Rice: a new staple for PNG?

The successful testing of hybrid rice varieties will make it possible to grow rice in large volumes in PNG.

For years, local producers believed soil conditions in PNG were not conducive to large-scale rice production. However, testing by the Philippines’ SL Agritech Corp. in Gabadi, outside Port Moresby, has proved hybrid varieties can be successfully grown.

In 2012, rice imports of about 200,000 tonnes cost the country US$208 million, according to the World Bank, supplementing an estimated 15,000 tonnes grown locally.

Predicting a world rice shortage, and a tripling of imports by 2050, the PNG Government has announced new national rice policy, focusing on local rice farming, reducing imports and enhancing food security. The aim is to be self-sufficient in rice by 2030.

Incentives are available to investors committing over K200 million to develop large, commercial-scale, mechanised irrigated rice farms. An import quota system of 170,000 tonnes is in place for 2015/2016 and the Government will introduce an export quota system.

With population growth at about 2.1%, increased rice consumption represents a significant opportunity in PNG.

The country’s dominant rice player, Trukai Industries, is developing a 6000 hectare rice plantation in Central Province.

Trukai’s Chief Executive Officer Greg Worthington-eyre says that, by 2018, 1500 hectares will be producing rice, with the long-term aim of producing 18,000 tonnes per year.

‘Trukai has a commanding market share and, although the market has been growing at about 5% to 5.5% per annum over the last few years, we are seeing current growth at about 3.8% and we see that contracting to closer to 3%,’ Worthington-eyre tells Business Advantage PNG.

‘In PNG, rice becomes more a part of the daily meal, as people can afford it. Hence the market is growing ahead of population.’

In an interview with Business Advantage PNG, Tate expressed concern about the PNG forestry industry’s outlook, particularly in the context of the slowdown in the Chinese economy. China remains the industry’s biggest export destination.

‘Further bad news from China could see a very rapid weakening of export timber prices,’ says Tate. He adds that Chinese buyers are also becoming very product selective. ‘So instead of you (being able to) sell everything to China they are becoming much more quality selective about what they will buy,’ he says.

‘This, in turn, is increasing the amount of stock being rejected, which is creating significant cost pressures for any producers unable to sell what they have. For a country that relies so heavily on timber exports, the current conditions do not augur well.’

While Tate expresses concerns about external threats to the sector, figures from the Bank of PNG suggest a more nuanced picture. In the nine months to September 2015, the kina value of export sales was down 5% on the previous corresponding period. However, the 2015 export values were still some of the strongest of the past five years. James Lau, Managing Director of Malaysia’s Rimbunan Hijau Group, the largest single player in PNG’S forestry sector, recently told Business Advantage PNG that the forestry sector faced significant difficulties in 2015.

‘Round log export prices declined because of oversupply and poor market conditions, especially in China— PNG’S main market,’ Lau says.

‘Despite these difficulties, we have maintained operations and employee numbers in this sector, but we foresee tough conditions to continue at least into the second half of 2016. Timber processing has continued normally and we hope to expand this sector in the future.’