Global rice market to enter price war
THE GLOBAL RICE market will experience a price war next year as an oversupply is expected at the same time as trade slows, Thai exporters say, putting pressure on the Kingdom because its rice is quite expensive compared with other countries’.
Exporters expect Thai rice shipments this year to total 9.5 million tonnes, maintaining the country’s status as the world’s largest rice exporter, slightly ahead of its major competitor India, which will export about 9 million tonnes.
Charoen Laothammatas, president of the Thai Rice Exporters Association, said prices would fluctuate late this year and into 2017 since many rice-importing countries had lower demand, while the supply of rice is expected to rise significantly from the upcoming harvest season after the end of the drought.
The strengthening of the baht against the US dollar has pushed up the price of Thai rice, which will cause difficulty for exporters as the prices of many competitors decrease after the onset of more rainfall.
“With more rice but lower demand, fluctuating currencies and the baht’s appreciation, and high competition, the global rice market will enter a price war. Thailand, which is the world’s major rice supplier and holds high stocks, needs to manage its rice stocks carefully and stabilise the price to ensure export competitiveness,” Charoen said.
As Thailand enters the price war, Charoen expects its rice to become cheaper, while domestic rice prices will also fall because of lower demand.
Lower demand in many importing countries will continue to be affected by low oil prices, particularly in Africa and the Middle East, which are major import markets for Thai rice.
This year, the association expects Thailand to export about 9.5 million tonnes of rice worth about Bt4.4 billion, while next year export volume will drop to about 9 million tonnes.
Thailand could lose its position as the world’s rice-export champion in 2017, since India has a high supply of rice and could release more next year, the association says.
The US Department of Agriculture expects the global rice trade in 2017 to decrease by 2 per cent from 41.34 million tonnes to 40.51 million, while world rice output will increase by 2.3 per cent from 470.64 million tonnes to 481.23 million.
Demand for rice consumption in the global market is expected to increase slightly, by 0.4 per cent from 478.48 million tonnes to 480.63 million, while ending stock in the global is expected to rise from 106.7 million tonnes to 107.3 million tonnes.
In the first half of this year, Thailand shipped 4.99 million tonnes of rice worth US$2.2 billion (Bt76.7 billion), more than India, which exported 2.76 million tonnes.
However, as India has high stockpiles of rice, about 25 million tonnes, while its price is lower than Thailand’s, Charoen’s association is afraid that India could become the world’s largest rice exporter instead of Thailand next year.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said it was hard to predict whether Thailand or India would be the world’s largest rice exporter next year because of the uncertainties due to fluctuating prices and higher output.
He said that as Thai rice is about $50 a tonne more expensive than some of its rivals’, exporters could have difficulty competing.
Currently, Thai rice is trading at around $425 a tonne, while Vietnam’s is $375 a tonne for 5 per cent white rice. Thai parboiled rice is quoted at $440 a tonne, and Indian parboiled rice is $375 a tonne.
Moreover, as a larger supply of rice from the upcoming harvest season is expected, the association warns the government to create a benchmark price carefully from its project to clear out its rice stocks.
Charoen said the government could continue to release rice via auctions but it should not sell it for too low a price as that could affect the market price and hurt farmers.
