Thai rice faces global price war
With long drought ended, farmers expected to plant lots of rice, global oversupply & price war possible.
With long drought ended, farmers expected to plant lots of rice, global oversupply & price war possible.
AGRICULTURE
Thai rice faces global price war
4/08/2016
Phusadee Arunmas
Thailand's rice market is expected to face a price war next year as a result of an oversupply of rice that will lower prices in both domestic and export markets
The stronger baht could hurt the competitiveness of rice shipments, exporters warn.
POST-DROUGHT RICE SUPPLY INCREASE PROJECTED
Paddy supply from the 2016-17 crop to be harvested from November to January, is estimated to rise by 10-20% from the normal level of 22 million tonnes.
Continual rainfall has ended the drought that plagued Thai farmers for so long.
The rainfall is expected to lead to increased supply after farmers, especially those in the Central Plains, Northeast and North, enlarge their planting areas.
LA NINA WEATHER GLOBAL PRICE RISE EFFECT
Global rice prices will likely be affected by the La Nina weather phenomenon.
La Nina is spreading across Asia and creating more monsoon rain to prop up rice production in countries such as India, Pakistan and Vietnam.
These countries are major export competitors of Thai producers and their output usually hits the rice markets at the same time as Thailand's crops.
INCREASED RICE SUPPLY IN 4TH QUARTER: GLOBAL PRICE WAR LIKELY
The increased rice supply is expected flood the market from the last quarter this year to cause a price war in the global rice market.
The report of the US Department of Agriculture (USDA), which earlier estimated world rice supply next year at 481.23 million tonnes, up 2.3% from 2016, while consumption will increase slightly by 0.4% to 480.63 million tonnes.
STRONG BAHT MAY MAKE THAI RICE MORE EXPENSIVE
The baht's appreciation in recent weeks would be another factor in decreasing the competitiveness of Thai rice in the global market.
The baht hit a one-year high (peak) on Monday at 34.72 against the US dollar and has risen by 3.3% against the greenback this year.
The strong baht will likely make Thai rice relatively costly.
Every appreciation of one baht against the dollar adds $10 to the price of a tonne of Thai rice, is a rule of thumb cited by experts.
RICE PLEDGING SCHEME STOCKPILES TO PUSH PRICES LOWER
Large stockpiles of Thai rice accumulated under the rice pledging scheme would also likely influence buyers to offer lower prices.
At present, there are about 9 million tonnes of milled rice in state stocks, down from 18 million tonnes two years ago.
In the first six months, Thailand shipped 4.99 million tonnes of rice and it is set to export about 9.5 million tonnes this year.
The USDA forecasts Thailand will export about 9 million tonnes of rice in 2017, followed by Vietnam at 7 million, India at 5.5 million and Pakistan at 4.25 million.
THAI RICE MORE EXPENSIVE THAN RIVAL VIETNAM
The price of Thai white rice in free-on-board terms is $425 a tonne or about $50 more than Vietnamese rice.
This shows that Thai rice is less competitive than that of its rivals and that may turn buyers to other markets.
http://www.bangkokpost.com/business/news/1052305/thai-rice-faces-global-price-war
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