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Several negative factors face rice exports this year, industry group says

Feb 03. 2015
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WITH no monetary policy to facilitate exports, higher competition among rice-exporting countries and a lack of development in the rice industry to lower production costs, Thai rice shipments will face a tougher time in the coming years, despite the plan t

“Thailand’s rice will face a tougher export market due to higher competition, fluctuating exchange rates and no clear strategy to increase development of Thai rice,” Charoen Laothamatas, president of the Thai Rice Exporters Association (TREA), said yesterday.

The association expects Thailand to ship out 10 million tonnes of rice valued at US$4.95 billion (Bt160 billion) this year, falling from last year’s 11.06 million tonnes worth $5.43 billion.

Thai rice is still expensive, while the market has a greater variety of sources to choose from, including Myanmar and Cambodia.

The government should put in place a monetary policy to facilitate the export sector, since the baht’s volatility has handicapped Thai rice sales in the global market, Charoen said.

While the baht is strengthening, other countries are taking measures to weaken their currencies. Thai rice has gone up by $25 per tonne, because of the baht appreciating from 33 to 32.20 against the US dollar last month.

With fluctuating currencies and lower oil prices, some countries will shun Thailand and turn to cheap rice from other sources, he said.

Nigeria, which is the Kingdom’s largest rice customer, could switch to India or other countries because the price of Thai rice has skyrocketed, while Nigerians have lower purchasing power because of the low price of oil, a key export commodity in that West African country.

Korbsook Iamsuri, honorary president of the association, said the government should closely monitor currencies and focus on weakening the exchange rate, since exports are still the country’s major economic engine.

High production costs

To raise Thai export competitiveness, weakening the currency would help, as well as lowering the interest rate to help small traders. With high production costs, Thailand’s rice-export competency will continue to drop, she said.

In the latest study by the Agriculture Ministry, the cost of |production for the main rice crop was Bt10,800 per tonne and for |the second crop Bt9,100, while the market price is about Bt8,500. Vietnam’s production cost is Bt3,500-Bt4,000.

The TREA called for long-term and sustainable measures to help lower the production costs for farmers.

For this year, it sees Thailand continuing to be the world’s largest rice exporter, as it has plenty of inventory, while its price is not too high now that the elected government has been overthrown and its subsidy measure has ended.

Besides negative factors, some positive factors for Thai rice exports are droughts, which will cause rice output to fall 30 per cent for this year’s second crop, and government-to-government deals.

On average, Thai 5-per-cent white rice will be quoted at $405 per tonne. This could be marked up or down slightly this year on swings in the baht’s value. The comparable price in Vietnam is about $355, while India’s rice is $380.

However, the TREA anticipates that the government will be able to release only about 3 million tonnes of rice from its stocks, which would be much lower than the target of 10 million tonnes.

Chookiat Ophaswongse, honorary president of the TREA, said the government would not be able to release huge volumes as expected because of tougher competition in the market, while the export sector would not grow as strongly as last year.

According to the US Department of Agriculture, Vietnam is expected to export 6.7 million tonnes this year, up from 6.5 million tonnes in 2014. India is projected to export 8.7 million tonnes, down from 10.5 million tonnes.

China will still be the world’s largest importer, buying about 4.3 million tonnes of rice this year from overseas, up from 3.9 million tonnes last year.

Next will be Nigeria with 3.5 |million tonnes, up from 3 million tonnes last year, and the Philippines with 1.7 million tonnes, the same as last year.

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