basis and 4.509 thousand tons on value basis in 2005, increased to 27,2 thousand tons on amount basis and 7.380 thousand tons on value basis in 2007 but decreased to 8.7 thousand tons on amount basis and 4.290 thousand dollars on value basis in the following year. Increasing in the following years, wheat import reached to 15,7 thousand tons on amount basis and 4thousand dollars on value basis in 2011. MILLING AND GRAIN PROCESSING INDUSTRY According to the Cambodia Market Survey prepared by Craig MacKay for Academy for Educational Development (AED) in 2007; wheat flour is consumed by Cambodians in bread, cakes, biscuits and instant/fresh noodles. About 70% of wheat flour consumption originates through the industrial production of two local mills located in Phnom Penh. The remaining 30% is imported both legally and illegally predominantly from Vietnam. There are some small-scale rice flour producers, however, the industrial market is dominated by the production of wheat flour. Wheat, predominantly hard varieties, is imported from Australia, Argentina, Canada, India, and the USA. As it is mentioned above, there are two flour mills operating in Cambodia. . Asia Flour Mills is the larger facility with a milling capacity of 130 MT of wheat (100 MT of flour) per day, currently operating 16 hours per day, 6 days a week, running at 65% capacity. Men Sarun has a milling capacity of 120 MT (91 MT of flour) per day, currently operating 10 hours per day, 6 days a week, and is running at about 60% capacity. Combined local production is estimated at 3000 – 3500 MT per month, with Asia flour Mills producing about 25% - 40% more than Men Sarun. Estimates of total market consumption, including local production, plus both legal and illegal imports from Vietnam, is about 5000 MT per month. It is estimated that 20% of the market consists of illegal imports of flour from Vietnam. Both millers produce two grades of flour - grades 1 and 2. It is estimated that 80% of each miller’s production is sold to the bakery industry (grade 1). The remaining flour (grade 2) is sold to the fresh noodle industry and biscuit manufacturers. The technologies used in the flour mills of the country are different. As one of the 2 mills in the country, Asia Flour Mills runs a vertical mill utilizing Buhler milling equipment with three ingredient feeders while Men Sarun uses used equipment from China which comprises 2 two milling lines located side by side in a warehouse. Men Sarun flour mill has a basic laboratory that tests for wet gluten, ash, moisture and sieving. Asia flour mill also has a laboratory and it is assumed that their testing process is equivalent to the Men Sarun mill. There is not any data on the numbers of the rice mills but the processed rice export is stated as low due to the insufficient and old technology of Cambodia. The country is estimated to need an investment of approximately 350 million dollars in order to realize the post-production processes of the harvested rice. The country needs rice mill investment. Due to the insufficient numbers of the rice mills, an important part of the harvested rice in the country is sent to the mills in Vietnam.
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