'Rice prices to rise' amid lower supply, high demand

Economy July 22, 2015 01:00

By Petchanet Pratruangkrai

The

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The price of Thai rice is expected to climb steadily into next year, mainly because of the impact of drought on the world market as well as production in Thailand.



However, there are still some factors that could suppress the price including the world economy, the financial problems in some countries, and the oil price, as it affects the purchasing power of some rice-importing nations.

The Thai Rice Exporters Association (TREA) announced yesterday that Thailand should be able to export between 9.5 million and 10 million tonnes of rice this year, as drought has increased demand in many countries, while Thailand has plenty of rice stocks.

TREA president Charoen Laothamatas said Thailand should be able to export at least 9.5 million tonnes of rice worth not less than US$4.77 billion (Bt165 billion).

"The drought will encourage higher rice prices in the world market and domestically amid higher demand amid lower production in Thailand and many countries. In Thailand alone, rice output is expected drop by 15-20 per cent or about 2 million to 3 million tonnes from the drought," he said.

He said the price of rice had bottomed out and should increase in the future after lower production, while higher demand by many importers such as the Philippines and Indonesia.

Thailand shipped 4.5 million tonnes of rice in the first half, down by 1.1 per cent year on year. During the same period, India shipped 4.24 million tonnes, while Vietnam exported 2.42 million tonnes.

The association expects the domestic rice price to be above Bt9,000 per tonne of white paddy in the second half, up from the current level of about Bt8,500, while the export price for white rice should be above $400 a tonne, up from $390 now. According to an updated "World Markets and Trade" report released this month by the US Department of Agriculture, global rice trading is expected to decrease slightly from 43.42 million tonnes last year to 43.72 million tonnes this year. World production will drop from 478.18 million tonnes to 476.28 million tonnes, consumption will rise from 481.47 million tonnes to 484.69 million tonnes, and global ending stocks will be lowered from 107.36 million tonnes in 2014 to 98.95 million tonnes this year.

Charoen said that with more demand but less supply of rice, it was a good opportunity for Thailand to release rice from its stocks. The country holds huge stockpiles of up to 15 million tonnes of rice, and releasing it now should not drive down the price too much.

However, there are still some worrying factors that could hit the rice price. The European Union is still recovering slowly from the last financial crisis, while declining oil prices in the world market have lowered purchasing power in some rice-importing countries, mainly Nigeria but also elsewhere in Africa and the Middle East.

Chookiat Ophaswongse, honorary president of the association, said the baht’s depreciation had stabilised the export price of rice. However, the domestic price of paddy should increase soon as it has already bottomed out and the drought should help drive it back up.

To promote sustainable development of the rice industry, the association urged the government to manage rice stocks with high efficiency to ensure minimum impact on the market price of the grain.

The government should accelerate negotiations with its counterparts in rice-importing countries for rice-sale contracts. It should promote Thai rice overseas, especially Hom Mali rice (jasmine rice), and stabilise the baht, as well as reduce obstacles or trade regulations and conditions on rice trading to many markets.