Caught by water shortages and declining crop production in its southern NSW heartland, SunRice is contracting farmers in Asia to grow the extra rice it needs to fill its annual million tonne global sales orders.
Tropical Japonica style short or medium grain varieties, specifically chosen after consumer taste test trials, are now being grown specifically for SunRice to help supplement Australia’s dwindling rice harvest.
The Riverina crop yielded just 245,000 tonnes in the season just ended.
Two seasons ago the crop was 820,000t - and even that was well short of SunRice’s needs.
Chief executive officer, Rob Gordon, is remaining “a little coy” about identifying where the offshore crops are grown or by how many farmers, but said SunRice was operating in “different parts of South East Asia”.
“It’s not exactly the same as the rice we are famous for growing in Australia, and some markets such as the Middle East will still only accept rice from Australia or the US,” he said.
“But we’ve done considerable sensory testing in the past 18 months and agronomic supervision identifying a particular variety which is helping supplement our supplies.”
Third party quality control processes are also in place to ensure overseas-grown crops meet SunRice brand expectations.
The new connection with farmers in Asia coincides with farmer-owned SunRice also opening an office in Singapore as it beefs up its marketing effort in the region.
Although Australia’s rice industry was snubbed during recent free trade deals with China and Japan, two months ago SunRice began selling Australian branded product direct to Chinese consumers via the internet.
“We already have quite a good presence in Hong Kong and Singapore, but we want to build Asia as the third leg in our export market portfolio,” Mr Gordon said.
“Volumes are not massive at the moment but we increased sales in our Asian leg by 28 per cent last (financial) year.”
Despite irrigation water shortages and increased competition from cotton in southern NSW, SunRice’s food processing and marketing business lifted total revenue 1.9pc to $1.3 billion in the trading year to April 30.
The company this week reported a 5.8pc profit rise to $52m for 2015-16 and declared a fully-franked total dividend of 33 cents a share for B-class shareholders - up 6.5pc on the previous year’s dividend.
About 300,000t was sourced from Asia and the US in 2015-16 to ensure the company serviced and maintain its expanding branded markets.
While the local rice shortage is a challenge, SunRice insists its premium domestic markets in Australia will continue to be supplied with Australian-grown varieties, including the industry’s preferred medium grain line Reiziq, for which growers received a total $404 a tonne from SunRice in 2015-16.
SunRice’s majority-owned US partnership business SunFoods in California, is set to help fill more export orders this year, but for the past few seasons has itself been caught by dry weather constraints.
Drought-breaking rain in the past six months improved Californian production.
When required, long grain rice for the Australian market is being sourced from Thailand where SunRice has long standing trading and food processing arrangements.
“There’s lots of long grain rice kicking around the world - we don’t have any trouble sourcing that to meet orders,” Mr Gordon said.
“But we also have some very important markets for medium grain which we can’t afford to walk away from so we’ve had to establish new supply lines.”
About 90pc of SunRice rice is now sold locally and overseas as branded products rather than in bulk commodity sales which were prominent until a few years ago.
SunRice’s improved profit performance was attributed to a “continuing favourable mix of sales into premium branded markets”, with growth in its international rice and rice food segments among highlights of the past financial year.
However, sliding currency trends in Australia, and particularly Papua New Guinea, eroded some offshore earnings gains.
“The business performed well across a range of markets, with the Middle East, Asia and Australia and New Zealand businesses delivering positive market share and volume results,” Mr Gordon said.
“The FY16 result clearly demonstrates the increased revenue scale and profitability levels experienced in FY15 have been maintained as a result of the strategy that was implemented in FY12.
“This strategy focuses on premium branded markets and builds capacity and capability across the organisation.”
“It has increased the group’s resilience in a dynamic and challenging operating environment.”
