Stronger Baht Limits Thai Rice Export Prospects

BANGKOK (Dow Jones)--Some buyers have temporarily halted purchase of Thai rice because of higher prices while others have switched to cheaper sources of supply such as Vietnam, Chookiat Ophaswongse, President of the Rice Exporters' Association of Thailand, said in an interview Wednesday.

Consistently high local prices for Thai rice this year will slow rice trade and slash the country's export volume below targeted levels, Chookiat said.

"Rice exports this year is expected to be not more than 8 million metric tons (given the high prices in the domestic market)," Choookiat told Dow Jones Newswires.

The Thai government originally set a rice export target of 8.5 million to 9 million tons for 2007, an increase from 7.5 million tons exported in 2006.

Chookiat said Thai rice prices are expected to stay at the current high level, or even rise further through the rest of the year due to the strengthening baht and higher freight rates.

"The baht's appreciation is eating into rice exports growth and shrinking margins (for) local exporters," he said. The Thai baht has gained about 7% against the dollar so far this year. The
dollar was trading around THB33.25 at 0620 GMT Wednesday, hitting 10-year low, versus THB33.48 at Tuesday's close.

The baht's sharper gains, particularly when compared with currencies of other rice exporting countries in the region, has been a cause of concern for Thai exporters. The Vietnamese dong, for example, has mostly been stable against the U.S. dollar, making Vietnamese exports more competitive.