The rice industry has gone from strength to strength, in terms of acres under cultivation and yield per acre, now averaging two tons per acre, that is, 32 bags at 140 lbs per bag per crop, due mainly to higher yielding varieties produced at the Burma Rice Research Station, and improved cultivation and husbandry practices. However, the industry has been slow to respond to acquiring markets for the increased production.
As a result of new technology, drying and milling systems have improved, resulting in better recoveries from paddy to rice.
A lot is being said now of monies that are owed by millers to farmers, by the Guyana Rice Development Board to the millers and by farmers to input suppliers, but nothing is mentioned of monies owed by millers to commercial banks, and the pressure the millers are under to dispose of the paddy in a timely manner, so as to pay the farmers.
The problem of millers owing the farmers could have been non- existent, if the money that was made available to Guyana (about $3 billion) by the European Union for the rice industry, was put in a revolving fund as in Suriname, rather than in the Consolidated Fund after the first year.
Because of the rapid increase in production, those looking for markets have been caught with their pants down. This is bearing in mind, that Guyana exports about 75 per cent of its production, while only 4 per cent of world’s production is traded.
The entry of Venezuela, although offering a higher price than Europe and the Caribbean, has caused some serious confusion in the rice industry, as they are only purchasing about 40 per cent of the production. All farmers on the other hand, are asking for prices based on the Venezuelan price, which is not possible.
A lot of numbers have been thrown around in relation to the price of a bag of paddy, some very ridiculous, resulting in more confusion.
Return on investments:
The commercial banks are offering 3 to 4 per cent per annum on fixed deposits. The return on investment for most businesses, is considered good, at 20 per cent per year.
It costs a farmer about $65,000 to produce two tons per acre per crop. Therefore, the total cost per acre per year (2 crops) equal $130,000. If the farmer were to make 20 per cent on his investment, he would expect $130,000 plus $26,000 equalling $156,000.
Considering 32 bags per crop equals 64 bags per year, the price per bag should be $156,000/64 equalling $2,437, which can be easily sustained by the Caribbean and European markets, which are readily available.
An additional $200 per bag on paddy can be available to the farmer, if cost savings can be considered in the areas of the levy to the GRDB, charges at the export ports, etc.
Assuming a farmer will live relatively comfortably on $80,000 per month, that is, $960,000 per year, with him earning $26,000 per acre per year, he will need to cultivate $960,000/ $26,000 which is equal to 36.9 acres. The majority of farmers in the rice industry are way below this acreage, resulting in constant complaining, which is justified.
So the big question is whether it is an industry problem or a social problem, seeing that the farmers have no other means of income.
Obviously, it is not possible to make 36.9 acres available to all the farmers in the rice industry.
This is where a new ADP (Export Agriculture Diversification Pro-gramme) should kick in, and encourage the farmers with a small acreage to concentrate on other crops, which will result in them earning 20 per cent or more on their investment.
The average price for paddy is $3,000 per bag presently, resulting in the farmer earning $192,000 per acre, resulting in an excess of $62,000 per year that is a return on investment of 48 per cent.
Variables to Consider
Cost of Production
$65,000 … Can be higher or lower … Efficiency is important.
Yield per acre
2 tons (32 bags) … Can be higher or lower … Efficiency is important
Cost of Living.
$80,000 per month … With the high cost of living prevailing can be considered on the low side.