Chief Executive Officer of the Guyana Bank for Trade and Industry John Tracey yesterday pushed rice stakeholders to introduce a financial instrument for the payment by millers to farmers that would alleviate the frustrations in dealing with the delays that continue to hinder the sector.
During his presentation on the role that finance plays in the structure of the rice industry at the National Rice Industry Conference at the Arthur Chung Conference Centre yesterday, Tracey said he was of the view that the sector would benefit greatly from timely payments.
He said that producers and millers along with commercial banks could try out a negotiable financial instrument which would allow farmers to be paid immediately or with interest by millers who would hold the credit at the bank. Bankers would have to be willing to accept the financial instrument, but then it would be up to the millers to honour their end of the deal, Tracey stated.
He expressed that an agriculture bank, which was earlier proposed by Dr Clive Thomas during his presentation, could be taken on by the commercial banks “if they have the appetite for the risk.”
Tracey, who is also a member of the Guyana Rice Development Board, recalled the Rice Competitive Facility a fund worth $1.9 billion that was used to expand the industry when the Venezuela Rice Agreement was first signed in 2010 and the industry was in need of an influx to expand and quickly. He stated under that prior facility, loans were at market value with producers allowed to take loans at 9% interest and millers and suppliers at 11% interest. Tracey said the facility revolved twice before it was reabsorbed by the government and repurposed in other sectors.
“There were probably about 5 defaulting loan applications; none of course in the milling sector. Just goes to prove the industry can sustain taking financing from the commercial banks and doing well with it,” he said advocating for the role of bankers in reducing the funding gap that plagues the industry.
Turning his attention to the Rice Factories Act, he said, “In my humble view, if you try and enforce it, it is going to be become counterproductive.
“The Rice Factories Act has not been enforced and I don’t think you want to have a regulation you can’t enforce… I think that could be counterproductive if you de-licence some of the millers then next crop you have less millers to buy the paddy and so you will overburden them. There will be a bigger gap, funding gap and it just wouldn’t work. I think we have to find a different way of having this industry perform.”
Tracey said there was need for a comprehensive approach to the sector respecting the value chain components and “what is required by each actor to efficiently add value to the product. One of the things that bothers me about the rice industry is the way it functions today. It strains to the point of breaking trust. It strains to the point of breaking patience. It strains to the point of breaking cooperation in the industry and that is not a good thing because when you consider the product and when you think of it in terms of a chain then you understand that each player has an important function.”
Tracey reiterated multiple times during his presentation the role that farmers play, stating, “When you think of it as the value chain you see that the rice producers are responsible for 70 to 75 per cent of the value of the end product.” He said millers contribute about 10% to the value chain.
Tracey said that in 2014 the value of paddy sold was roughly $46 billion and lending from commercial banks rested at $9.4 billion which resulted in the need for government intervention and self-financing to the tune of $36.6 billion to fill the gap, which ultimately delays payments to farmers and upsets the sector.
Tracey said there were seriously social and political implication for an industry that was constantly unable to finance itself.
He said the lack of financing and delayed payments ultimately reflected in producers being unable to complete husbandry practices which leads to low yields and reduction in profitability. Additionally he said that for millers the quality and quantity of paddy is decreased and a low quality of rice produced which also ends in reduction to profits.
The GRDB board member engaged farmers in his presentation and included their concerns into how he formulated his responses.
Farmers in the audience also responded well to presentations by GRDB Extension Manager Kuldip Ragnauth and Chairman of the Millers Association who when through the cost of production from the famers and millers’ perspectives respectively.
Stakeholders in the audience chimed in as the figures used by all three presenters were perceived as higher than the actual average farmers were paid for their paddy by millers.
Farmers said the presentations were informative and Tracey’s did stick out as it ended with solutions.
The National Rice Industry Conference fulfilled one of the coalition government’s 100-day promises. The forum was hailed a success by various farmers and millers Stabroek News spoke with, however many had expected government to put forward plans to assist with the lack of available markets.
