Thai Rice Exports: 'Sector May Be Heading For Disaster'

[webfact]

RICE EXPORTS

'Sector may be heading for disaster'

PETCHANET PRATRUANGKRAI

BANGKOK: -- Rice industry, already lost the title of world's top exporter to India, is heading for disaster in the next few years due to a lack of proper strategic management of the rice-pledging scheme and the country's exports, the Thai Rice Exporters Association said yesterday.

As of July 10, India had eclipsed Thailand as the world's largest rice exporter, with year-to-date overseas shipments of 3.61 million tonnes.

Thai exports in the period slumped by 45.8 per cent to 3.6 million tonnes, while Vietnam is breathing down the Kingdom's neck in third place with an impressive 3.52 million tonnes.

This is the first time in half a century that Thailand has lost its position as top rice-exporting nation.

Association president Korbsook Iamsuri said the government should neither rely on the unexpected, such as competitor nations finding themselves faced with a tough export situation, nor spend a huge budget on pledging without proper concern for the trading situation.

If the government continues on the current path, "the Thai rice industry will soon collapse, as trading would be in limbo, while farmers would face a domino effect and be unable to sell their rice because of millers being faced with excess stocks", she said. "And the government would lack the funds to continue its subsidisation of the next few crops."

According to the association and a US Department of Agriculture forecast, Thailand will this year rank as the world's third-largest rice-exporting country, after India and Vietnam, with shipments reaching just 6.5 million tonnes.

India will become the export leader with 8 million tonnes, followed by Vietnam with 7 million tonnes.

Thailand's share of global exports will continue to fall, from 29.4 per cent last year to a predicted 18.3 per cent this year, while India's share will climb from 12.8 per cent to 22.5 per cent.

Korbsook called for the government to work closely with rice traders to increase the efficiency of management and release of stocks, so that exports can continue to grow in the remainder of the year.

Currently, about 12 million tonnes of rice is warehoused in the government's stockpiles, the highest level in 50 years of trading.

The association forecasts that another 3.05 million tonnes of Thai rice will be exported in the second half of the year, but expects India and Vietnam to export higher amounts because of their retail prices being much lower than those for Thai rice. The price is gap is as wide as US$170 per tonne for white rice.

Korbsook said how much rice Thailand could be exported this year was no longer the key issue, as the country had definitely lost its top position. The major concerns among exporters are now the lack of competitiveness and the gloomy outlook for Thai rice trading and farming in the near future, she stressed.

Vichai Sriprasert, honorary president of the association, questioned whether the government's pledging was creating real benefits to the country.

"Although the price per unit for Thai rice has risen by 19 per cent from $671 to $594 per tonne during the past year since the pledging scheme started, export income has shrunk by a huge 34 per cent to Bt71.43 billion, while export volume has dropped 48 per cent year on year," he said.

Thailand has already spent about Bt260 billion on subsidising rice prices for almost a year, he said, adding that if the government continued with an unreasonable pledging policy, further excessive budgetary amounts would be used up, while the Thai rice industry would soon come to an end.

The industry is approaching a deadlock situation, as the government and millers would be unable to shoulder the high volume of rice in the stockpiles if the pledging continued. The Kingdom would lack the financial resources if taxpayers had to shoulder rice-price subsidisation on a never-ending basis, he said.

Vichai said the excessively high price of Thai rice had forced some exporters out of business, while millers would also have to pull out if unable to sell to exporters and being faced with overstocking because of their having to handle government stocks.

Farmers would then also find themselves at the sharp end, as they would be unable to sell their output to the millers, he said.

Overall, the number of enterprises that would suffer from the government's inefficient rice management would be about 300 exporters, 30,000 millers and 4 million farmers and their families, he estimated.

Somkiat Makcayathorn, who sits on the association's board, said Thailand was now entering the final phase of the rice industry's failure, with exports falling continuously and rice-quality development having been ignored.

Meanwhile, rice in the government's stockpiles is deteriorating in quality and it is inevitable that Thailand will soon face huge losses when it releases the stocks, he said.

The government should, therefore, devise a strategy to release rice at an acceptable price and with the minimum impact on exporters' continued ability to operate, he suggested.

Chookiat Ophaswongse, an adviser to the association, said that although the government had a strategy to release rice from its stockpiles, it would not be easy to sell at a price acceptable to buyers, as the prices quoted by rival export nations are much lower.

Moreover, India is handling a huge stockpile of up to 30.7 million tonnes, which it can only sell at $420 per tonne, while Vietnamese rice is quoted at $405 for 5-per-cent white rice, he said.

-- The Nation 2012-07-26

[Sayonarax]

Som nom na. Thai's still think there number one and wont be beaten.. aint that a slap in the face.

[Pond Life]

No mention of the out dated, inefficient & environmentally destructive growing methods that farmers insist on sticking to.

Yields could easily be increased with lower overheads if only they would open their minds to change.

[Thai at Heart]

Well, the crop up country near me, is very dry this year. Maybe this crop is headed for poor results, so it may be nice to have some stock.

As for India, yes they are getting a nice boost from their devaluation, but it id hardly a planned govt policy.

[jerrysteve]

Farming is very hard physical work and the Thai Farmers (all of them) no matter what they produce have had a very difficult time...

While India has supassed Thailand in rice production and Vietnam will soon supassed Thailand, the government has been too busy beating

their own drums and blowing their own horns.

In both domestic markets and world markets no one can sleep on their past performance.

Thailand suffers from what I call Rip Van Winkle Syndrom & has been asleep at the helm, while countries which were considered 3rd

countries are passing them by. It won't be long before Thailand will no doubt be eating Burma's dust as Burma passes them by also.

Markets do not discriminate...and Thailand will have to take its lumps in the market place and will continue to do so.

It is one thing to "Save Face, but quite another to lose your Arse.

[BuckarooBanzai]

No mention of the out dated, inefficient & environmentally destructive growing methods that farmers insist on sticking to.

Yields could easily be increased with lower overheads if only they would open their minds to change.

Very true - but don't let the farmer on the next barstool hear you say that - thems fighten words.

In my neck of the woods many of the farmers have already switched over to the more weather tolerant cassava and sugar cane crops which I believe are more lucrative for them.

The rice hub of the world is definitely being de-hubbed.

[dcutman]

Governments plan "A" for their pledging scheme, was everybody around the world loves Thailand so much and their rice. The government can sell it for 40% more than other countries.

OOOOPS that on did not pay off.

Governments plan "B". extend the rice pledging scheme, export less, stockpile more, and wait for other rice producing countries to run out.

OOOOPS India, Vietnam, and Burma had a good crop and have big stocks for the rest of the year.

Governments paln "C". Dont worry we will come up with one and make every farmer rich.

[Thai at Heart]

No mention of the out dated, inefficient & environmentally destructive growing methods that farmers insist on sticking to.

Yields could easily be increased with lower overheads if only they would open their minds to change.

Very true - but don't let the farmer on the next barstool hear you say that - thems fighten words.

In my neck of the woods many of the farmers have already switched over to the more weather tolerant cassava and sugar cane crops which I believe are more lucrative for them.

The rice hub of the world is definitely being de-hubbed.

When u look at the global production numbers, only a small percentage is traded internationally. Thailand is so fortunate it can grow so much. But as the prices for other cross increase, inevitably people switch. It isn't an obligation for Thai farmers to feed the world and feather the pockets of traders and exporters.

[geriatrickid]

I wonder why no consideration has been given to the drought in North America and the flooding in China?

60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s has been hit hard. . Eastern Canada has been hit hard with the corn and fruit sectors on the verge of being wiped out this growing season. Both Canada and the USA are major agriculture exporters, particulalrly of grains such as corn, soybean, wheat etc.

Last week, China was hit with some of the worst rainstorms and flooding it has seen in 60 years. In Beijing at least 37 people died this past weekend. Rural farm areas have been washed out. In May in 26,170 hectares of crop lands were destroyed. Then in June another 982,400 hectares of farmland were hit.

Ok, some will say, yea, but its not Thjailand and its not rice. Well, commodities are all linked and what North America and China cannot supply to the market will be replaced by alternative grains and alternative suppliers. This year India benefited from a fantastic deal on Iranian oil that allowed India to subsidize an agriculture sector heavily dependant upon oil. Next year may be very different if India cannot access cheap oil because India will be obliged to respect the trade sanctions.

I am not excusing poor management, but in a global economy, one country's catastrophes are another's opportunity.

[dcutman]

Thailand Spends $8.17 Billion to Date for 16.53 Million Tons of Rice Under Mortgage Scheme

By Oryza News on July 17,2012

Thailand’s (BAAC) reports that it has paid around 258 billion baht (about $8.17 billion) to purchase over 16.53 million tons of paddy rice from over 2.02 million farmers under the government rice mortgage scheme.

The Thai government introduced the rice mortgage scheme in October of last year to boost farmer income through hopes of pushing up rice prices in the international market. The scheme promises farmers 15,000 baht (about $473) per ton for white paddy rice and 20,000 baht (about $630) per ton for jasmine paddy rice.

The mortgage scheme was split into several phases: the first running from October 7, 2011 to February 29, 2012, and the second from March 1, 2012 to September 15, 2012. The scheme has now been extended until November.

The BAAC said that it spent 118.44 billion baht (about $3.74 billion) on a total of 6.97 million tons of rice from 1.14 million farmers in the first phase of the scheme, and another 139.46 billion baht(about $4.41 billion) to purchase 9.56 million tons of rice from 885,933 farmers in the second phase to date, suggesting average prices of about 536 per ton and $460 per ton in each respective phase.

The government has said that it intends to run the rice mortgage scheme until export quotes for white milled rice reach $800 per ton, and prices for fragrant rice reaches $1,200 per ton.

Read related Oryza stories:

Southeast Asia Expert: Rice Mortgage Scheme May Cost Thailand 5% of GDP

Thailand Extends Rice Pledging Scheme to November

1200 usd per ton is a pretty lofty price. I think they need to build more rice storage space.

[Crushdepth]

Now how many people said this was a cynical, populist scheme doomed to to failure for reasons a high school kid could understand?

Go "economic dream team"!

[TomTao]

Anyone could see this coming as soon as the rice pledging scheme was introduced, well done PTP!

[Reasonableman]

And of course "told you so" is no consolation. Too late mate, by the look of it.

[Ricardo]

Another victory for PTP-government under Dubai-management, what business genius does it take, to see that over-paying the mills to buy rice, then having to subsidise it for exporters to be able to shift it, is a lose/lose strategy for the public-finances ?

As forecast yonks ago, here on TV.

Edited July 26, 2012 by Ricardo

[thaicbr]

I wonder why no consideration has been given to the drought in North America and the flooding in China?

60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s has been hit hard. . Eastern Canada has been hit hard with the corn and fruit sectors on the verge of being wiped out this growing season. Both Canada and the USA are major agriculture exporters, particulalrly of grains such as corn, soybean, wheat etc.

Last week, China was hit with some of the worst rainstorms and flooding it has seen in 60 years. In Beijing at least 37 people died this past weekend. Rural farm areas have been washed out. In May in 26,170 hectares of crop lands were destroyed. Then in June another 982,400 hectares of farmland were hit.

Ok, some will say, yea, but its not Thjailand and its not rice. Well, commodities are all linked and what North America and China cannot supply to the market will be replaced by alternative grains and alternative suppliers. This year India benefited from a fantastic deal on Iranian oil that allowed India to subsidize an agriculture sector heavily dependant upon oil. Next year may be very different if India cannot access cheap oil because India will be obliged to respect the trade sanctions.

I am not excusing poor management, but in a global economy, one country's catastrophes are another's opportunity.

You are making excuses. Phua Thai didn't know that would happen. India sorted out a great deal and you degenerate it. Thailand has a crap policy you defend it against other countries. Wow.

But OK. Let's see how Phua Thai manage "one countries catastrophes are another's opportunity "

They should be able to shift the excess rice stock easily. That's right isn't it GK.

Sent from my GT-P1010 using Thaivisa Connect App

[fredob43]

I wonder why no consideration has been given to the drought in North America and the flooding in China?

60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s has been hit hard. . Eastern Canada has been hit hard with the corn and fruit sectors on the verge of being wiped out this growing season. Both Canada and the USA are major agriculture exporters, particulalrly of grains such as corn, soybean, wheat etc.

Last week, China was hit with some of the worst rainstorms and flooding it has seen in 60 years. In Beijing at least 37 people died this past weekend. Rural farm areas have been washed out. In May in 26,170 hectares of crop lands were destroyed. Then in June another 982,400 hectares of farmland were hit.

Ok, some will say, yea, but its not Thjailand and its not rice. Well, commodities are all linked and what North America and China cannot supply to the market will be replaced by alternative grains and alternative suppliers. This year India benefited from a fantastic deal on Iranian oil that allowed India to subsidize an agriculture sector heavily dependant upon oil. Next year may be very different if India cannot access cheap oil because India will be obliged to respect the trade sanctions.

I am not excusing poor management, but in a global economy, one country's catastrophes are another's opportunity.

Drought in the USA so Thailand can shift all it's rice in one go??? What part of India has got over 30 mil: ton's of the stuff stocked piled and selling it far cheaper than Thailand do you not understand. Oh I get it now the yank's will buy it because it's more expencive, silly me.

[Thai at Heart]

I wonder why no consideration has been given to the drought in North America and the flooding in China?

60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s has been hit hard. . Eastern Canada has been hit hard with the corn and fruit sectors on the verge of being wiped out this growing season. Both Canada and the USA are major agriculture exporters, particulalrly of grains such as corn, soybean, wheat etc.

Last week, China was hit with some of the worst rainstorms and flooding it has seen in 60 years. In Beijing at least 37 people died this past weekend. Rural farm areas have been washed out. In May in 26,170 hectares of crop lands were destroyed. Then in June another 982,400 hectares of farmland were hit.

Ok, some will say, yea, but its not Thjailand and its not rice. Well, commodities are all linked and what North America and China cannot supply to the market will be replaced by alternative grains and alternative suppliers. This year India benefited from a fantastic deal on Iranian oil that allowed India to subsidize an agriculture sector heavily dependant upon oil. Next year may be very different if India cannot access cheap oil because India will be obliged to respect the trade sanctions.

I am not excusing poor management, but in a global economy, one country's catastrophes are another's opportunity.

This tends to be the case. The total amount of rice traded globally is relatively small in the grand scheme of production, that it only takes a small downturn or increase in production in the "global" production for demand for the exported volumes to fluctuate wildly.

http://www.fao.org/docrep/006/Y4751E/y4751e03.htm

http://www.fao.org/asiapacific/rap/home/news/detail/en/?news_uid=121987

Global rice production is expected to set a new record when figures for 2011 are finalized, according to FAO, which raised its forecast for the world harvest by 700 000 tonnes on improved crop prospects in Asia. Rice production should increase by 21. 4 million tonnes, a 3 percent increase over the record set in 2010, and total 721 million tonnes (481 million tonnes, milled basis). Improved output from Asia was the key driver in the higher forecast.

Rice Trade

After achieving a record of 34.5 million tonne (milled basis) in 2011, the international rice trade is forecast to fall by approximately 1 million tonnes, or 5 percent, in 2012 as improved prospects in several major importing countries may reduce world demand. Total rice trade should decline to about 32.8 million tonnes. Among the countries expected to import less rice in 2012 are Bangladesh, Indonesia, Nepal, Nigeria and the Philippines.

So rice exporting is a business of 34mnt in a global business of 721 mn tonnes, of which Thailand had a total of about 10mn being reduced to 6mn tonnes. India alone produces 129mn tonnes of rice, and is now exporting a bit, but you can see, only a 10% drop in production in a place like India would firm up the export prices in Thailand massively. I can understand the logic that the exporters of decent quality rice (Thailand) should have some pricing power in this situation, but 2011 was a bumper year for production, globally. Not the best time to try and push up the minimum price when all most of your customers have a cupboard full from domestic production already.

One really has to question, what is actually the benefit to the country as a whole of chasing to be "the largest exporter" in the world. Who actually benefits from it. The farmers don't seem to do particularly well out of it, it doesn't feed the Thai people, since it is being exported, it makes for a nice headline, but in the global scheme, is a fickle trading industry that is largely based around having boat loads of cheap farmers. Hardly the situation when rural populations are ageing very quickly.

Wouldn't it be better to reduce the amount of surplus Thailand produces for export and move to something else?

[jonclark]

I wonder why no consideration has been given to the drought in North America and the flooding in China?

60 percent of the continental United States, the largest area since the epic droughts of the 1930s and 1950s has been hit hard. . Eastern Canada has been hit hard with the corn and fruit sectors on the verge of being wiped out this growing season. Both Canada and the USA are major agriculture exporters, particulalrly of grains such as corn, soybean, wheat etc.

Last week, China was hit with some of the worst rainstorms and flooding it has seen in 60 years. In Beijing at least 37 people died this past weekend. Rural farm areas have been washed out. In May in 26,170 hectares of crop lands were destroyed. Then in June another 982,400 hectares of farmland were hit.

Ok, some will say, yea, but its not Thjailand and its not rice. Well, commodities are all linked and what North America and China cannot supply to the market will be replaced by alternative grains and alternative suppliers. This year India benefited from a fantastic deal on Iranian oil that allowed India to subsidize an agriculture sector heavily dependant upon oil. Next year may be very different if India cannot access cheap oil because India will be obliged to respect the trade sanctions.

I am not excusing poor management, but in a global economy, one country's catastrophes are another's opportunity.

Grasping at straws there GK China and N America will rapidly bouince back with a minor dent in exports. S America will no doubt be on standby = often forgotten that S America is a massive exporter as well - cheap too

[rubl]

Currently, about 12 million tonnes of rice is warehoused in the government's stockpiles, the highest level in 50 years of trading.

...

Thailand has already spent about Bt260 billion on subsidising rice prices for almost a year, he said

...

Meanwhile, rice in the government's stockpiles is deteriorating in quality and it is inevitable that Thailand will soon face huge losses when it releases the stocks, he said.

It's time for a National Campaign to promote eating rice instead of noodles or hamburgers or pizza. As prices of rice may still be a bit high for locals, the government should spent another few billions to easy local price pressure.

BTW THB 260 billion on rice price pledging? Surely at least Thai rice farmers must be rich by now? Oh yes, this government is making huge progress!

[Reasonableman]

Rice straw has its uses.

[smedly]

The simple truth is that Thailand is primarily an exporter (and that includes tourism as it involves foreign currency) and the high Baht is the real problem, the high baht is benfiting some hi-so rich money men including Thaksin, while it is slowly driving Thailand huge debt and an ultimate implosion, when that happens the baht will drop or be dropped and all the money men will sell their foreign currency and so the cycle continues - who suffers ? The country as a whole and the general population who don't know whether they're blew up or stuffed. Greed of the few outwheigh the needs of the many

Edited July 26, 2012 by smedly

[warfie]

Geez, who'da thunk it?

Artificially inflate the price of a commodity (whether it be rice, rubber, palm oil, labour, or whatever) instead of letting the market decide, and guess what? The market goes elsewhere! DUH!

[OzMick]

(snip)

Wouldn't it be better to reduce the amount of surplus Thailand produces for export and move to something else?

Handing out a huge subsidy hardly encourages farmers to switch crops, though apparently some are, but to other subsidised crops.

But you have to realise that the rice subsidy has nothing to do with rice exports, balance of trade or foreign currency income. The rice pledging scheme is for one reason only, buying votes with other people's money.

[slapout]

You think its bad so far, wait until they start trying to locate the "stores of rice" that storage is being paid for on a perodic basis.

The present government spending reminds me of the bank loan system so popular when Thaksin was leader. Many of us can remember how that turned out. The taxpayer in Thailand is still contibuting to that payoff.

I am of the opinion that this government/country could further corrupt a cess pool, and would find a way to lose benifit from the resultant fertlizer

[Semper]

Never mind the rice, is the Baht getting weaker?

[moe666]

It is a grand scheme. When the government can no longer buy rice and the farmers are starving the program will be dropped and the reason being it was a failed scheme of the democrat government and Big T has saved the farmer from ruin. As we know Thais believe anything that Big T says and they will swallow it hook line and sinker as the rice drops in price and Thailand returns to number one, Big T will be the hero

Since GK as explained how the rice crop will replace the loss of corn in the US he left one thing out most of the corn grown in the US cannot be consumed by humans as it is grown to feed cattle or converted to ethanol for use as a fuel, why would you import a food crop consumed by humans for use as a cattle feed or converted to ethanol. I guess it could happen but doubtful.

[Skywalker69]

Now how many people said this was a cynical, populist scheme doomed to to failure for reasons a high school kid could understand?

Go "economic dream team"!

[Skywalker69]

Another victory for PTP-government under Dubai-management, what business genius does it take, to see that over-paying the mills to buy rice, then having to subsidise it for exporters to be able to shift it, is a lose/lose strategy for the public-finances ?

As forecast yonks ago, here on TV.

It was to secure the election victory.

[jerrysteve]

Perhaps more of the same economic polices will lead to Thailand Importanting Rice from India and Vietnam.

Sooner or later the chickens will come home to roost, and in the case of the economic poorly thought out polices, some of the chickens

have already come back and more will be headed home.

Its kind of an economic Karma.

.

[Skywalker69]

Rice straw has its uses.