Dong devaluation hurts Thai agricultural crops

Despite the forecast of lower supplies and higher prices for agricultural commodities next year, Thai crops may not enjoy the highest price level as expected, due to the weakening of the dong.

Other important factors that will directly hit Thai commodity exports next year are the global economy, oil price, a stronger baht, natural disasters and irrigation.

However, the government should not ignore the labour-shortage problem, because some farming, such as rubber tapping, requires skilled workers.

The Agriculture Ministry's Office of Agricultural Economics (OAE) and Kasetsart University yesterday hosted their annual seminar entitled "Thailand's Outlook on Agriculture". It was aimed at allowing the public, particularly farmers, to learn more about negative and positive factors, price trends and other warning signs.

Last week, the State Bank of Vietnam devalued the dong 5.5 per cent, in order to curb quickening inflation and widening trade deficits via exports.

OAE secretary-general Apichart Jongskul said Thai export crops, particularly those also exported by Vietnam, such as rice and rubber, would be affected, because Vietnam could offer export prices that were 5-per-cent lower.

Thailand's farm sector foresees a brighter future next year, particularly for prices, due to rising demand in the global market, he said. But prices will not reach as high as those quoted last year, when there was a farm-production crisis.

However, the oil price should not be much higher than US$70 (Bt2,300) per barrel, while the baht should be maintained at 33 to the US dollar.

The government's Thai Khemkhaeng stimulus package, focusing on the agricultural sector, particularly irrigation development and the income-guarantee scheme, will encourage farmers to plant more, Apichart added.

Paiboon Wongchotsathit, president of the Thai Fresh Fruit Traders and Exporters Association, called the baht's appreciation "the most worrisome factor for traders".

"If the baht strengthens too much, traders will have to force farmers to lower their prices," he said.

For every baht of appreciation, the price of fruit at the farm gate will drop 2-5 per cent, Paiboon said.

The dong's impact on Thailand's export competitiveness may be slight, because most products from Thailand are different, he said. Although Vietnam also has some fruits like custard apples, longans and mangoes, their output remains less.

Thai Rubber Association president Luckchai Kittipol said rubber exports were expected to expand 10 per cent by volume next year and 20 per cent by value, due to higher demand and lower supply.

The dong's devaluation will affect Thai rubber-export competitiveness only slightly next year. Vietnam has started to become an export rival with Thailand. It grows and exports 500,000 tonnes of rubber a year.

Pornsri Laurujisawat, deputy managing director of Charoen Pokphand Foods' economic-advisory office, said Vietnam would enjoy lower costs of production following the devaluation of the dong.

However, Vietnam has not yet become a major threat to Thai chicken exports, because it has lower production capacity as well as low quality.

However, Vietnam could become an important rival of Thailand's in the next few years, Pornsri said.

Apichart said Thailand should do more to maintain its reputation as the world's biggest exporter of rice (8 million tonnes), tapioca (5.8 million tonnes), rubber (6.73 million tonnes) and shrimp (395,039 tonnes).

Thailand's farm exports generate an average of Bt1.1 trillion in foreign-exchange revenue per year, he said.

Montri Congtrakultien, president of the Charoen Pokphand Group's Crop Integration Business Group, said the government should focus more on developing fuel crops like sugar cane, palm oil and cassava. These crops' prices generally follow the oil price, which is now on an upward trend.

To maintain export competitiveness in rice, Thailand should concentrate more on crossbreeding for high-quality rice seeds. That would help Thailand compete with rivals on price through higher yields, he said.

"Thailand is the biggest rice exporter, but the government sets a very low budget for the Rice Department and government agencies responsible for rice development," he said.

Saroj Aungsumalin, dean of Kasetsart University's Faculty of Economics, said China, Japan, South Korea, the Philippines, Cambodia and Laos were predicted to form a region of economic wealth in the world within 20 years.

As Thailand is involved in this region, it should draw up a strategic plan to access these markets more.

"Thailand should not focus only on our strengths like in the past. We should diversify our products to meet market demand, even specific requirements," Saroj said.

Price, quality and services will be three keywords for boosting the country's competitiveness, he added.