Baht appreciation adds to rice exporters' competitiveness woes
The Thai rice industry faces an even tougher trading situation this year, with lower export volume and value expected because of continuing high pledging prices and the baht's appreciation hampering exporters' competitiveness.The Thai Rice Exporters Association (TREA) yesterday projected that the Kingdom's exports would come in at 6.5 million tonnes worth only Bt130 billion this year, lower than last year because of high prices, the baht's rapid strengthening and rivals in other countries being better placed on price terms to export their produce.
The association's estimate is much lower than the US Department of Agriculture export projection of up to 8 million tonnes this year. However, the TREA projection has not taken into consideration exports under government-to-government contracts, as figures for such sales have not been publicly revealed since last year.
India is expected to export 7.5 million tonnes of rice this year, while Vietnam is projected to export 7.4 million tonnes.
TREA president Korbsook Iamsuri yesterday said many negative factors would continue to cause sluggishness in Thai rice exports in the short and medium runs.
Higher competitiveness of other exporting countries, mainly Vietnam, lower global demand for rice imports and the high price of Thai rice will hamper trading growth this year, she said.
"The market will acknowledge that Thailand has a high supply of rice due to the high volume of stockpiles under the pledging project. Exporters will continue to face tougher competition to win trading contracts, as the prices of other countries are lower than Thai rice by about US$200 a tonne," she added.
Thailand shipped a total of 6.94 million tonnes of rice last year, down 35 per cent from the 2011 level.
Export value also dropped sharply, from Bt190 billion in 2011 to Bt147.12 billion. This represented a decline of 24 per cent year on year.
FAILURE TO PROMOTE INDUSTRY
Vichai Sriprasert, honorary president of the TREA, said falling exports in both volume and value terms clearly proved that Thailand had failed to promote rice industry growth.
"The high pledging price of Thai rice has dampened export competitiveness. The rapid strengthening of the baht this year will also cause lower export capacity," he said.
Vichai said exporters had lost hope of persuading the government to revise its high-pledging-price strategy, as it was an official policy.
However, the government must release rice stockpiles to traders at the market price and shoulder the losses resulting from high pledging prices. Otherwise, it will continue to face excessive stockpiles and a high fiscal burden as a result of holding enormous stocks, he warned.
Thai rice will also continue to depreciate in quality, which will cause problems in regard to the reliability of the Kingdom's exports, he added.
Vichai also said the government faced a loss of Bt40 billion a year under its pledging policy. It also has to spend Bt40 billion annually on stocking rice.
Charoen Laothamatas, vice president of the TREA, said that during the past month the baht had appreciated by 3 per cent against the US dollar, which meant exporters must quote prices about $30 a tonne higher than before.
The baht's strength has added another level of difficulty for exporters, who already faced problems when competing on the international market because Thai rice is priced much too high.
"The baht has swung significantly when compared with the stable Vietnamese dong, which is quoted at 20,800 against the US dollar," Charoen said. "Thai rice exporters have normally made trading contracts three to six months in advance. The rapid strengthening of the baht has caused problems for exporters and foreign importers' ability to adjust."
The danger is that more importers will turn to other countries once they find they are no longer able to cope with the rising price of Thai rice, he added.
TREA honorary president Chookiat Ophaswongse said that if the baht strengthened to 28 against the greenback, export value would be less than Bt130 billion this year.
For every Bt1 appreciation, Thai rice would be quoted $30-40 per tonne higher, he said, adding that this trend would undoubtedly force buyers to purchase rice from other countries.
Exports of Thai premium rice would be the most badly affected this year by rising prices, he said.
According to the association, as of January 24, Thai jasmine rice was quoted at $1,197 a tonne, while the price of Cambodian fragrant rice was $935, and Vietnamese fragrant rice traded at just $565.
The price of Thai 5-per-cent white rice was quoted at $599 a tonne, while the Vietnamese equivalent traded at $390.