Product-by-product outlook for major thai agricultural goods in 2009

Thailand's farm prices reflect changes in the balance between global supply and demand. Major crops are forecast to increase this year, giving importing countries stronger bargaining power to negotiate for lower prices. Achara Pongvutitham and Petchanet Pratruangkrai report in the second of a two-part series.

Globally, agricultural commodities are classified into four groups - cereals, vegetables and fruit, livestock, and fuel crops and vegetable oils. Thailand's exports of these crops are still relatively small but show high potential for growth.

Cereals groups rice, maize, wheat, sorghum, rye and oats. Cereals is the biggest group, with production averaging 2 billion tonnes per year. However, cereal production dropped by an annual average of 0.92 per cent from 2005 to 2007. The biggest producer was the US (20 per cent) followed by China (19.2 per cent) and the European Union (11.67 per cent). Thailand's share was a minimal 1.02 per cent.

Vegetables and fruit annual production has reached 1.4 billion tonnes, of which vegetables accounted for 900 million tonnes. China is the biggest manufacturer, responsible for 39 per cent of production, while Thailand shares only 0.8 per cent.

Livestock covers pigs, chicken, cows and raw milk. Annual production is 570 million tonnes. The EU is the biggest manufacturer, controlling 26.48 per cent of global production. Thailand is a small producer, accounting for 0.49 per cent.

Fuel crops and vegetable oil have total production of 520 million tonnes per year. Fuel crops, including soybean, rapeseed and cotton, account for 400 million tonnes and the remainder consists of soybean, palm oil, rapeseed, sunflower and cotton. Thailand's share amounts to 0.28 per cent.

However, the Office of Agricultural Economics (OAE) has classified Thai farm crops into five groups - field crops, horticultural crops, fuel crops, livestock and fishery. Under those groups are 19 products, including rice, maize, soybean, cassava, sugar cane, palm oil, rubber, pineapple, longan, chicken, shrimp and fish meal.

The OAE's forecasts for Thai cultivation are based on global and local factors such as production, trading, supply and demand, exchange rates and oil prices. Its report said global production of almost all crops would increase slightly but exports would drop, particularly in price terms. Commodity prices will also follow the plummeting oil prices as well as the weakening currencies of major trading partners. Financial institutions also come into play by more carefully screening credit line applications.

OAE's 2009 forecast for major Thai crops is as follows:

Rice

Production of the Kingdom's main crop, paddy rice, is forecast to reach 24.04 million tonnes, up 3.16 per cent compared with 2008. However, the second paddy rice crop will decrease by 14.88 per cent to 7.51 million tonnes.

Domestic consumption of paddy rice will grow slightly by 0.44 per cent to 16.85 million tonnes due to the growth in population and demand for animal feed.

Rice exports are targeted at 9.5 million tonnes. However, with world supply estimated to increase but trading to decline, the rice price is also predicted to decline.

Maize

Production is predicted to increase by 1.46 per cent to 3.79 million tonnes after high prices encouraged farmers to expand their plantation area. However, demand will increase by less - 0.99 per cent to 3.86 million tonnes.

The increase in consumption is derived from melamine contamination of dairy products and feed meal as well as a larger import quota for Thai chicken in the EU market.

Maize is on an upward trend with demand high both in Thailand and the world market. However, the price would not jump to the same level as last year due to the lower oil price and stronger greenback.

Soybean

Due to the global downturn and plummeting oil price, the global market price for soybean oil is expected to drop by 6-7 per cent and for soybean seed by 5-6 per cent.

China, as the world's biggest soybean oil consumer and importer, will reduce its imports due to higher domestic production.

Thailand's soybean seed production is expected to drop by 0.52 per cent to 192,000 tonnes as farmers shift to sugar cane, which yields a higher return.

The country's soybean seed demand will increase by 0.17 per cent to 1.74 million tonnes. High demand has prompted the government to allow the import of 1.55 million tonnes.

Cassava

Thailand is the world's biggest tapioca-products exporter, controlling the lion's share of 75 per cent in the global market.

Exports take the form of chips, pellets and flour.

Total production is projected to jump by 15.89 per cent to 29.15 million tonnes. Farmers have expanded plantation areas thanks to high prices and demand. The root is also a fuel crop used to produce gasohol.

The average price of cassava was quoted at Bt2 per kilogram last year. It is predicted to drop slightly to Bt1.80-Bt1.90 per kilo this year.

Sugar cane

Plantation areas are shrinking because farmers have turned to growing more fuel crops. However, higher yields and a good environment will ensure bumper harvests to some extent. Cane production is expected to drop by 5.2 per cent to 69.7 million tonnes.

Sugar production will reach 7.6 million tonnes, of which 1.9 million tonnes are planned for domestic consumption and the remainder for export. Exports will reach Bt67 billion.

The domestic price of sugar cane should be adjusted in line with the rising global sugar price, which has gone from 14 cents to 15-16 cents per pound.

Palm oil

The government has been promoting palm oil for use in producing alternative energy. As a result, the total plantation area will be enlarged by 9.02 per cent to 3.18 million rai while production will ramped up by 19.06 per cent to 9.54 million tonnes of palm fruit.

Cooking-oil consumption will take 920,000 tonnes of fruit, while 360,000 tonnes will support biodiesel manufacturing.

However, the crude palm-oil price will drop from an average of Bt28.70 per kilo in 2008 to Bt20.44 in 2009.

The Commerce Ministry on Tuesday set up two teams to monitor the Kingdom's exports and commodity prices. The ministry plans to spend Bt1.18 billion of the government's budget to subsidise farm crops to alleviate farmers' cost of living.

The first part was published yesterday.