or more usually c.i.f. and terms of payment are mostly D/P collections, occasionally by letter of credit, and, for rice of Chinese origin, commonly on consignment. In some countries, for example China and Cambodia, purchases are made from the relevant State Trading Organizations; in others, through normal commercial channels. Apart from the actual purchase price, which can fluctuate quite widely and often swiftly over a short period, and apart from freight rates which vary from time to time, important elements in determining the price at which importers can sell without loss is the cost of financing stocks held, the cost of warehousing the stocks themselves, handling charges, allowances for deterioration, and the price of stock replacement. It has been estimated that during the past two years, over and above the c.i.f. price of Thai rice, the importer has had to meet expenses of the order of $4.50 a picul before any parcel of rice can be delivered to retailers in Hong Kong. These expenses include not only insurance and freight, bank and handl- ing charges in importing rice into Hong Kong, but also costs (i.e. interest, insurance, storage charges, depreciation, etc.) to the importers for main- taining stocks. Prior to 1965, expenses were probably lower reflecting lower handling charges and interest rates, although the latter will have to some extent been offset by maintenance of stocks generally at a high level.
The importers are traditionally accustomed to sell rice by auction. exclusively to members of the wholesalers association (who are effectively 32 in number), giving them a rebate of 30 cents on each picul of rice sold, of which a part customarily goes to the wholesalers' staff. (Since June 1965 some retailers have purchased direct from the importers on a cash basis). Wholesalers in turn sell to retailers, usually but not in- variably, at importers' auction price plus a standard mark-up of 80 cents a picul. The rebate plus mark-up represents the wholesalers gross income, from which they have to deduct their overheads, (staff, rented premises, interest on credit they extend to retailers over and above that extended to them by the importers, bad debts, etc.) to determine their net profit. Wholesalers are not directly charged for storage, nor do they have to meet the cost of transport of rice sold; they do not at any time handle rice physically.
All wholesalers belong to the Hong Kong Rice Merchants' Association, membership in which is tightly controlled, and is by purchase. They are not subject to official control. Free competition exists amongst whole- salers for retailers' business, and takes the form of cash rebates to
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retailers which have, at times, amounted to 30 cents a picul, i.e. the entire rebate which wholesalers receive from importers. Extension of normal credit by wholesalers has also been from time to time a major factor in securing retailers' business.
The period and amount of credit extended at each link in the chain is a factor vital in determining prices to the consumer. Competition between rice retail shops is intense, and they are thus reluctant to link retail prices too closely to movements in wholesale prices. Instead, it is common practice for them to adjust the ratios of the different qualities of rice in the mixture they sell in order to compensate for wholesale price movements or to make additional profit.
Importers/stockholders are not allowed to extend more than 30 days credit to wholesalers, under the provisions of the Rice Control Scheme. But wholesalers frequently extend up to 40-50 days credit to their retail outlets. Retailers, in their turn extend credit to the ultimate consumer. It is estimated that, at any one time, approximately $40 million worth of business in the rice trade is financed on credit.
3. SOURCES OF SUPPLY
(a) Domestic Production
The Colony depends almost wholly on imports for its supply of rice since home production amounts to less than 5% of total consumption. The acreage of cultivated paddy fields in Hong Kong fell by 36% between 1958-59 and 1965-66; production about the same. Both were average years as regards crops. Details of the area under rice cultivation in Hong Kong, and domestic production from 1958-66 are summarized in Appendix IV (i).
(b) Imports
Rice is imported into Hong Kong mainly from South East Asian countries, Thailand and China being the main suppliers, with smaller amounts coming, in the past, from South Vietnam and Cambodia. Import figures by source and grades are summarized in Appendix IV (ii).
4. DEMAND PATTERNS
(a) Consumption (Aggregate)
Total rice consumption for each year since 1958 is summarized in Appendix V (a).
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