Exports strong, households hurting

Farmers should not panic over the slight drop in rice prices last week, as global supplies will remain tight and the government's intervention measures should work well, reports Petchanet Pratruangkrai.

The domestic paddy rice has softened for a week in line with market mechanisms. Both exporters and millers have delayed purchases of paddy from farmers, as their warehouses are full and the second crop is entering the market.

Two weeks ago, jasmine paddy rice was quoted at Bt18,000-Bt20,000 per tonne compared with Bt18,000-Bt19,000 last week.

Regular paddy rice was traded at Bt13,500-Bt15,500. This compares with the Bt12,500-Bt14,000 level last week.

The government forecast that the second crop would add 6.2 million tonnes of paddy rice, equivalent to 4.25 million tonnes of white rice, to the market.

Commerce Minister Mingkwan Sangsuwan insists that exports of jasmine rice will not be quoted lower than US$1,000 (Bt31,900) per tonne.

While rice exports face a bright future, consumers have to shoulder high living costs, with rice, their main staple, breaking price records.

To help households make ends meet, the Commerce Ministry today is launching its cheap rice programme by releasing 100,000

5-kilogram bags. However, consumers still complain that they get access only to the highest rice prices ever. Regular rice is going for Bt150-Bt160 per bag while jasmine rice fetches more than Bt200.

Farmers may fear that the government's cheap rice scheme will drive local prices down, but in fact prices have already adjusted to a new high level that reflects farmers' real production costs.

The ministry is also committed to purchasing as much paddy rice from farmers as the volume entering the market.

The government has instituted a policy to maintain an inventory of 2.1 million tonnes at all times for the country's food security.

Prices are expected to stabilise after next month, until the main crop is harvested in November and December.

In a bid to ensure maximum benefits for farmers, the government is negotiating with many countries that want to purchase Thai rice.

Estimates are that 6.7 million tonnes of rice contracts will be signed by exporters.

The Rice Exporters Association has reported that the jasmine rice price slipped from US$1,162 to $1,158 per tonne a week ago before rebounding to $1,245 on May 7. In the same period, 100-per-cent white rice also fell from $894 to $854, before swinging back to $941.

Apiradi Tantraporn, director-general of the Foreign Trade Department, said foreign demand for Thai rice remained healthy, which would prop up prices.

Recently, many countries have entreated the government to provide them with rice.

Malaysia wanted 500,000 tonnes, Nigeria 500,000 tonnes, Sri Lanka 50,000 tonnes and Timor 45,000 tonnes.

Others put in a variety of requests, including Poland, Liberia, Benin and the Philippines.

"The rice price has fluctuated for a short period as base prices have adjusted to higher than Bt10,000 per tonne of regular rice. The rice price should stay at a high level along with rising consumption," Apiradi said.

Chookiat Ophaswongse, president of the Rice Exporters Association, said rice prices declined last month because importers were waiting for the peak to pass.

Exporters continue to believe that regular rice will stay expensive, at an average price of Bt12,000 per tonne, he said.

Prices might retreat a little as it is close to the end of the second harvest, but prices should stay relatively firm due to high demand and the limited supply from rice-exporting countries, Chookiat added.

Harvesting of the second crop will end this month. Less than

3 million tonnes of regular paddy rice are expected to enter the market in June and July.

"Rice prices will keep high until the main crop will be cultivated in November," he said.

The government predicts that the main crop will reach 20 million tonnes of both regular and jasmine paddy rice.

The government will then consider a price intervention measure to secure a high rice price.

The United Nations forecasts that rice supplies will shrink while demand will intensify.

An analyst at the International Rice Research Institute said demand would grow due to three major factors - rising urban populations worldwide, emerging countries like Africa and the Middle East importing more rice to meet their increasing consumption, and global climate change continuing to affect the production of rice and other cereals.

The world's population has reached 6 billion people. Half of them eat rice as their staple food.

The US Department of Agriculture's "World Market and Trade" report projects world rice trade this year increasing to 30.51 million tonnes from 29.37 million tonnes last year.

Global rice demand for consumption is expected to strengthen to 422.5 million tonnes from 419.99 million tonnes.

The picture of rice production and consumption confirms that prices should remain high and not easily plunge to levels as low as in the past.