Rice farmers, millers brace for “blow” after collapse of Venezuelan market

Last Updated on Thursday, 9 July 2015, 14:41 by GxMedia

Rice being loaded into a Venezuela-bound ship (file photo)

by Zena Henry and Denis Chabrol

In the face of the imminent collapse of the lucrative Venezuelan rice market, Guyanese rice farmers and millers are preparing for the eventual fallout by having to take lower world market prices for the grain.

Guyana will have to “aggressively” seek  search for more rice markets as the State’s only and most lucrative; rice for oil deal with Venezuela has fallen through.

Under the agreement, Guyana earns about US$760 per ton for rice and US$540 per ton for paddy from Venezuela compared to world market prices of US$500 per ton for rice and US$340 for paddy.

This was confirmed by Finance Minister Winston Jordan who recently returned from Venezuela after negotiations were held there on the continuance of the arrangement.

Jordan told Demerara Waves Friday July 9 that the Spanish speaking neighbour has opted to purchase rice quantities from Suriname and Uruguay.

Guyana’s arrangement with Venezuela comes to an end in November of this year and Venezuela will not be renewing its contract. He said Venezuela did hint however, interest in purchasing Guyanese rice next year but in a smaller quantity.

Guyana and Venezuela are currently involved in a widened territorial controversy that includes an offshore area where American company, Exxon Mobil, is drilling for oil in Guyanese territory claimed by Venezuela.

Although the Venezuelan negotiators did not raise this as a reason for their withdrawal during their meeting, the Finance Minister said, “read between the lines.” He said however that shipment records show a reduction of Venezuela’s orders and this should have been a sign to the previous administration.

While authorities are scrambling to find other high-price markets for rice and paddy ahead of November when the current Guyana-Venezuela agreement will expire, the Guyana Rice Millers and Exporters Association (GRMEA) and the Guyana Rice Producers Association (GRPA) are concerned that less cash would be flowing into the industry.

“It will have a significant loss to millers because it would be loss of a significant market and it is a very high priced market so we will see a reduction in paddy prices to farmers and we have to have access to world market prices,” said GRMEA President Patrick De Groot.

While De Groot was unsure how the lower prices would affect millers who have taken loans to improve their factories, he acknowledged that several of the more than 60 mills had improved their capacities over the years.

The GRMEA plans to join any government delegation in going to Venezuela to lobby authorities there to continue buying much of the paddy and rice from Guyana instead of turning to the other two South American countries.

De Groot said given Venezuela’s poor economy, local rice industry stakeholders were always questioning when the purchase annual agreement with Venezuela would not be renewed. He believed that the almost one-month old spat over Venezuela’s unilateral extension of its maritime boundary was quite unhelpful to the grain market there. “What has made things now is that the relationship politically between the two countries has deteriorated,” he said.

RPA President, Dharamkumar Seeraj predicted that if the accord is not renewed at least 8,000 farmers and other employees in the industry would be severely affected. “If we lose the Venezuela market, which is a third of our exports and  on the high (price) side, it definitely is going to be a blow to the industry,” he told Demerara Waves Online News.

He said if the average price to millers falls, then farmers would earn less than GUY$3,000 per bag when the grain is sold at world market prices, which are lower, to other countries.

Guyana produced more 633,000 tons of rice in 2014.

Finance Minister Minister Jordan’s team to Venezuela consisted of  General Manager of the Guyana Rice Development Board (GRDB), Jagnaraine Singh and GRDB Technical Expert, Alison Peters.

Rice industry expert, Turhane Doerga flayed government for including Singh in the delegation, arguing that rice farmers and stakeholders have blamed that GRDB official and the Board for the booming sector with ailing market accessibility.
Dorega said, “the Minister went with Singh, who campaigned for the PPP and is still at the rice Board.” He said it would have been wise if key persons such as him who had initiated the PetroCaribe deal were consulted. “I wish that the government would finally make the decision to let professionals handle the rice sector,” Doerga told Demerara Waves.

The Minister stated, however, that “Venezuela was adamant…let’s be blunt about this…This deal was not meant to be a permanent deal.” He explained that Venezuela has the right to buy rice from any country in and out of the  rice deal zone, before indicating the need for countries to be careful in actions that have an impact on the arrangement.
He said that these arrangements are made by the two parties who are seeking to satisfy their specific interests. “This interest can be plain or sometimes hidden.”

Every country with whom this rice for oil deal exists, negotiates one-on-one with Venezuela on how their deal works out.
Guyana, Jordan explained, negotiated and got a very lucrative offer. However Guyana was told previously by Venezuela, that it should start looking for other markets. The Finance Minister added that the recent dispute could have seriously affect the rice arrangement.

Doerga argued that the arrangement could be saved, suggesting that negotiations be held and the territorial dispute be handled in a more diplomatic and subtle way.

Recent reports out of Venezuela were that Guyana was being used by America to penetrate their long time Spanish-speaking foe, an accusation that the Guyana government has vehemently denied.
Some locals are also of this view that Guyana is being used.

One senior member of the rice industry who opted anonymity said that “Guyana has not even seen oil yet and already they are allowing the Americans to turn them against their neighbours.” He suggested that “the rhetoric and threats will not help the situation.”

Doerga described the new development as “bad, really bad.” He noted however that markets have to be found soon as thousands of farmers would be affected by the non-renewal of the rice agreement at a time when rice production is at its highest for a very long time.

Guyana has been seeking to tap into new rice markets such as European countries, Brazil, Panama, Belize and several Caribbean countries. Guyana already sells fairly large quantities of rice to Jamaica.