Thailand Rice traders harvest new businesses

New generation turns away from historic Songwad Road to find more lucrative opportunities Profit margin as low as 10 cents to the dollar is making the rice business increasingly unattractive for Thailand's legendary rice traders. The Kingdom's historic rice-trading area on Bangkok's Songwad Road may not be permeated by the smell of grain and rice dust much longer, as exporters diversify to protect their businesses from market fluctuations and politically shifting government policies. The property, energy and service businesses are popular sectors they have moved into to capitalise on higher margins. In particular, office buildings or condominiums in Bangkok's prime areas generate high income at an average of Bt80,000-Bt100,000 per square metre. Such prices create profit of at least 10-20 per cent for investors. Soon Hua Seng Group, once the Kingdom's biggest rice exporter, has turned away from the rice business to focus mostly on pulp and paper through its Double A printing-paper brand and is now pursuing a new challenge as a small power producer. Rice and other crops no longer form the group's core business. In another example, Hong Yiag Seng (Thanapornchai Rice) has shifted to other lucrative business, particularly TPI Polene, a cement manufacturer. The diversification of the industry has relegated the Kingdom's Rice Trading Road to legend status. For nearly 100 years, Songwad Road was not only the country's biggest rice-trading area but also the heart of the Chinese community in Bangkok, where the wealth of many well-known Chinese-Thai families was generated. This changing environment raises questions on whether it will undermine Thailand's status as the world's biggest rice exporter. In addition, severe competition from export rivals, particularly Vietnam, Cambodia and Burma, as well as the regional integration through the Asean Economic Community by 2015 will affect Thailand's rice business. The business diversification has occurred over the past 20 years as rice traders sought to avoid not only high risk but speculation. In addition, rice exports generate low margins despite large sales volumes. "With these factors, Thai rice exporters have to explore other businesses to secure their profits," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. Chookiat is also managing director of Huay Chuan Rice, a pioneer rice exporter on Songwad Road. The family now has also undertaken such businesses as a hotel in Phuket, manufacturing Pheasant bicycles, and plastic manufacture. Charoen Laothamatas, president of Uthai Produce, pointed out that continuing in the rice business was very difficult now amid tougher competition both in the country and overseas. The business has not attracted the young generation, who like working with digital technology and modern facilities. "The rice business has no textbook to teach you how to manage it, but one has to do it with heart, sense and serious intention. In addition, there is a lot of political interference," he said. "Rice trading does not make a lucrative profit as in the past. Now, you have to be satisfied with a 10-per-cent margin on an order." Charoen suggested that if |anyone wants to succeed in rice export, the scale of investment should be at least Bt1 billion. He noted that political intervention |in the government price-subsidy programme had caused a lot of problems along with severe price competition from export rivals. Inevitably, Charoen has also entered the hotel service business, opening Dheva Mantra last year with an investment of Bt800 million. It is a premium resort and spa in Kanchanaburi with full facilities. Chockchai Sethiwan, an executive of Thai Hua (2511), said Songwad Road was now just a rice-trading legend. There is only small-scale trading of beans and cereals at present instead of the crowded bargaining environment between brokers and traders as in the past. While the history of the area is preserved in the form of a few historic buildings still owned by pioneer rice exporters, the businesses themselves have moved into modern offices, Chockchai said. He noted that the fluctuating rice price was the most important factor forcing rice exporters to explore new business opportunities. Chockchai's property business has focused on office buildings, service apartments and residences. Its latest interest is to form a joint venture with a Thai partner to set up a solar-energy business. The companies carry on with their rice export business parallel with diversified business not only to reduce risk but to accommodate their older staff who have accumulated long experience in the rice business. While the future for the old way of business may not be bright, the way has been paved for new enterprises, creating business opportunity for newcomers. Meanwhile, rice millers have developed to become exporters, playing an important role in maintaining Thailand's place as the world's No 1 rice supplier.

India rice procurement crosses 10 mn tonnes so far

The Food Corporation of India (FCI), the nodal agency for procurement and distribution of food grains, has procured over 10 million tonnes of rice since October. "Rice procurement as on today stands at 100,83,026 tonnes," according to an official statement. The government had procured similar quantity of rice in the year-ago period. FCI and other state agencies have purchased 8.28 million tonnes from Punjab, 1.6 million tonnes from Haryana so far in 2010-11 marketing season (October-September). The rest has been purchased from Tamil Nadu, Andhra Pradesh, Kerala and Uttar Pradesh. The government''s rice procurement had declined in 2009-10 marketing season by seven per cent to 31.45 million tonnes due to a sharp fall in production by about 10 million tonnes, on account of a widespread drought in 2009. However, FCI officials are expecting better procurement this year as rice output is estimated to increase in 2010-11 crop year. In Kharif season, the country''s rice output is estimated at 80.41 million tonnes against 75.91 million tonnes in Kharif season last year. The sowing of rabi crops are in process.

Vietnam-Cambodia cooperate in rice marketing

The Cambodian Takmoa Agriculture and Industrial Development and the Vietnamese Thai Thinh Company have signed a US$22.4 million contract to plant 20,000ha of rice for export. The Thai Thinh Company will provide assistance and support for rice cultivation and processing for two Cambodian provinces, Kompong Cham and Kompong Svay. The two sides will develop a water drainage system in the area and build a rice processing factory capable of producing 500 tonnes of rice a day in January, 2011. Lim Kimkhun, Chairman of Cambodian Takmoa Agriculture and Industrial Development said that both sides will cooperate to produce 2 harvests a year with an average yield of 7 tonnes per ha and a target to export 200,000 tonnes of rice by 2012. The contract will also generate works for nearly 280,000 Cambodian farmers.

S. Korea rice output falls to 30-year low

South Korea's rice production fell to the lowest level in 30 years due to bad weather conditions and a steady decrease in the size of rice paddies, a government report showed Tuesday. The report by Statistics Korea said the country's rice production reached 4.29 million tons this year, down 12.6 percent from 4.91 million tons in 2009 and the lowest since 3.55 million tons in 1980, when cold weather devastated output. "Unseasonably cold weather in spring, and hot, overcast skies during the summer months seriously affected the yield of the staple grain," an official said. "This year's harvest was also hurt by several typhoons that hit the country." Reflecting the bad weather conditions, the average rice production for a 10-are paddy fell 9.6 percent to 483 kilograms this year from a record 534 kilograms last year when South Korea had a bumper crop harvest, helped by ideal weather and no typhoon damage. The report, meanwhile, showed the total area of rice paddies in the country falling 3.5 percent on-year to an all-time low of 892,000 hectares, as more farmland was converted for other uses. A hectare is equivalent to 10,000 square meters. The size of South Korea's farmland has been decreasing by a yearly average of about 2 percent, as the government eased restrictions on rural development and moved to build more roads and other industry-related infrastructures over paddies and fields.

Thailand Rice Price - Weekly

Domestic and export prices increased by 3-5 percent as foreign buyers stepped up their enquiries of Thai white rice for export to African markets. Additionally, rice millers and traders are holding stocks speculating that MY2010/11 main-crop rice production will likely decline significantly in flooded areas. However, exporters expect prices will likely ease over the next few weeks once the damage due to floods is assessed.

Vietnam Rice exports total $2.5 billion

Viet Nam has exported 6 million tonnes of rice this year, worth US$2.5 billion, reported the Viet Nam Food Association (VFA). The association said the export price of Vietnamese rice within the last two weeks increased sharply by between US$5 and $20 per tonne to $450 per tonne for 25 per cent broken rice and to $495 per tonne for 5 per cent broken rice. Head of the Ministry of Agriculture and Rural Development's Plantation Department Nguyen Tri Ngoc said the demand for rice by the end of this year would increase sharply while global supply would decrease, so traders should sign export contracts soon to capitalise on the opportunity. Domestic and international rice experts said the supply might increase next year because the Indian Government would resume exporting large quantities of rice. Therefore, export prices for rice would decrease during the next year. The Government issued a decree detailing the conditions for export rice trading to improve the quality of export rice and management. Under Decree 109/2010/ND-CP, eligible rice traders must have legal trading certification, one warehouse to store at least 5,000 tonnes of rice, one rice mill that can process at least 10 tonnes of rice per hour and will have to follow additional standards that will be mandated by the Ministry of Agriculture and Rural Development. Professor Vo Tong Xuan, a rice expert, said the decree would help increase the value of Vietnamese rice and improve the product's reputation globally. The country expects to export 6.5 million tonnes of rice this year, reported the association.

Philippines sets 2011 rice output goal at 17.4-M tons

The government has set a rice production goal of 17.4 million tons next year, nearly 9% higher than a revised target of 16 million tons in 2010, a senior official said on Monday. The Philippines, the world's biggest rice buyer, expects rice production to reach 19.2 million tons in 2012 before becoming self sufficient in its staple in 2013, Dennis Araullo, a grains program director at the Agriculture department, told reporters. Agriculture Secretary Proceso Alcala, meanwhile, said rice purchases for 2011 will not be more than half of the record imports of 2.45 million tons last year. For the first 9 months, domestic production of unmilled rice fell 15% from a year ago.

Philippines May Import Rice in Early 2011

The Philippines, the world’s biggest rice importer, may hold tenders for the grain in the first quarter of 2011, Agriculture Secretary Proceso Alcala said in a press briefing today. The Southeast Asian nation, which imported a record 2.47 million metric tons for this year, cut its rice production forecast this year to 16.02 million tons from 16.24 million tons due to storms that damaged crops. It’s still reviewing the volume, mechanics and timing of rice imports, Alcala said.

Thailand Rice harvest could be down 20%

This year's rice production is expected to drop by about 20 per cent due to the massive flooding in the country, Thai Farmers Association president Prasit Boonchoey said on Thursday. Mr Prasit said the country usually produces about 10 million tonnes of rice paddy per year. The extensive flood damage to rice fields is likely to cut the crop by about 20 per cent. The drop in production would not cause shortages of rice, either for domestic consumption or export, because the country still has a considerable amount of rice in stock. Mr Prasit said rice prices are still in a favourable direction. The price of paddy is currently 9,000 baht per tonne, up from 8,500 baht, due to concerns over production both inside the country and abroad, since other rice-producing countries including Vietnam, India and Pakistan have also been hit by natural disasters. Therefore, the price may rise to as much as 10,000 baht per tonne, but not as high as 15,000 baht as some people may hope, he said. "Tomorrow (Nov 12), there will be a meeting of all concerned to discuss prices and marketing," Mr Prasit said. Mr Prasit said the government's plan to provide financial relief for flood-hit farmers at the rate of 2,098 baht per rai was good, but authorities should watch out for people trying to make dishonest gains from this measure. He said some people who had not really suffered damage have registered for help, causing a delay in relief payments to those actually affected.

Drought likely to hit rice crop Vietnam

Insufficient rainfall is likely to affect the winter-spring rice crops across the country, the National Hydro and Meteorological Forecasting Centre said yesterday. Water levels in rivers in the north-central provinces would be less than last year's average levels by about 30 per cent. Those in the country's south-central and Central Highland provinces would be about 60 per cent less than last year's averages, said centre head Bui Minh Tang. "Drought and water shortages will spread extensively," said Tang. "Southern provinces will probably have to deal with salt water intrusions." The Red River's water level stabilised at 2.85m last month, said irrigation expert Dang Duy Hien. The river's average was usually about 2.91m. If the drought continued, about 650,000ha of winter-spring rice crops in the northern delta might be ruined, he added. The Ministry of Agriculture and Rural Development had asked northern provinces to reorganise their crops according to climate forecasts and recommended farmers plant dry crops such as corn or cashews, among others, that need little irrigation, said Deputy Minister Bui Ba Bong. "We should sow up to 60 per cent of land as soon as possible to avoid drought and salt intrusion early next year," Bong said. Vu Van Thang, head of the Irrigation Department, said provinces should develop drought mitigation plans as soon as possible and dredge canals and culverts to ensure irrigation of every field. "Additional pumps should be available when river levels drop too low," he said. The Department of Cultivation head Pham Dong Quang said provinces had been asked to save irrigation water for next year.