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Commodities

Rising baht and falling output to curb Thai rice exports

Exporters risk missing 9.5m ton target for 2018

Workers transfer sacks of rice from a barge to a cargo ship on the Chao Phraya River in Bangkok.   © Reuters

BANGKOK -- A stronger baht and smaller harvest are expected to curb Thai rice exports this year, potentially causing the country to miss its 2018 target of 9.5 million metric tons, according to the Thai Rice Exporters Association.

The 2018 rice export target was set at around 18% lower than the record figure of 11.6 million tons achieved the previous year, said Charoen Laothamatas, president of the association.

"The stronger baht was the major problem for rice exports this year, as it makes the price of Thai rice unattractively high compared with the prices of competitors."

Charoen said the figure of 9.5 million tons was set at the end of last year. However, the baht rose more than 9% in 2017 and has gone up another 3.1% so far this year to 31.6 per dollar on Tuesday. The strengthening baht is tied to both Thailand's relatively healthy economic outlook and overseas investors chasing funds to reap foreign exchange gains amid a weakening dollar.

"We will be monitoring the baht's movement closely during the first quarter of this year and, if it continues to rise, the association will revise down the 2018 rice export target," he added.

The dong, in contrast, rose by just 1%, while the rupee rose 6%, making rice from Vietnam and India considerably cheaper.

The going rate for premium grade Thai fragrant rice was $1,200 a ton this week almost double the $650 being asked for a ton of the same grade produced in Vietnam.

Charoen said global demand would remain strong as major importing countries like the Philippines and Indonesia were expected to buy 1-1.5 million tons this year.

In addition, rising oil prices are likely to help strengthen the purchasing power of Middle Eastern rice importers.

"Demand is there, but the problem is which origin the client will buy from," said Charoen.

Falling production has also taken its toll. The government has sought to limit plantation areas in the hope that restricting supply might help prop up prices. The measures come in response to a failed rice-purchasing scheme implemented by former Prime Minister Yingluck Shinawatra.

Policies Yingluck introduced in 2013, which offered to pay above-market prices, encouraged many farmers to grow larger amounts without paying attention to quality. The scheme resulted in the government stockpiling 18 million tons of the crop and incurred multibillion dollar losses.

The current government has sought to remedy the situation by implementing a zoning policy on paddy fields that could cut total annual production to around 30 million ton, down from around 33 million tons last year.

Charoen added that non-tariff barriers in some rice importing countries, such as tighter surveillance of chemical contamination, could also dent exports, particularly to Japan, the EU and the U.S.

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