Check out our FREE food commodity markets bulletin service - AGRIMARKETS - market analysis, prices and daily commentary @Agrimarkets

Saturday, September 10, 2011

CAMBODIA: CORN - PROSPECT FOR THE FUTURE

Cambodia holds a key position in the Greater Mekong Sub-region (GMS) and has the potential to be the food basket of South-east Asia.

Fed by the Mekong River and the site of the unique Ton Le Sap water body (visible in the satellite photo), the country has excellent soils and wide areas of flat, fertile lands. Access is overland to neighbouring Thailand and Vietnam and to the sea at Sihanoukville.

Cambodia grows rice, upland perennial crops such as coffee and rubber, oil palm and corn (maize). With a population of over 14 million recovery from the civil conflict of earlier years has been impressive and there is a stable government based on an Asian form of democracy and a constitutional monarchy.

Rated B+ in terms of official country risk and somewhat lower on the World Bank's Index of Doing Business than it should be, Cambodia has actually attracted large amounts of foreign direct investment.  Overall China is the largest investor but other investors from Taiwan, Korea and Malaysia have been prominent. Surprisingly this year the UK has led the investors.  FDI is welcome and with a tax rate of 20% and various tax holidays, Cambodia has set its heart on being the business destination in this part of the world.

In terms of agriculture, the Government has seen investors come and go. Political disagreements with Thailand have meant that the larger Thai agribusiness companies such as Charoen Phokphand have been wary of their investments; many of the other Asian investors have been property speculators who took Economic Land Concessions (ELCs), sat on them perhaps with minimal investment and then hoped to have turned a speculative profit as land prices have risen.  So not as much progress has been made as could have been.

The Government is sick of this circumstance. So there is every official encouragement for serious long term real investment based on large-scale farming with good management and technology.

In this case, with our partners we have developed a concept-level corn project.  Details may be downloaded at this link - CAMBODIAN CORN PROJECT

In brief, we are planning to develop a start-up ELC of 3,000 to 5,000 hectares for irrigated corn (maize) with a target three crops per year aimed at the animal feed market. The project can be scaled up to 20,000 hectares once success has been assured.  We envisage an initial capital investment of US$15 million (depending on needed infrastructure).

Corn prices are at their highest level for years (see analysis on our sister site Agrimarkets) but at average long-term prices (which we always use for analytical purposes) of half the current price, this project looks very attractive.  Demand for animal feed is growing sharply in Asia as economic growth increase middle-class incomes and as people eat more meat rather than rice.  China, Korea and other Asian countries import corn and the market is growing.

With our partners we intend to develop this project in the coming months, laying a base for similar developments throughout this region.  FoodWorks will operate as the development facilitator, putting the pieces of the investment puzzle together and ensuring that the projects, wherever they may be, are undertaken with due regard for local communities and environmental safeguards.

For more information please contact: gqb@foodworks.ag