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Government of Guyana looking to promote rice sector

29 October 2010

According to a recent review undertaken by the Ministry of Agriculture in Guyana, rice is set to overtake sugar as Guyana’s main agricultural export. The growth in revenues has been underpinned by a 15.5% increase in the US dollar value of rice exports, up to US$ 68,586,947 from US$59,361,868 for the 2009 first crop. The area under rice has increased by 7.2%, while production has increased 4.5%. In 2010 first crop exports jumped to 157,234 tonnes from 124,277 tonnes in 2009. Guyana’s major rice export markets are Jamaica, Netherlands, Portugal, and now Venezuela, and Trinidad and Tobago. Price volatility and inadequate industry standards remain major commercial challenges to Guyanese rice exports.

According to private sector operators, the CARICOM market is being taken increasingly ‘seriously’. However this requires investment in upgrading processing and packaging facilities. This is seen as the trend for the future, with the industry needing to place ‘a greater focus on continually adding value to the country’s rice exports’. This requires the attainment of higher standards of packaging and labelling. According to press reports, however, many agro-processing companies are reluctant to invest in upgrading packaging, despite the earnings losses which poor packaging can generate. To facilitate improvements in the area of packaging, a sector-wide approach is being encouraged, given the relatively small size of the Guyanese economy.

With a view to promoting more sustainable production development, the government of Guyana is exploring the scope for a rice-sector insurance scheme which ‘would transfer exogenous agricultural risks to a third party and thus effectively solve the conundrum surrounding the predictability of cash flows into the agricultural sector.’ World Bank assistance is being sought for the scheme, ‘to reduce the reluctance of the commercial bank lending to the agricultural sector’ by reducing their exposure to exogenous risks.

The scheme is designed to address the ‘declining trend in commercial bank lending towards small enterprises in the agricultural sector’. Currently the micro-financing institutions which have stepped in to fill the funding gap charge around ‘30% for a typical six-month loan’, a rate ‘significantly higher than the current annual prime lending rate of 14.5% prevailing in the commercial banking sector’. Several other related programmes to introduce more sound business planning and management at the enterprise level are also being implemented in the overall drive for risk mitigation and industry improvement.

Editorial comment

While the area under rice has increased, production is growing less rapidly, suggesting that important issues of agricultural productivity are faced. Providing a framework for farmers which provides greater commercial certainty (via new insurance schemes and better regulation of the functioning of the supply chain to ensure prompt payments of farmers for the rice supplied to local milling companies) appears to form a central part of government policy initiatives in the rice sector.

With the price premiums on the EU market largely disappearing, the development of regional markets in the Caribbean and Latin America is likely to take on increased importance in the coming years. This accounts for the importance attached to improving processing, packaging and labelling. Currently high world market prices for rice would appear to be creating a market situation which encourages investment in value-added processing. On this basis, traditional Caribbean rice exporters may well be able to make a successful transition to ‘post-preferences’ profitability.

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