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Food export forecast cut on baht volatility

Jun 13. 2013
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The National Food Institute (NFI) has slashed its growth forecast for the Kingdom's food exports this year to just 1.5 per cent, citing as the major reason the continued fluctuation of the baht, which has caused many producers to reject potential export
NFI executive vice president Amorn Ngammongkolrat yesterday said the institute had previously targeted food exports expanding 6 per cent to Bt1.03 trillion this year. 
The revised estimate of 1.5 per cent is down to a number of negative factors, chief of which are a decline in output of major ingredients, such as vegetables and fruits, and the increased volatility of the baht in relation to the currencies of major trading partners, particularly the US dollar and the yen. 
The baht’s fluctuation has had a negative effect on food producers and exporters when making their production plans and taking new orders over the past couple of months, he said, adding that the unit is expected to appreciate again in the coming months, which would impact the business sector yet again.
Amorn said the strong baht had impacted any food products with more than 50 per cent of the ingredients sourced locally, such as processed shrimp, canned pineapple, frozen squid, canned sardines, sugar and tapioca. 
However, food products with local ingredients accounting for less than 50 per cent will benefit from cheaper imports of ingredients such as soybean sauce and beer. 
Food exports are expected to improve in the second half of the year due to an increase in global food prices and higher output of some ingredients, he said. 
Exports dropped 3 per cent year on year in the first quarter to about Bt225 billion, and are forecast to fall by 1.5 per cent year on year to Bt249 billion in the current quarter.
They are then targeted to increase by 3.6 per cent and 4.8 per cent to Bt258 billion and Bt247 billion, respectively, in the third and fourth quarters.
Panisuan Jamnarnwej, president of the Thai Frozen Food Association, said the recent depreciation of the baht back to about 31 against the US dollar had not in reality had any positive effect on the export sector, as exporters did not dare to take the current level into account in taking export orders due to the unit’s tendency to fluctuate rapidly.
Chokchai Sethiwan, vice president of the Thai Rice Exporters Association, said that in the first four months of the year, Thailand had been able to export about 2 million tonnes of rice, down 11 per cent year on year, due to its high price compared to the levels in rival countries.
The Kingdom is expected to export between 6 million and 6.4 million tonnes of rice this year, which is below the 6.5 million tonnes projected previously and lower than the 6.9 million tonnes shipped last year. 
Thailand’s exports of 2.34 million tonnes of rice from January 1 to May 21 were lower than India’s 3.38 million tonnes and Vietnam’s 2.78 tonnes.
Pornsin Patcharintanakul, president of the Agricultural Food Business Committee of the Board of Trade of Thailand, said local exporters were now suffering from the volatile exchange rate, which was an uncontrollable factor. 
They have to learn about matters such the exchange-rate mechanism as well as currency trading, but the government needs to have a good warning system in place about the currency rate and any signs of fluctuation, Pornsin said. 
The government should also regulate the baht in such a way that there are no rapid fluctuations in its value, said the panel chief.

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