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Commodities

Thai rice exports on their way to the 10m-ton mark

As countries pay more for the grain Thailand reaps a cascade of benefits

Lertviroj Kowattana, permanent secretary of the Thai Ministry of Agriculture and Cooperatives, dressed in a traditional costume, tosses grains of rice during the annual royal plowing ceremony in central Bangkok on May 14, 2018.   © Reuters

BANGKOK -- Thailand upwardly revised its 2018 rice export target to 10 million tons, from the previous forecast of 9.5 million tons, after exports of the grain for the first four months of this year performed better than expected, according to the Thai Rice Exporters Association.

From January through April, Thailand exported 3.31 million tons of rice, up 38% from a year earlier and outpacing other big rice exporters like India, which shipped 3.21 million tons; Vietnam, 1.61 million tons; and Pakistan, 1.28 million tons.

"During the first quarter of this year, Thai rice exports rose more than expected as demand in several importing countries increased," said Charoen Laothamatas, president of the Thai Rice Exporters Association. "And we expect demand to support Thai exports for the whole of this year."

The association's upward revision matches the latest Commerce Ministry forecast of 10 million tons worth of rice exports for 2018.

In Thailand, which has a population of 68.9 million, rice is considered a "political commodity." More than 13 million Thais are rice farmers, and most of them are poor. As the rice outlook brightens, the government's popularity among the poor grows. Either way, Thai rice farmers usually vote for politicians who lend support to commodity growers.

 

Thailand has more than 13 million rice farmers among its population of 68.9 million. Most of these growers are poor, but some are now benefiting from rising global demand for their crop.   © Reuters

Rising rice prices have another effect: The cost of rice paddies also goes up. This could eventually lead to reduced government rice subsidies. In the meantime, it could help farmers who have to sell their land to millers to pay off their debts.

One more benefit: Prasit Boonchoey, president of the Thai Farmers Association, said domestic prices for rice have risen by around 10% so far this year, which should keep farmers from staging protests as they have done sporadically in the past when demanding government price support measures.

Every year, the government sets aside billions of baht (tens or hundreds of millions of dollars) to buy around 20% of Thailand's 25 million tons of paddy output. This prevents prices from falling sharply during the harvest season.

This year's brighter export outlook makes it unlikely that the government will have to come through with a price-support scheme. Strong demand has made exporters commit to rice sales in advance, so supplies are already being absorbed before the October-December harvest.

Still, the government is expected to offer soft loans to farmers to help them build silos, which will allow them to store their grain and sell it when prices rise.

"That would lend long-term support to farmers," Charoen said.

Both the commerce minister and exporters attribute the rise in exports to strong demand, particularly in Southeast Asia and Africa.

The Philippines' National Food Authority recently bought 250,000 tons of rice, 120,000 tons from Thai exporters. Moreover, private Thai exporters were able to sell 200,000 tons of rice to Indonesia. The Philippines and Indonesia both requested prompt shipments.

"There are more orders from other Asian and African countries that should help push Thailand's annual rice exports to the target of 10 million tons this year," Charoen said.

The price of Thai premium-grade white rice -- a fragrant, long-grain variety called hom mali, or jasmine -- hit a record high earlier this week at $1,200 per ton, up from $823 last year, when prices began their upswing

The jasmine price rise is largely due to limited supplies; production has fallen this year for the first time since a decade ago, when the country turned to the crop to help it raise the value of its agricultural exports.

Thailand normally produces an annual 20 million to 21 million tons of milled rice. Of this, around 3 million to 4 million tons are premium-grade rice, which only grows well on certain plateaus in northeastern provinces.

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