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NEWS UPDATES Asean Affairs    27 July 2012

Thailand rice sector may be heading for disaster: exporters


Thailand's 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, honourary 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 71.43 billion baht ($2.25 billion), while export volume has dropped 48 per cent year on year," he said.

Thailand has already spent about 260 billion baht 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.

*1 USD = 31.6450 THB

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This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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