Make hay while the sun shines, say experts

Achara Pongvutitham

The Nation

Commodity prices are trending up mainly due to four factors - increasing world population, food supply shortage, climate-change problems, and increasing demand for fuel crops. If there are prolonged problems, it will take a toll on world demand and supply in the future.

The trend of rising prices of farm goods are expected to continue for the next few years. Particularly, rice prices have already hit a new record high and the local price should not be traded lower than Bt6,500 per tonne of paddy rice any longer.

In the recent roundtable seminar entitled "World's food crisis: will it challenge Thailand?" organised by Krungthep Turakij, panellists shared the view that Thailand's farm sector had great potential.

However, food exports account for only 10 per cent of the country's total targeted export value of US$169.4 billion (Bt5.3 trillion) this year. But food exports helped turn the country's trade deficit into surplus last month, thanks to the increasing price of almost all farm goods.

Montri Congtrakultien, CEO and president of Charoen Pokphand Group's Crop Integration Business Group, said Thailand should reap the benefit from the farm sector, especially when almost all developed countries are cutting farm crop produce to focus more on the services sector, mainly banking and finance, telecommunications and information technology.

Many organisations have reported that the world food supply cannot catch up with demand. For instance, the world's rice demand increases an average of one million tonnes per year, while its carry stock dropped to a low of 70 million tonnes last year compared with 100 million tonnes normally.

"The figures show that the world's food production has not served total demand," he said.

Since the tsunami at the end of 2004, the world has faced climate-change problems, leading to drought and flooding, which also reduced farm production. Besides, farmers are turning their eyes to growing more lucrative plants, particularly fuel crops.

For Thailand, the top priority is to develop the farm sector by increasing yield and establishing more irrigation systems, the experts said. They also said farmers should pay a reasonable price for the water.

Yuthasak Supasorn, president of the National Food Institute of Thailand, said the world's food crisis will continue from now on. Many international organisations - including the World Bank, the Food and Agriculture Organisation, the United Nations and the World Trade Organisation - have expressed concern over the food crop problems.

"The key question on rice is about overpricing. We have to address how to balance food crops and fuel crops as part of the national agenda," Yuthasak said, noting that the time for cheap farm goods was over.

Paiboon Ponsuwanna, chairman of the Food Processing Industry Club of the Federation of Thai Industries, said the US sub-prime crisis had encouraged American investors to explore the benefits of investing in the farm sector in Asia.

"They [American investors] are speculating on the skyrocketing price of agricultural crops to offset their losses from the sub-prime investments," he said.

In addition, Western countries also foresee that the service sector will generate higher value-added income, and this has prompted them to reduce farm production. Developing countries are forced to grow plants to meet rich investors' demands.

Compared to other Asian countries Thailand has the advantage of resources to flourish in the farm sector. For instance, China has a mountainous and desert terrain, not really ideal for agriculture, while the Philippines and Indonesia have to cater to local consumption. Vietnam is facing problems from climate change, which will directly affect food crops.

Thailand should join hands with other Asean countries to set up a single standard for exports, which would strengthen the region's bargaining power with importing countries and groups, such as the European Union.

Niphond Wongtra-ngarn, a committee member of the National Economic and Social Advisory Council, said as one of the world's biggest rice exporters, the Thai rice price should be the indicator for global market trading. However, it has not filled that role since the Food and Agriculture Organisation used Thai rice prices as its price indicator in the early 1980s.

He believes that the domestic rice price will not drop lower than Bt8,000 per tonne in the medium term.

Jariya Sutthichaiya, senior economist at the Agricultural Economics Office, said Thailand should concentrate on farm technology development to increase yield and the world's food security.

"Agricultural goods stock is different from industrial goods - it is a life-cycle production, which should take at least 100 days to build up stock," she said.