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Cambodian Rice: It's Niche, or Nothing

Posted by James Plamondon on August 02, 2016 . 0 Comments

Like I was saying: In Cambodia's rice industry today, it's niche, or nothing.

From today's Phnom Penh Post: Gloomy forecast for Cambodia's rice sector

Cambodia is getting squeezed out of the commodity rice export market. Its profitable sales volumes are steadily falling to zero, driving a consolidation in the industry.

If prices fall even a little further after that consolidation -- just 10% -- then Cambodia's profitable sales volume will be zero. Nada. Zip. Zilch.

Yet there is hope.

A 20' container of premium Cambodian jasmine rice sells, FOB at Sihanoukvile, for a gross revenue of less than $19,400 ($970/ton, 20 tons in a 20' "dry" container). Of that, perhaps $2,000 is profit (at most; probably more like $1,000 after all overheads, debt service, taxes, etc.).

Alternatively, a 20' refrigerated container of consumer-ready 2lb bags of same rice, refrigerated after milling and quick-frozen on arrival in the USA, would sell for a gross revenue of $396,000 ($22/kg, 1000kg/ton, 18 tons per refrigerated container). Of that, approximately $100,000 would be profit.

That is, a single container of chilled jasmine rice could earn as much profit as 50 containers of "dry" rice. Fifty!

If the price of premium jasmine rice falls by $100, from $970 to $870, then Cambodia would be unable to make a profit on its most profitable rice...but its chilled rice would still be profitable. (Indeed, it would become even MORE profitable, as its raw material costs would be lower.)

YES, the market for chilled gourmet rice at that high price would be smaller than the market for "traditional" dry jasmine rice. Who cares? IT'S FIFTY TIMES AS PROFITABLE, and it is immune to changes in the commodity price. It is "de-commoditized."

Besides, Cambodia's high-volume market is disappearing anyway, whether Cambodia likes it or not.

It's NICHE, or NOTHING.

Given the choice, I'd take "niche." Wouldn't you?

Seriously, I ask Cambodia's rice millers: Wouldn't you?

If so, email me: jim@awardbest.com.  Let's chat.

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