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Rice is a central part of many cultures and some countries even credit rice cultivation with the development of their civilization. It is the staple food for more than half of the world population. Rice is the world's most consumed cereal after wheat. It provides more than 50 percent of the daily calories ingested by more than half of the world population. It is the most rapidly growing source of food in Africa, and is of significant importance to food security in an increasing number of low-income food-deficit countries.
Each year, close to 600 million tones of paddy [360 million tonnes of milled rice] is produced, with over 90% of the production being concentrated in Asia, given the favorable climatic conditions and the relatively lower costs of production. China and India account for almost two thirds of this production with Thailand, Vietnam, Indonesia, Pakistan and Myanmar making up the balance. The producing countries are also large consumers of rice. International Trade in rice is only around 28 million tonnes [less than 8% of global production]. Africa and Asia import over 85% of the internationally traded rice volume.
Olam’s Role in the Rice Business
Olam is one of the leading global players in the Rice Business. We participate in the entire value chain from sourcing, shipping and logistics management through to marketing and distribution. Our physical presence in the major rice exporting countries and our distribution infrastructure in the major destination markets has provided us with an unparalleled insight into the market and establish a unique and distinctive competitive position within the global rice market.
Majority of the rice trade happens between developing economies. We have, by virtue of our physical presence in all the key exporting countries, have been able to establish strong and sustainable relationships with exporters and have emerged amongst the leading buyers from these countries.
We place significant emphasis on the quality of the rice that we source and export and this is evidenced by the focus we have as a company on quality control systems and procedures. Our trained and tested quality control inspectors closely monitor the quality at various stages of the production and packaging process at our suppliers’ manufacturing facilities prior to export.
Our in-house shipping desk helps the business secure the competitive freight rates it requires by using a combination of voyage and time charters, coupled with innovative hedging tools which allows the business to hedge itself effectively in a volatile freight market. Our shipping desk manages close to 15 vessels for the Rice Business at any given point in time. With this expertise in shipping and logistics management, we are able to ensure timely and cost effective delivery of rice to our customers.
In the destination markets, we have set up an extensive warehousing and distribution network and market the rice in these markets through our strong and well entrenched distribution channel. We have successfully positioned many of our brands in both the parboiled and white rice segments and many of them are household names today in several markets.
Our strategy of setting up distribution networks in the destination markets, coupled with selective backward integration into the logistics and origination part of the value chain has provided us with a strong foundation to profitably grow this business into the future.
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