• 
• 

Published on April 19, 2008

nophakhun limsamarnphun

nop1122@yahoo.com

the nation

Chookiat Ophaswongse, 54, has been an international rice trader since starting to work. He knows the trade inside-out and prefers to be risk-averse during this period of high price volatility.

His father, Samarn, was one of Thailand's first-ever rice traders during the late 1950s and early 1960s, when the Huay Chuan Rice Co was founded.

"In fact, my father traded rubber first. Then he switched to rice. Malaysia was the first foreign customer, as we shipped Thai rice over there by train. Later on, we shipped rice to Hong Kong," recalled Chookiat, who grew up in the family's business.

"Other traders and exporters in those days included Puay Heng Rong, Soon Hua Seng (or Kaset Rung Ruang), Thanaporn Chai (related to former TPI boss Prachai Leophairatana), Au Fong Lao and other Sino-Thai merchants.

"In those days, we also operated a rice mill in Saraburi but it shut down about 25 years ago because we didn't have the time to manage it properly.

"Even today, rice milling is a tough business and there isn't enough professional and reliable management out there. If you or other family members can't do it, it's a very risky enterprise," said Chookiat, who inherited the family business from his father more than a decade ago.

Chookiat got his MBA from Portland State University and a bachelor's degree in economics from Chulalongkorn University in the 1970s.

Today, Huay Chuan Rice is a medium-sized exporter handling about 200,000 tonnes of high-quality rice per year, including hom mali, or fragrant jasmine rice.

"Now, hom mali is the world's most expensive rice. We just sold it at a new record of over US$1,300 per tonne to customers in Hong Kong for May delivery. Singapore, Malaysia and China are also our major customers.

"Looking back some 45 years, a tonne of hom mali rice was just over US$100. Today, we've seen record prices of not only rice, but also crude oil [$120 per barrel], gold [$1,000 per ounce] and other commodities," said Chookiat.

As a veteran rice trader as well as president of Thailand's Rice Traders' Association, Chookiat doesn't like the current unprecedented price volatility of rice, as it means higher risks for all traders.

"The facts are contrary to public perception that we're making huge profits on the price surge. Now we need to do business much more cautiously, since prices are changing at high speed.

"It's unprecedented that some traders are losing as much as US$200-300 per tonne on advance orders placed by overseas clients just a few months ago.

"We're now in the fourth straight month of price upsurge, meaning that prices for all kinds of rice have more than doubled - from $360 to $860 per tonne for white rice and from $620 to $1,300 for fragrant jasmine rice.

"As traders, we prefer steady price adjustments, as stability means less risk. A key factor is the government's inventory, which has fallen to just two million tonnes from as much as six million tonnes, so prices will continue to be affected.

"In fact, the wheat price went up on the global market, which is essentially the Chicago Board of Trade, sometime before that of rice. However, rice is now more expensive than wheat, largely due to higher global demand.

"For instance, Africa's economy improved after the surge in oil prices so more Africans are eating rice instead of other staples such as corn.

"Besides, several rice-growing countries such as India have banned rice exports for fear of domestic shortages, but major buyers such as Indonesia and Iran have not purchased rice, so the market is tightening.

"In addition, biofuels have become more popular worldwide due to the record crude oil price, meaning that more farmers have turned to corn or tapioca for biofuels instead of rice.

"Still, I believe that the rice price will be in the range of a plus or minus of 20 per cent for the rest of this year. Personally, I'm a rather conservative trader in this kind of market as there are few hedging tools.

"Even the AFET [Agricultural Futures Exchange of Thailand] is not an effective hedge because the trading volume [of contracts] is too small. So, we traders protect ourselves by gathering rice stocks before we sell and by reducing our exposure - or else we could risk bankruptcy," said Chookiat.