Weekly Report
Period : Nov 8 – 14, 2015
By Banyat Nithiuthai
Market situation:
- USDA World Agriculture Supply and Demand ( WASDE) report showed that 2015/2016 global ending stocks increase 3% from last report as China and India consumption fallen.
- 2014/2015 Indian rice stock was reported around 30 million tons and exports around 11 million Mts. Thai rice stock was reported around 18.5 million tons. 6 million tons was considered damaged rice and had to dispose. Around 0.5 million tons was disappeared. This year, Thai rice export figure expected to be around 9millioo Mts.
- International traders bids for white rice 5% new crop at 335 USD/Mt and white rice 5% old crop at 305 USD/Mt. There are some sellers selling at this low price.
- Importing rice to China will face to on trade barrier from Chinese government. Ministry of Agriculture will appoint some staff to certified rice processing plant and issue GMP at the first step and Chinese government will send his certify body to check and give the certificate for the plant which processes exporting rice into China. The rice mills which are not certified will not allow exporting the rice into China.
Productivity improvement role:
- We have stuffed 3 containers of rice to USA. We take the rice gone through the color sorting process before pass through cleaning the dead insect via blowing into dust collector.
- From my opinion for using our current facility, quality problem may happen due to lacking of efficient packing export processing line. Therefore the foreign mater may be contaminated into the exported rice bags such as small stone, dead insect, and dead worm. We have to ask Mr. Manus for his opinion if there is enough equipment for export processing.
- There are a lot of birds are able to fly into the processing plant including the packing area although SAP has installed the net to protect the birds. The contamination of foreign mater into the rice can be happened.
- The experience of SAP’s workers seems not so skillful in packing and stuffing the cargo into the container comparing to other rice exporters or rice mills. The normal stuffing rate at SAP is approximately 70 minutes per 20 ft containers (440bags). From asking Mr. Koon (our warehouse supervisor), he told me that stuffing rice in 50kg bag into 20 ft container should take about 20 minutes per container. Therefore SAP stuffing rate will be slower than the industrial practice about 3 times.
- Refer to Nov1st, 2015 meeting; Khun Pherm approved SAP to buy new 4 equipments for checking the incoming paddy yield. We will start to process 8000 Mts of paddy in order to achieve the estimated cost as per Mr. Manus report. After Khun Thanasit press an order to buy that equipment. it is going to take 3 months for the supplier to deliver those equipment to SAP rice mill. For oven using reducing the moisture of incoming paddy, Mr. Thanasit asked the technician to make one. Before having the whole set of equipment, we are not able to check incoming yield of paddy which we buy. According to the meeting with Mr. Manas, SAP is going to start buying 8000Mts of paddy after we are able to check the incoming yield of paddy. This plan seems to be delayed for 2 months because the equipment supplier can make delivery the equipment 3 months after pressing order.
My suggestion against the problem found:
1. Ask Mr. Manas advice how to prevent the export quality problems (contamination of foreign mater such as small stone, dead insect, dead worm) with the current facility.
2. Install some speakers in the processing building in order to transmit the firecracker sound to make those birds not come to stay in the processing building. We should transmit the firecracker sound in the evening, in the morning every day. This may solve this bird problem.
3. The slow pace of stuffing process seems to come from 2 reasons: (1) the skill of the operators and (2) the inefficiency of weighing machine on the conveyor belt at the bagging station. It seems that the weigh will cause an error from time to time. This can make short weight and over weight problem in each bag. Quality checking at this station is very important to prevent the weight loss.
4. Before we receive the whole set of equipment to check the quality of incoming paddy, we should not start to buy 8000Mts of paddy to process because we cannot control the incoming yield of paddy. This will be important for the processing yield checking as well. According to Mr. Manas study, the processing yield showing 58% may not be achieved because of low incoming yield of paddy.
Rice Trading role:
- Discuss with a Chinese broker for Chinese market. We come up with the brokerage fee at 1.2 USD/Mt of rice which his client buys from SAP. He will take into consideration and will come back to us next week.
- I have contact CP inter-trade CEO to find out the right person to discuss about selling rice to them. He kindly gives me the contact person name. But he has gone to abroad and will be back next week. I will follow up next week.
- After meeting with Louis Dreyfus last week, I invite him to visit SAP rice mill. He came to visit SAP rice mill on Nov 12, 2015. We have the meeting and brought him to see our operation plant. He gives us some comment that most rice exporters which supply rice to him are able to process 20 containers per 8 working hour. If it is lower than this level, it may not achieve an economy of scale from his side and from rice exporter side. His buying term is ex-work Payment term TT in THB 7 days after delivery in case using Dreyfus subsidiary company in Bangkok as a buyer. In case of using Dreyfus Singapore, payment term is also TT.
- The price idea from international trader for white rice 5% new crop is around 335 USD/Mt and for old crop is around 305 – 310 USD/Mt. The price seems quite low compare to selling to sell via local trader to other exporter.
- SAP currently sells through only one local trader. Khun Pasit mentions that he can trust this local trader because he has worked with this one since his father period. The price got from this one is not able to check if it is cheap or not.
My suggestion:
1. We should have one more local trader to sell to exporters or local market. But have to get the reliable local traders.
2. As a shipper for exporting, quality has to be sound otherwise the buyer can reject the cargo at destination. Our processing should be able to control the export quality at all time.
3. Payment term with the big name international traders is likely TT because they will apply this term with all suppliers in Thailand. Buyer credit risk has to get approve case by case via the management. If the new buyer, LC or DP will be safe.
4. Selling to international trader, they can buy in big quantity. But the price may be lower than small traders or importers. As far as we can cover variable cost, selling to international traders will bring us a big volume. This make us be able to achieve an economy of scale.
5. Our old crop Hom Mali rice may have to sell to local traders as soon as possible because the quality of the rice may be reduced due to not storing in the control temperature room. During the discussion last week, we agree to find out the actual market value of this 900Mts of Hom Mali stock. Khun Thanasit is checking the actual weight and actual quality. After checking will let you know where is the actual value and the current market value of the standard Hom Mali Rice old crop.