Baht Is On Landmark Verge

[SoiSong]

Balance of payments is an issue.

Copied from the Nation:

strategies, some plan to stop doing business if currency touches 32

With the baht breaking the barrier of 35 to the US dollar last week, Thai exporters must now revamp their export strategies to avoid losses - and some rice exporters may even stop trading if the baht reaches 32.

"If the rising baht reaches 32 to the dollar, I would consider closing my export business rather than trading at a loss from the exchange rate," said Chookiat Ophaswongse, deputy managing director of Huay Chuan Rice, one of the industry's pioneers.

The company will focus more on its diversified businesses, including hotel and apartment services.

Rice exporting is one of the Kingdom's oldest trades and was once its biggest foreign-exchange earner. However, globalisation has turned the industry from a highly profitable to a low-margin one in the last 25 five years amid fierce competition.

Despite the stronger baht, Thailand wants to maintain its status as the world's biggest rice-exporting country, with volume set to reach 8.5 million tonnes this year.

Chookiat said the public might wrongly believe rice exporting earned high profits when in fact rice was a commodity export that relied mainly on its cost. This means the export cost is 92 per cent. Moreover, exporters need good management, particularly in anticipating the market price. Rice is sold in advance and delivered later. If the price increases during the interim period, exporters face immediate losses.

Rice exporters have faced high losses from the exchange rate, with the baht appreciating 15-17 per cent since last year. Chookiat, who is also president of the Rice Exporters' Association, said hundreds of new rice traders and exporters had emerged in the market during the past few years. Association membership has reached 185 companies, while 60-70 companies are non-members.

When Thailand first started exporting rice, about 10 companies controlled the market, with export volume of only 100,000 tonnes a year. The new players have focused more on price-cutting to attract customers. "Even though they know their prices will cause them a loss, they still sell. The situation has allowed buyers to pressure the price as low as they want," Chookiat said. Some long-established rice exporters have sharply reduced their export volume and turned to other lucrative businesses, particularly property and hotels.

The baht's strength is the most important factor behind exporters considering whether to shut down their decades-old business.

"Some rice exporters do not want to forge a difficult export environment during the baht's surge," Chookiat said, adding that some were being hampered by hedging restrictions with commercial banks.

Chookiat said the baht's strength had also reduced the Kingdom's export competitiveness, particularly compared with emerging neighbour Vietnam, whose currency has been stable.

However, Thailand is expected to achieve its export target of 8.5 million tonnes this year, because the El Nino weather phenomenon has caused a drought in rice-consuming countries like Indonesia and the Philippines. Moreover, world rice trading is forecast to total 29.2 million tonnes, due to high demand and low stockpiles.

Achara Pongvutitham,Petchanet Pratruangkrai, The Nation

What will be the social inplication of a baht at that position. Considering the problem of people who live along the rice belt of Hwy 226 from Burrram to Ubon and those about at very poor areas north about the area on Khon Kean will likely not survive a season of not enought rain and lowered profits....If the rice drops below 10 baht per kilo what will happen..

They have no choice............

More and More Issan people will abondon their subsistance living to enter the already over crowded employmkent market in the tourism industry.