Thailand fears rice export prices are forced to fall

Oversupply and a stronger baht could hurt the price competitiveness of Thai rice.

Economists predict that Thailand’s rice market will face a price war next year. Oversupply will push prices lower for both domestic and export markets, while a stronger baht could hurt the competitiveness of Thai rice.

Thailand's rice supply is expected to increase by 10 - 20% in the 2016 - 2017 crop year. (Illustration photo: KT)

Mr. Charoen Laothammatas, President of the Thai Rice Exporters Association, said that the rice supply from the 2016-2017 crop, expected to be harvested from November this year to January next year, will increase by 10-20% compared to the level of 22 million tons.

Domestic rice production is expected to increase as farmers, especially in the Central, Northern and Northeastern Delta regions, expand their cultivation areas to take advantage of continuous rains following a severe drought.

Global rice prices are also being affected by the La Nina weather phenomenon that is spreading across Asia and creating more monsoons, which is a favorable condition for rice production in countries such as India, Pakistan and Vietnam, which are Thailand’s main export competitors and have similar harvest times, Charoen said.

Mr Charoen expects rice supplies to flood the market from the last quarter of this year due to a price war in the global market. Mr Charoen’s forecast echoes a report by the United States Department of Agriculture (UNDA) that estimated rice supply next year at 481.23 million tonnes, up 2.3% from 2016, while consumption rose only slightly by 0.4% to 480.63 million tonnes.

Charoen also said that the baht’s appreciation in recent weeks could be another factor in reducing the competitiveness of Thai rice in the global market. The baht hit a one-year high on Aug. 1 of 34.72 baht to the U.S. dollar, up 3.3 percent against the dollar this year.

In addition, the release of Thailand’s largest rice stockpile – built up under the rice pledging scheme implemented by former Prime Minister Yingluck – will also affect the market, pushing prices lower. Currently, Thailand’s state rice stockpile is around 9 million tonnes, half the level it was two years ago.

In the first 6 months of 2016, Thailand exported 4.99 million tons and the target figure for this year is 9.5 million tons. USDA forecasts that Thailand will export about 9 million tons of rice in 2017, followed by Vietnam with 7 million tons, India with 5.5 million tons and Pakistan with 4.25 million tons.

The price of Thai white rice delivered on board is 435 USD/ton, 50 USD higher than that of Vietnamese rice. This shows that Thai rice is less competitive than its rivals./.

According to VOV