Exporters Warned As Baht Heads Towards 30 Per Dollar

[rubl]

Ad. 3.

30% drop in rice exports has more to do with price setting due to the 'rice price pledging' scheme of the government distorting prices than rise of Baht IMHO.

The Thai Rice Export Association says different:

According to Thai Rice Exporters Association "More buyers in Hong Kong are turning to Vietnamese rice as its jasmine rice is about $550 PMT while Thai jasmine rice is sold at $900 PMT".

http://www.thaivisa....ost__p__3836875

It IS due to enormous price differences and not -just- government steps.

Thai jasmine rice is almost double the price of Vietnam.

LaoPo

You may wonder what caused that enormous price difference. If the price at which the government pledges/buys is too high, exporters need to add their margin, and bingo. May not explain the total difference, but most of it IMHO.

Edited August 26, 2010 by rubl

[LaoPo]

Ad. 3.

30% drop in rice exports has more to do with price setting due to the 'rice price pledging' scheme of the government distorting prices than rise of Baht IMHO.

The Thai Rice Export Association says different:

According to Thai Rice Exporters Association "More buyers in Hong Kong are turning to Vietnamese rice as its jasmine rice is about $550 PMT while Thai jasmine rice is sold at $900 PMT".

http://www.thaivisa....ost__p__3836875

It IS due to enormous price differences and not -just- government steps.

Thai jasmine rice is almost double the price of Vietnam.

LaoPo

You may wonder what caused that enormous price difference. If the price at which the government pledges/buys is too high, exporters need to add their margin, and bingo. May not explain the total difference, but most of it IMHO.

One may question WHAT caused the price differences as long as one wants...the fact remains that there is a dramatic drop of 30% in the first 6 months of this year in Thai rice exports.

The other fact is the rising Baht and a declining Vietnamese Dong with 3 times a devaluation since last November.

Go figure.

And. that's just about rice exports....

MY point is my warning for an expensive Baht versus the opinion by some members here, applauding that expensive Baht.

They don't realize the VERY SERIOUS consequences of an expensive Baht.

Not for me though since I don't hold anything in assets in Baht; I'm not stupid...but it could have serious consequences for themselves

But I will wait and see....

LaoPo

[Thai at Heart]

One may question WHAT caused the price differences as long as one wants...the fact remains that there is a dramatic drop of 30% in the first 6 months of this year in Thai rice exports.

The other fact is the rising Baht and a declining Vietnamese Dong with 3 times a devaluation since last November.

Go figure.

And. that's just about rice exports....

MY point is my warning for an expensive Baht versus the opinion by some members here, applauding that expensive Baht.

They don't realize the VERY SERIOUS consequences of an expensive Baht.

Not for me though since I don't hold anything in assets in Baht; I'm not stupid...but it could have serious consequences for themselves

But I will wait and see....

LaoPo

We will all wait and see. What would be a weak value to the baht? 35, 45, 55 to the USD?

As for rice, the middle man is getting squeezed just a little, but of course, the farmers will pay for it next year, because the warehouses will be stuffed. Of the 900 USD per ton which sounds a lot, but when you equate it with 0.90 USD per kilo, it sounds a lot less.

Of that 0.90 per kilo, how much ended up in the farmers hands? I will not lose one blink of sleep over an oligopoly such as the Rice Exporters association bleating about the export price which they are demanding. I would wager that their margin, for buying, processing, packing and exporting is more than enough to cover reducing the export price to a more attractive price per ton. They have profited off the back of the farmer since time immemorial in Thailand.

The Thai government believes its new price-guarantee scheme and the lower supply of rice in the market can boost paddy rice price to Bt8,000-Bt8,500 (US$246.9 - US$262.3) a ton next month. Commerce Ministry permanent secretary Yanyong Phuangrach said the National Rice Policy Committee's measures will help farmers obtain better returns. Rice price has dropped sharply to below Bt7,000 (US$216) a ton.

http://www.globalintelligence.com/insights-analysis/asia-news-update/asia-news-update-may-7-2010/thailand-new-price-guarantee-scheme-to-boost-rice-/

March 2010 - 8000 baht per ton - 242 USD per ton @ 33:1USD - 0.24 USD per kilo approx

Export at 900 USD per ton @ 31 = 27,900 Baht, very nice business if you can get it.

A couple of sand and dust shakers, some threshers, and a dryer, and a bagging machine a bit of aluminium phosphide to fumigate is all you need, along with some labour at 192 baht a day somewhere up country.

And you suppose they would be selling at a loss at 0.70 per kilo?

Why don't we all go run and get a license for export? Oh of course, us foreigners (if ever that was a joke about the historical roots of just about every licensed rice exporter in the country) would rip the farmer off. The most valuable license anyone can get in this country is a rice export license.

It is a license to essentially print money. Does anyone in Thailand know of a rice exporter who went bust? Of course not, the risk gets thrown back on the government and the farmer next year. Why doesn't the government encourage more diversification to get away from this idea of Thailand being 'the largest rice exporter' anyway? Thai's need it to eat, and a few exporters need it to print money. But that would mean treading on some of the biggest and oldest toes in this country.

[LaoPo]

We will all wait and see. What would be a weak value to the baht? 35, 45, 55 to the USD?

As for rice, the middle man is getting squeezed just a little, but of course, the farmers will pay for it next year, because the warehouses will be stuffed. Of the 900 USD per ton which sounds a lot, but when you equate it with 0.90 USD per kilo, it sounds a lot less.

Of that 0.90 per kilo, how much ended up in the farmers hands? I will not lose one blink of sleep over an oligopoly such as the Rice Exporters association bleating about the export price which they are demanding. I would wager that their margin, for buying, processing, packing and exporting is more than enough to cover reducing the export price to a more attractive price per ton. They have profited off the back of the farmer since time immemorial in Thailand.

The Thai government believes its new price-guarantee scheme and the lower supply of rice in the market can boost paddy rice price to Bt8,000-Bt8,500 (US$246.9 - US$262.3) a ton next month. Commerce Ministry permanent secretary Yanyong Phuangrach said the National Rice Policy Committee's measures will help farmers obtain better returns. Rice price has dropped sharply to below Bt7,000 (US$216) a ton.

http://www.globalint...to-boost-rice-/

March 2010 - 8000 baht per ton - 242 USD per ton @ 33:1USD - 0.24 USD per kilo approx

Export at 900 USD per ton @ 31 = 27,900 Baht, very nice business if you can get it.

Exactly and I fully agree with you.

It's like always...the poor (rice farmers & workers) are affected most; not the Thai Rice Exporters Association.

"Commerce Ministry permanent secretary Yanyong Phuangrach said the National Rice Policy Committee's measures will help farmers obtain better returns.."

Yeah..right

That's also MY point about such an expensive Baht. It affects the poor more than anyone else.

Your question: "What would be a weak value to the baht? 35, 45, 55 to the USD?" is hard to answer for everybody, not just me since it depends on so many economical factors, worldwide.

LaoPo

[thaibeachlovers]

The Baht is officially floated, however unofficially pegged by the BOT who control it by purchasing US dollars. Ifyou visit fxhistory.com you can look at historical values between USD/THB. Now take a look at USD rates vs other countries - only the pegged currencies and the baht are virtually unchanged (a few baht does not make it floating).

For example, look at the variations between NZD, AUD, EUR - these are true floating currencies. These are markets which rise and fall based on export sucesses and import consumption demand. The Thai baht is built on quite something else - ensuring that you cant get as many baht per USD as you can for the yen, or the kip...

I have traded currencies for 7 years and made a lot of money from it - if you want to have nice holidays but cant obtain baht where you live, simply buy USD and you will be just as well off when you arrive and convert in Thailand - this works for the same reason, that it is virtually pegged to the dollar.

All these two banks are stating, is that they are expecting BOT to acknowledge this year that the USD dollar has weakened on an international scale, and that they are going to allow some movement in the exchange rates to reflect this fact. The NZ Dollar overall is very weak, yet we are on market highs with USD.

This is a facade, and more likely just an attempt by BOT to streamline the export industry by cutting off the fat of the market and make those that survive more efficient to compete with Vietnam rice production exports, which is now outpacing Thailand. BOT realises that if they cannot compete with Vietnam rice export prices, the only thing Thailand will be able to export are bar girls and Pad Thai after Sanuk yuu tee Soi Sii.. Ka pom.

What is the $NZ weak against? Certainly not Sterling, I just checked and it's 2.21148. It was over 3 in late 90s.

[mommysboy]

The Baht is officially floated, however unofficially pegged by the BOT who control it by purchasing US dollars. Ifyou visit fxhistory.com you can look at historical values between USD/THB. Now take a look at USD rates vs other countries - only the pegged currencies and the baht are virtually unchanged (a few baht does not make it floating).

For example, look at the variations between NZD, AUD, EUR - these are true floating currencies. These are markets which rise and fall based on export sucesses and import consumption demand. The Thai baht is built on quite something else - ensuring that you cant get as many baht per USD as you can for the yen, or the kip...

I have traded currencies for 7 years and made a lot of money from it - if you want to have nice holidays but cant obtain baht where you live, simply buy USD and you will be just as well off when you arrive and convert in Thailand - this works for the same reason, that it is virtually pegged to the dollar.

All these two banks are stating, is that they are expecting BOT to acknowledge this year that the USD dollar has weakened on an international scale, and that they are going to allow some movement in the exchange rates to reflect this fact. The NZ Dollar overall is very weak, yet we are on market highs with USD.

This is a facade, and more likely just an attempt by BOT to streamline the export industry by cutting off the fat of the market and make those that survive more efficient to compete with Vietnam rice production exports, which is now outpacing Thailand. BOT realises that if they cannot compete with Vietnam rice export prices, the only thing Thailand will be able to export are bar girls and Pad Thai after Sanuk yuu tee Soi Sii.. Ka pom.

What is the $NZ weak against? Certainly not Sterling, I just checked and it's 2.21148. It was over 3 in late 90s.

Herein lies the paradox, I think OZ and NZ are lumped in with Oceania, whilst USD and GBP are very firmly 'the west'. But the point is Thailand's fortune is very much linked to the west for trade, ever more so since agriculture and tourism plummeted, and according my understanding that accounts for 40% of the workforce.

This is a country heading for an awful fall as it doesn't understand where its bread is buttered ( perhaps a bad metaphor). It's certainly a country that doesn't understand the difference between turnover and profit. As far as I can see the economic miracle is based on some very temporary exports for cars, which probably produce lowish profits and certainly negligible employment. Never more the words 'turnver is vanity, profit sanity' were more true. I made this point a couple of months ago but just got the proverbial taken out of me by thse pairofaxxes sbXandhengthetwXT.

[Thai at Heart]

We will all wait and see. What would be a weak value to the baht? 35, 45, 55 to the USD?

As for rice, the middle man is getting squeezed just a little, but of course, the farmers will pay for it next year, because the warehouses will be stuffed. Of the 900 USD per ton which sounds a lot, but when you equate it with 0.90 USD per kilo, it sounds a lot less.

Of that 0.90 per kilo, how much ended up in the farmers hands? I will not lose one blink of sleep over an oligopoly such as the Rice Exporters association bleating about the export price which they are demanding. I would wager that their margin, for buying, processing, packing and exporting is more than enough to cover reducing the export price to a more attractive price per ton. They have profited off the back of the farmer since time immemorial in Thailand.

The Thai government believes its new price-guarantee scheme and the lower supply of rice in the market can boost paddy rice price to Bt8,000-Bt8,500 (US$246.9 - US$262.3) a ton next month. Commerce Ministry permanent secretary Yanyong Phuangrach said the National Rice Policy Committee's measures will help farmers obtain better returns. Rice price has dropped sharply to below Bt7,000 (US$216) a ton.

http://www.globalint...to-boost-rice-/

March 2010 - 8000 baht per ton - 242 USD per ton @ 33:1USD - 0.24 USD per kilo approx

Export at 900 USD per ton @ 31 = 27,900 Baht, very nice business if you can get it.

Exactly and I fully agree with you.

It's like always...the poor (rice farmers & workers) are affected most; not the Thai Rice Exporters Association.

"Commerce Ministry permanent secretary Yanyong Phuangrach said the National Rice Policy Committee's measures will help farmers obtain better returns.."

Yeah..right

That's also MY point about such an expensive Baht. It affects the poor more than anyone else.

Your question: "What would be a weak value to the baht? 35, 45, 55 to the USD?" is hard to answer for everybody, not just me since it depends on so many economical factors, worldwide.

LaoPo

As it stands today, it isn't entirely fair to say that a strong baht hurts the poor the most. The poor of Thailand (and the rest of us) are largely insulated from movements in the exchange rate when we live our daily lives, because the importers of Thailand live behind enormous import duties and licenses to protect their domestic businesses. A strong baht insulates Thailand from rising fuel prices which definitely hurt the middle to lower earning Thai straight in the pocket. I didn't see too many retailers passing on the benefits of lower duty on Australian wine, or cheaper Louis Vuitton handbags as the currency has strengthened. This is a more severe weakness in the Thai market.

We never get to see the benefits of cheaper goods be they imported beer, cars, luxury goods because this is exactly where one part of the establishment have made their market. However, I wish the government would let some of these useless middlemen in the export market go to the wall. The government has a pledge price, and the exporters must meet the difference. A market for export of a commodity such as Thai rice should have 5 or 6 massive players, plus one government organisation and one farmers co-operative to provide scale of production.

Right now, if you check the website, it goes up to 193 members all trying to make a margin on the deal. This is FAR TOO MANY bloodsuckers.

last page of members of the RIce Exporters Association

Maybe they aren't all in possession of an export license, but how can such a simple market be supposed to function properly with potentially 193 people in the middle of it. I have worked in one part of agricultural export from Thailand and 2 or 3 dominant companies involved in that industry, and some would say that is too many. The same goes for sugar, dozens of inefficient medium sized sugar mills, just so that far too many can grab a bit of the 70% margin, when to make it efficient there should be 4 or 5 massive mills, and one co-op mill to increase efficiency.

I don't know if any particular political party can solve it, but those on all sides of the political divide are more than aware of the problem/benefit. Cut through the blood suckers and make it efficient, the farmers can get more, and the market gets streamlined.

[LaoPo]

Herein lies the paradox, I think OZ and NZ are lumped in with Oceania, whilst USD and GBP are very firmly 'the west'. But the point is Thailand's fortune is very much linked to the west for trade, ever more so since agriculture and tourism plummeted, and according my understanding that accounts for 40% of the workforce.

This is a country heading for an awful fall as it doesn't understand where its bread is buttered ( perhaps a bad metaphor). It's certainly a country that doesn't understand the difference between turnover and profit. As far as I can see the economic miracle is based on some very temporary exports for cars, which probably produce lowish profits and certainly negligible employment. Never more the words 'turnver is vanity, profit sanity' were more true. I made this point a couple of months ago but just got the proverbial taken out of me by thse pairofaxxes sbXandhengthetwXT.

The 40% workforce is correct and in fact even 42.2%..BUT...only in agriculture!

The Service industry to which tourism belongs accounts for another 38% in workforce of the total: some 39 million workers

Industry has only 20% of the workforce.

But, Thailand is NOT very much linked to the West for trade; that's a misconception.

Thailands' exports are for 11% to the USA and the other major export partners are:

China 10.58%, Japan 10.32%, Hong Kong 6.22%, Australia 5.62%, Malaysia 5.03%, Singapore 4.97%

Thailands' Import partners are:

Japan 18.7%, China 12.73%, Malaysia 6.41%, UAE 4.98%, Singapore 4.27%, South Korea 4.05% (2009) whilst the USA is just 6.31%

Data from CIA worldfactbook

LaoPo

[LaoPo]

As it stands today, it isn't entirely fair to say that a strong baht hurts the poor the most. The poor of Thailand (and the rest of us) are largely insulated from movements in the exchange rate when we live our daily lives, because the importers of Thailand live behind enormous import duties and licenses to protect their domestic businesses. A strong baht insulates Thailand from rising fuel prices which definitely hurt the middle to lower earning Thai straight in the pocket. I didn't see too many retailers passing on the benefits of lower duty on Australian wine, or cheaper Louis Vuitton handbags as the currency has strengthened. This is a more severe weakness in the Thai market.

We never get to see the benefits of cheaper goods be they imported beer, cars, luxury goods because this is exactly where one part of the establishment have made their market. However, I wish the government would let some of these useless middlemen in the export market go to the wall. The government has a pledge price, and the exporters must meet the difference. A market for export of a commodity such as Thai rice should have 5 or 6 massive players, plus one government organisation and one farmers co-operative to provide scale of production.

Right now, if you check the website, it goes up to 193 members all trying to make a margin on the deal. This is FAR TOO MANY bloodsuckers.

last page of members of the RIce Exporters Association

Maybe they aren't all in possession of an export license, but how can such a simple market be supposed to function properly with potentially 193 people in the middle of it. I have worked in one part of agricultural export from Thailand and 2 or 3 dominant companies involved in that industry, and some would say that is too many. The same goes for sugar, dozens of inefficient medium sized sugar mills, just so that far too many can grab a bit of the 70% margin, when to make it efficient there should be 4 or 5 massive mills, and one co-op mill to increase efficiency.

I don't know if any particular political party can solve it, but those on all sides of the political divide are more than aware of the problem/benefit. Cut through the blood suckers and make it efficient, the farmers can get more, and the market gets streamlined.

That's a very interesting post TaH !

When I said that the poor are hurt the most I meant that in the end they will suffer most from declining (rice) and agriculture exports due to the expensive Baht since exports are dropping severely.

Mind you (as I mentioned above in the previous post) that 42% of the Thai workforce (total 29 million people) works in agriculture and another 38% in the service industry.

I find it fascinating how you feel that the rice and other agricultural exports/producing should be handled by just a few....2 or 3, instead 193 members in the rice industry.

Don't you think that if the handling of the exports would be in the hands of just 2 or 3 companies the market would be dominated by just a few people ? At least there is some competition now (if they didn't make secret decisions about commodity prices that is of course).

I agree that cheaper import (margins) profits due to the high Baht are never returned to the end-clients but that's the same all over the world.

In Europe people (mortgages) and businesses are complaining because the banks (who caused the financial crisis) are NOT giving the low interest rates (they borrow from the Central Banks) back to their clients but artificially keep the interest rates much too high..higher than they should be and are thus the same thieves as the importers, benefiting from the high Baht in Thailand.

It's the same all over the world.

LaoPo

[lovelomsak]

You are so wrong and so indoctrinated. All you are stating is the rhetoric of financial gurus who got us in the financial mess we have. The Thai baht being strong is good for Thailand and time will prove this. Bloomberg has been seriously wrong before and is again and will be quite often for the next few years until they admit to the strengh and depth of the asian economy..

Exports willnot drop. Tourism may drop yes. What you fail to see is Thailand is a quickly developing industrial country. In the not to distant future its economy will mean more to the US than Japans. Thailands currency will take the position of the one used for most asian trade. You should turn some lights on so you donot live in the dark and can see things clearer.

..flattering comments from another Dr. in Thai economics.

Yes, Thailand is developing in it's industry output but many do not realize that Thailands' economy is in a twisted shape and deep trouble for it's citizens' future.

Next to that it's NOT Thailand's own industry but mainly "owned" by large foreign companies and/or shareholders who invested their capital in Thailand. Thailand itself has no "brainer" industry; Japan has.

The moment the GDP output of Thailand (read: exports) is becoming too expensive the companies pack their bags and move on. It happened and is still happening in the west and will happen in LOS too.

Another example is rice: Thailand is the largest exporter of rice in the world but in fact only a small producer; If rice becomes too expensive, buyers will go elsewhere.

How do YOU solve the problem for the jobless workers (17 million workers in agriculture)?

Sure, 43%+ of Thailands' GDP is created from industry but "produced" by only 20% of Thai labor force. Total Thai labor force is some 40 million workers so 8 million of them produce 40% of GDP;

WHAT do the other workers do ?

Agriculture, on the other hand, produces a mere meager less than 12% of GDP but has a staggering labor force of 42% or 17.2 million people, mostly poor.

You want numbers for the Service Industry ? a staggering 38% (or 15.2 million workers) of the labor force produces 45% of GDP.

See? Thailand has a big problem and if you say that Thailand will once become more important than Japan to the US you do not realize than Thailand is just a small "island-country" in an enormous ocean of other countries, totaling more than 60% of the world's population or around 4 to 4,2 BILLION people in Asia.

Thailand has a mere 66 million people whilst Indonesia has 240 million; Vietnam 88 million; Guangdong province in China 100 million people; Japan 127 million people; Many people do not even realize or know that a country, around the corner from Thailand, Bangladesh has a staggering 156 million people, apart from it's neighbor India with 1.156M people.

If Thailand becomes TOO EXPENSIVE, read: a high Baht the country is killing itself and other countries are standing in line to take over Thailand's role.

Period, and if you think otherwise....

Dream on

Me, indoctrinated? .. it's simple economics....1+1 = 2 and not 3 as you dream on with an expensive Baht.

LaoPo

Thought i would keep this thread alive I feel we should keep it alive till the proof is in the pudding so to speak.

I amnot sure if all of you aware that Thailand now will be doing its trade in foreign currencies I feel know why I just want to hear fron the rest of you to see if you know why?

All I will say is it goes along with what I have already stated..

[whybother]

When the Thai government sort themselves out and get the value of the baht down against the $US, will the $A also head back down? The way everyone is talking, it's seems like it's all controlled by the baht.