EFFORTS to protect padi farmers and consumers have left millers, the middlemen, high and dry, said a Khazanah Research Institute (KRI) report launched today.

The report, titled “Status of the Padi and Rice Industry in Malaysia”, said the padi industry is weak due to “segment favouritism”.

Lead author Dr Sarena Che Omar said the guaranteed minimum price (GMP) for millers buying padi from farmers, as well as the move to peg the price of rice at RM1.80 for consumers’ benefit, have taken a toll on millers.

As of 2016, there were 157 licensed millers in Malaysia.

“You have a price that stops at the rice end, and at the farm end, it keeps going up. So naturally, you have a squeezing of the middle segment because you want to protect consumers and farmers,” said Sarena.

“When you have these two conflicting polices, you get a supply chain that is artificial. The ones in the middle are not making money.”

As a result of GMP, Kelantan has gone from having 16 mills to no functioning ones.

This is where Padiberas Nasional Bhd (Bernas) steps in as a last-resort buyer of “unwanted” rice at a cost.

“To compensate for the cost, they (Bernas) import,” said Sarena.

Although Bernas has courted much controversy for its monopoly, she said, it is important to ensure that the supply chain is first strengthened before the company’s import rights are re-examined.

“Make sure we have an alternative before we do anything.”

A small to medium miller is said to make a loss of RM19 for every metric tonne of padi bought.

KRI chairman Dr Nungsari Ahmad Radhi said squeezing middlemen’s margins to protect consumers and farmers paves the way for leakages.

“The middle is where there are leakages… there are trading and smuggling elements in that part, and when you want to squeeze margins there because you want to protect consumers and farmers’ income, you’re creating a lot of hanky-panky.”

Sarena said contract farming, which allows for a win-win situation for farmers and millers, may be the solution.

“Leverage the millers to have a vested interest in farmers’ performance.”

She said under the model, farmers can get contracted with millers, who in turn ensure the production of high-quality rice. – April 10, 2019.