Cambodia’s Farmers Sinking Into Debt After EU Tariffs Lead to Plunging Rice Prices

cambodia's farmers sinking into debt after eu tariffs lead to plunging rice prices Cambodia’s Farmers Sinking Into Debt After EU Tariffs Lead to Plunging Rice Prices Cambodia Farmers in debt 822x463

ut he fears that he will not be able to meet the payments from this year’s harvest due to plummeting grain prices caused by the imposition of tariffs by the European Union, imposed over protectionist concerns.

Rice prices at market have decreased by about 12.5 percent since the EU announced the tariffs earlier this month.

“If the price keeps the same or goes lower than that, I will lose,” the 39-year-old farmer told VOA Khmer at his paddy field in Kampong Thom’s Srayov commune.

He rented the 30 hectares of land he farms to export rice to Vietnam, costing about $7,500 for four months.

He now owes about $15,000 to the bank and needs to meet the $100 monthly payments of interest, as well as paying off half the loan by mid-year.

“I thought the rice price would be higher … That’s why I tried to invest in that,” he said. “We saw others coming here and they managed. So we took the risk to come here.”

The cost of fertilizers, gasoline and labor costs has also risen, he said.

New tariffs

Paddy rice prices in Cambodia have fallen sharply following the EU decision to re-introduce import duties on grains from Cambodia and Myanmar over the next three years.

The European Commission had received a request from Italy that called for the imposition of safeguards on Indica rice originating in the two countries.

The request was supported by rice growing states in the EU, according to the EU ambassador.

“The commission opened a formal investigation on 16 March 2018. The findings of this investigation confirm a significant surge of imports of rice that has caused economic damage to the rice sector in Europe. As a result, the EU has decided to impose safeguard measures on rice from Cambodia and Myanmar,” he said in an email to VOA Khmer.

Under the new rules, normal customs duties will be imposed on the product, reducing annually over the coming years.

The EU is one of the world’s largest rice importing regions, with lower income countries gaining tariff-free access via its Everything But Arms preferential trading scheme.

“However, it is important also to ensure that EU farmers and producers do not suffer as a result of high volumes of cheap imports. The regulation related to the scheme foresees that in such cases tariffs can be restored,” Edgar said.

In response to the tariff, the Cambodian government has expressed its disappointment, saying it would be used as “a weapon to kill farmers and their families”.

Farmers deceived

But on the ground local farmers are unaware of the cause of their misfortune.

“I didn’t know about this,” says Samnang. “I just grow rice and I don’t know about the market.”

Farmers are largely reliant on an informal network of brokers who provide access to international markets.

Srey Vuthy, an agriculture ministry spokesman, said the dealers can exploit events like the EU tariff imposition to manipulate prices.

“Villagers don’t know about it and they just follow [what the dealers say]. They are deceived.”

The problem was compounded, he added, by the harvest season in Thailand and Vietnam coinciding with Cambodia this year.

“Our country’s paddy rice still depends so much on Vietnam,” he said. “We heard that Vietnam won’t buy much from us.”

Samnang does not trust the dealers, but has no choice but to use their connections to sell his produce.

“We can’t talk about the price much with the dealers. When they say it costs this and that, we have to follow.” I don’t think the dealers are honest with us. They want more profit,” he said.

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Storage until the prices change is also not an option as the rice will spoil in the heat and humidity, he says.

Nory Noeun, 35, a laborer who collects rice from the farmers, complains about the price increases, which he attributes to an “EU tax.”

“I think the dealers have taken this opportunity to relate [a price rise] to the EU,” he said.

​Another farmer, Tong Y, also has an outstanding $15,000 loan to pay for her 70-hectare land.

”I want to try this year, but it is bad since the prices are low already,” she said.

Other farmers VOA Khmer spoke to agreed.

The Srayov commune chief, Sao Sothy, said he was aware of the problem, adding: “I can’t help them. If you can, you should.”

“Farmers know what profit they can make. It’s a free market. When there is more rice, the price decreases.”

Vuthy, the agriculture spokesman, said the government could not intervene to help farmers. “Our country does not have a subsidy policy. We don’t have money.”

Chinese help

China has grown increasingly close to Cambodia in recent years. A week after the EU decision, Prime Minister Hun Sen met Chinese President Xi Jinping in Bejing, securing a purchase of 400,000 tons of Cambodian rice.

Cambodia exported some 630,000 tons of rice last year, with about 40 percent going to Europe.

Despite the EU tariff, Vuthy said he still believes Europeans will demand Cambodian rice, even if it is more expensive.

“They want to eat delicious rice. Why not spend more money? We still urge [farmers] to grow fragrant rice for the EU and still believe EU people will purchase the rice despite the higher cost,” he said.

Local farmer Samnang, this is his last rice-growing season.

“I don’t want to do it anymore,” he said.

For Pha Sreysor, 32, Samnang’s wife, the mounting debts are a real worry.

“I am now very sad because of the paddy rice price. If [we] don’t have the ability to pay, [our land] will be withdrawn.”

Credit: VOA