Thai rice exports falling on greater Vietnam competition

Oversupply of rice in global markets & competition from Vietnam means sluggish rice prices this year, but premium Jasmine rice may be a bright spot.

AGRICULTURE & EXPORTS

Thai rice exports seen slipping on greater Vietnam competition

2/02/2017
Bloomberg News Agency

Rice shipments from Thailand, the largest global rice supplier after India, are likely to decline about 4% this year amid increased competition from Vietnam and other producers.

Rice exports will total 9.5 million tonnes in 2017 compared with 9.88 million tonnes in 2016.

This is according to data from the Commerce Ministry and Chookiat Ophaswongse, the honorary president of the Thai Rice Exporters Association.

DROP IN GLOBAL RICE DEMAND BEHIND PROJECTED DROP IN EXPORTS

The US Department of Agriculture (USDA) expects global rice consumption (demand) to lag behind production (supply) for the 12th straight year.

World rice production will increase 1.6% to 480 million tonnes and consumption will rise 1.5% to 477.8 million tonnes, according to the USDA.

BASIC SUPPLY AND DEMAND AT WORK

The basic laws of supply and demand in economics can help the reader understand this.

Excess supply (over-supply) in global rice markets means roughly that the supply of rice is greater than demand.

Excess supply should cause the price to decrease or at least rise at a slower rate.

Prices always rise a little every year due to inflation. 

RICE OUTPUT FROM VIETNAM & INDIA ALSO RISING  

Output from India, Thailand and Vietnam, the world’s top exporters, will increase this season.

Competition from Vietnam may cut white rice exports by about 400,000 tonnes to 4.6 million tonnes.

Despite the decline in Thai rice exports, sales of premium jasmine grade rise climb about 9% to 2.5 million tonnes.

RICE PRICES HAVE CHANGED LITTLE THIS YEAR

Prices of Thai white rice, a regional benchmark, have changed little over the past year and were at $375 a tonne on Jan 25.

Vietnamese white rice is quoted at $434 a tonne and Indian rice at $370.

Thai prices may hover around current levels as increasing demand is offset by ample supply from key suppliers.

The upcoming harvest in Vietnam may cause prices to drop by $5 to $10 a tonne in the near term.

THAI GOVT OFFLOADING OF RICE STOCKPILE COULD HAVE NEGATIVE EFFECT ON PRICE

Prices may also be pressured in the short term by the Thai government’s plan to sell its entire 8-million-tonne stockpile of food- and animal feed grade rice this year.

The government will announce details on the timing of the sale 2.8 million tonnes of food-grade rice on Friday.

The effect of the sales on prices should depend on their timing.

If buyers of state reserves have to take delivery in the next few months, the sales could have a short-term negative impact on prices as it would coincide with the start of the minor crop harvest

In the longer term, it is likely to lift negative pressure from the market and help boost global prices.

As much as 3 million tonnes of exports this year are likely to be old varieties from state reserves, according to Mr Chookiat.

Of the total state stockpile, 3 million tonnes are food-grade and the balance is for animal feed and ethanol producers, according to government data.

http://www.bangkokpost.com/business/news/1191420/thai-rice-exports-seen-slipping-on-greater-vietnam-competition

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