CP Intertrade mulls build-up of rice inventories
As the country's biggest rice packer, CP Intertrade is considering a budget of billions of baht to build up its inventories, amid expectations that the government's pledging policy would drive up both rice prices and its operating costs.
The company, also one of the country's top five rice exporters, has not decided on a definite budget figure as it has to consider many variables such as global market prices.
However, the anticipated rise in the cost of rice would prompt the company to reduce its purchases by 20 per cent in volume, but its income from rice trading is expected to increase by 10 per cent.
The company is most worried that the pledging scheme would inflate stocks if the government has no stringent inspection measures in place. Then the government would have to spend more than the Bt200 billion it estimated for the subsidy.
CEO Sumeth Laomoraphorn said the pledging programme, which starts on October 7, would push up the price of jasmine rice from Bt35-Bt36 currently to Bt38-Bt40 per kilogram and white rice from Bt18 to Bt24-Bt25. However, for planning purposes, the company had assumed an average cost of Bt15-Bt20 for both types of rice.
"Paddy prices over the weekend went up, showing that the market welcomed the government's policy. Consumers will no longer eat cheap rice," he said.
Despite forecasting higher costs, the company projects its exports reaching 1 million tonnes and its domestic sales 400,000-500,000 tonnes next year. The company targets its exports at 780,000 tonnes and domestic sales at 300,000-400,000 tonnes this year. It is expected that competition in the domestic market will become fiercer, as the number of small packers is forecast to increase by 5-10 per cent.
The government's idea of implementing the programme next month - one month ahead of schedule - was smart, as it will absorb the second crop of 3.1 million tonnes of paddy rice, Sumeth said. Because of global warming and natural disasters, the main crop would be harvested one or two months earlier than usual.
The government needs to prepare well to manage both the mortgage scheme and the ballooning inventories. The scheme will force the government to stock 6 million to 7 million tonnes from the paddy rice crop of 11 million to 12 million tonnes. The whole supply chain from local traders, middlemen and millers to modern retailers and exporters is expected to hold a combined 3 million to 4 million tonnes.
Sumeth declined to reveal how much rice the company has, noting that its newest warehouse in Ayutthaya's Nakhon Luang district can accommodate 1.08 million tonnes.
The company also manages two mills with about 400,000 tonnes
combined. Manufacturing adds 1.51 million tonnes to total holdings per year.
Thailand's exports should expand beyond the projected 10 million to 11 million tonnes this year becaue of lower global stocks. Exports are seen dropping to 8 million to 9 million tonnes next year, but the value will increase by 30 per cent, he added.
Thai rice for export has been quoted at US$600 (Bt18,000) a tonne for 5 per cent white rice, $620 for parboiled rice and $1,100-$1,200 for jasmine rice.
