Thailand's new crop insurance programme will not affect the country's position as the world's leading rice exporter, say local academics.
Somporn Isvilanonda, an economist with Kasetsart University, said the crop insurance programme was in line with market principles while still reassuring farmers of receiving a fair price.
For years, the government has supported the prices of key crops such as rice by allowing farmers to pledge their crops with the Bank for Agriculture and Agricultural Co-operatives at set prices. If market prices fall below the mortgage price, then farmers can transfer their crops to the state. On the other hand, if market prices stay above the mortgage price, farmers can sell their crops in the open market and pay off the bank directly.
In practice, mortgage prices have often been set to subsidise farmers, resulting in upfront outlays for the government of more than 100 billion baht per year.
The new system is an insurance programme under which the government will pay farmers the difference between market prices and guaranteed prices for a limited quantity of crops. The change will slash the state's upfront costs and indirect expenses such as storing pledged crops.
Benchmark prices will be announced on the 1st and 16th of each month.
Volatile global prices and rising production costs threaten small farmers, which could lead to Thailand's agricultural sector being dominated by large producers, said Mr Somporn.
Mortgage prices jumped from 7,000 baht per tonne of paddy in 2004 to 14,000 baht in 2008 as global prices rose.
But the price rise and the price mortgage programme led farmers to increase production with too little consideration for quality and efficiency, said Mr Somporn. As product quality fell, the country lost competitiveness to countries such as Vietnam, the world's second-largest rice exporter, he added.
Top-quality Thai rice still enjoys a premium of about US$100 per tonne over Vietnamese rice in the global market, he said. But some farmers have been prompted by high pledging prices to cultivate lower-grade, faster-growing strains for quick returns, to the detriment of the overall industry.
Only 40% of the 100 billion baht committed to the rice mortgage programme in previous years is estimated to have actually reached the hands of farmers, he added. In his view, the insurance programme is likely to be much better at directing funds to farmers and at cutting waste and corruption.
Ennoo Suesuwan, the acting president of the Bank for Agriculture and Agricultural Co-operatives, said guarantee prices under the insurance programme would be based on average prices sampled at different markets across the country.
Guarantee prices should be within 5% of market prices, with export prices and Chicago futures prices also being used in the calculation.
Insurance will be offered free to registered farmers for now. But in the future, insurance coverage might be free for up to 25 tonnes of produce per customer, with a guarantee fee being charged for coverage of additional produce, he said.
For the first time in decades, Thailand, the world's biggest rice exporter, will not buy direct from farmers in the coming season, a move likely to prompt a jump in exports that will push down world prices.
Rising stocks: A rice mill at Naurta near Karnal in Haryana. Rice stocks have risen to 30.1 million tonnes in India. Ramesh Pathania / Mint
It marks a dramatic reversal of fortune over the last year for the rice market, which saw global prices surge along with other foodstuffs in early 2008 as funds flooded into commodities on speculation of rising demand.
Coming on top of rising sales from No. 2 exporter Vietnam and increased output from Myanmar and Cambodia, a flood of grain from Thailand could quickly push benchmark export prices down by a quarter to $400 (Rs19,360) a tonne or lower, analysts and traders said.
"If there is no weather catastrophe or any sudden drought, I expect Thai rice prices to fall to around $380-400 a tonne by the end of this year due to rising supply," said Chookiat Ophaswongse, president of the Thai Rice Exporters Association.
For the moment, benchmark 100% B grade white rice is holding at $540 per tonne, helped by the government's decision to extend its buying programme until the end of September in the face of protests by farmers.
That is exactly half the record high of $1,080 per tonne seen at the height of a panic over food security in April 2008.
Thai prices have slumped since early 2009 when demand subsided as most big importers had secured supplies. The fall was in line with global trends as supply in key producing countries is on the rise, including in the US.
Vietnam expanded its rice stockpiling scheme last week, saying it would buy another 500,000 tonnes on top of the 400,000 tonnes it bought in August to stop prices falling under the weight of the 35.99 million tonnes (mt) the US Department of Agriculture says the country will produce in 2009.
But Thailand has said it will no longer support farmers by buying directly from them, as it has done for years, citing the need to cut huge storage costs. Thailand will still help farmers, but from now on it will be by setting a benchmark and paying farmers the difference if they are forced to sell to millers at a price below that level.
Moreover, the rice the government has bought in the past and now holds in its stocks will add to the downward pressure on prices—since traders know it will be released at some point.
Thailand is holding its highest ever rice stock of 7mt and has failed to push ahead with a plan to reduce it.
In India, rice stocks have risen to 30.1mt from 23.2mt a year ago. Traders said that was high enough to satisfy domestic consumption but not enough for the country to return to the export market in a big way.
Indian exporters are currently contracting basmati rice at $1,200 a tonne, about 9 per cent higher than last year, following increased demand for superior varieties of the grain. Exporters had sold the premium quality rice at $1,100 per tonne last September.
According to trade sources, out of every 10 contracts signed, at least six are being inked at $1,200 a tonne. Only in two cases exporters agreed to ship the rice at a minimum export price (MEP) of $900 a tonne.
Traders are contracting basmati rice at a marginally higher price this year. And since there are a number of varieties available, the contracts are being signed "at varied rates,'' a Chandigarh-based exporter said.
He, however, added that the current contract at $1,200 a tonne is being signed on the condition that the prices would be "re-negotiated'' if basmati prices fall or rise by more than $ 50 a tonne.
The government recently lowered the minimum export price (MEP) of basmati rice to $900 a tonne from $1,200 a tonne to help Indian exporters compete with their Pakistani counterparts in the international market.
Basmati rice is grown only in India and Pakistan.
One hundred and one years ago the first shipload of Japanese immigrants landed in Brazil to fill jobs on coffee plantations. Thousands of shiploads later, the country is now home to 1.5 million Japanese immigrants and their descendants — the largest Japanese population outside of Japan.
Surely then, selling U.S. sushi rice in this market would be a simple proposition After all, the United States produces short- and medium-grain rice of equal or better quality than that produced in Japan.
But, after 100 years of immersion in Brazilian culture, the Japanese Brazilians have adopted a unique blend of the two cultures. Long-grain rice — grown in abundance in Brazil — is now included in most of the country's Japanese cuisine.
Although sushi purists stateside will cringe, long-grain rice is king in Brazil, a country that produces nearly 13 million metric tons of rice annually and has per capita rice consumption of 105.6 pounds — about four times U.S. per capita consumption.
Thus, a seemingly simple proposition presents itself as a great challenge for the USA Rice Federation, which is conducting a pilot program to market U.S. short- and medium-grain rice to the large Japanese foodservice sector in São Paulo.
In June 2008, USA Rice launched a high-profile pilot program with great fanfare, serving 8,000 pieces of U.S. rice-made sushi at the official opening ceremonies of the Centennial Celebration of Japanese Immigration into Brazil. (See the June 11, 2008, issue of USA Rice Daily, http://www.usarice.com/doclib/122/3284.pdf.)
U.S. rice was the only rice served at the ceremonies. Building on the attention garnered during that mammoth event, USA Rice is promoting U.S. rice for sushi during bi-weekly tastings inside Marukai, the city's leading wholesaler/retailer of local and imported products for Japanese cuisine. Marukai serves a high-volume foodservice clientele. Since the pilot program began, Marukai has imported five container loads of U.S. rice, an increase from zero before the program began.
In May, Marukai's number-one competitor, Casa Bueno, urged the USA Rice Federation to set-up tastings inside its store also. USA Rice gladly accepted the offer, and held its first U.S. rice promotion at Casa Bueno one Monday in May, a day when restaurants typically stock-up for the week.
Through the pilot program, USA Rice Federation promotes U.S. short- and medium-grain rice as "the true taste of Japan," urging consumers and restaurants alike to "rescue" their traditional way of eating sushi.
Sushimen, who prepare sushi at the city's estimated 500 Japanese restaurants, are invited to attend workshops where they are given the opportunity to work with the U.S. rice. Indeed, most sushimen notice its benefits — its polished appearance, its superior texture which makes it easier to work with than long-grain rice, and, of course, its taste.
While the quality of the rice sells itself, price offers yet another challenge for U.S. exporters. With U.S. rice as the most expensive product in the market, how can U.S. rice compete with cheaper Uruguayan short-grain or the traditional Brazilian long-grain?
To address this challenge, USA Rice offers the words of Alberto Hideki Arata, owner of Sushi do Alberto, and a recent convert to using 100-percent U.S. rice in his establishment as a result of his participation in the pilot program. The sushimen hear his statement proclaiming that "the rice is not the most expensive ingredient on the menu. The fish is. If I am serving good fish and spending money on good fish, I should also offer the best rice I can find. And the best rice I can find is U.S. rice. I now use it exclusively in my restaurant."
Arata reports that a 20-percent increase in his customers as a result of his better-tasting food has helped offset the increased price he pays for U.S. rice. Still, in a price-sensitive market, where economic hardship is common, overcoming the aversion to higher U.S. prices will not be easy
The USA Rice pilot program has also recently captured the attention of a local milling company, Lider Alimentos, which markets the country's top-selling Brazilian long-grain rice for the Japanese sector. Lider, which sells the brand, Arroz Guin, is currently testing samples of the U.S. southern-grown Jupiter variety, as well as various California-grown varieties, with hopes of improving the quality of products it offers for the Japanese sector.
USA Rice is currently considering the future of the program. If the promotions continue, an essential step will be to get U.S. rice samples into the hands of restaurant owners and sushimen, and then let the quality speak for itself.
The Ministry of Industry and Trade, along with the Viet Nam Food Association and other enterprises, has compiled a draft regulation on rice export management to raise export prices of Vietnamese rice and enhance the effectiveness of rice export activities.
According to the draft, rice exports would be managed by granting licences, and connecting rice exporters' interests with the obligations of buying rice from farmers and stabilising the domestic market in the co-ordination of the Viet Nam Food Association.
The ministry would appraise and grant rice export licences, and also extend them, it said.
The draft would also stipulate conditions on trading export rice, including those that enterprises must have workshops for husking and rubbing rice and warehouses to keep the grains.
The new draft management was expected to hike prices for both the domestic and export markets for Vietnamese rice, while improving the effectiveness of rice export activities.
According to the Ministry of Agriculture and Rural Development's Information Centre of Agriculture and Rural Development, the average export price of Vietnamese rice had declined from US$413 per tonne of 5-per cent broken rice and $355 per tonne of 25 per cent broken rice in June and July to $392.94 and $340.39 in August. Meanwhile, those prices were $524.56 per tonne and $432.06 per tonne for Thai 5-per cent and 25-per cent broken rice.
The quality of Vietnamese export rice hads improved remarkably compared to the same period last year.
The low prices were partly due to the fact that some rice exporters had offered export prices for their rice lower than the average export price for Vietnamese rice.
They had done this to compete with other exporters, but also because they did not have warehouses to store the rice while they waited for the price to rise again.
Besides this, there were many problems with fluctuating rice prices and inadequate supplies. So when the world demand increased, Viet Nam did not have enough rice to export.
Le Van Banh, head of the Cuu Long Delta Rice Institute, said that the quality of Vietnamese unhusked rice was not lower than that of Thai unhusked rice, but the quality of Vietnamese husked rice was often lower than Thai husked rice due to poor maintenance.
Thailand had stability in the rice export market and a good trademark for its rice. Viet Nam did not have those things, Banh said
Vietnamese rice traders should co-operate to ensure rice purchases from farmers and to have stable purchasing prices, he said.
Relevant offices and enterprises should create a trademark for Viet Nam's export rice and build warehouses , he said. Banh added that the stores would help traders keep their rice while they waited for increases in export prices on the world market.
The Ministry of Agriculture and Rural Development has proposed a ceiling price of VND3.800 per kilogram and the Vietnam Food Association (VFA) are purchasing around 400,000 tonnes of rice from farmers. However will these measures help to keep the selling and export prices at reasonable level?
Mr Banh: Vietnam harvests its summer-autumn crops at the same as with other countries' which leads to glut in the market. This is a natural thing. However, farmers do not have the facilities to store rice so it goes rotten and they have no capital to plant the next crop. When the market price keeps decline sharply proposing a ceiling price of VND3.800 per kilogram is a good measure.
If farmers want to sell rice they must pay service fees for traders and they find it difficult to earn VND3.800 per kilogram. In addition, the traders are hesitation to go to remote areas to buy rice.
Are current selling and export prices reasonable?
Mr Banh: It is really difficult for farmers to sell rice at VND3.800 per kilogram to traders. The estimated production cost for the summer-autumn crop is VND2,800 – 3,000 per kilogram. If the Government finances 30 percent of the production costs the ceiling price is still too low. Meanwhile traders purchase rice from farmers at a lower rice.
Why does Vietnamese rice sell for US$100 a tonne lower than Thai rice?
Mr Banh: Firstly, Vietnam must tender to sell its rice. If we win contracts we will sell rice. Vietnam does not have many regular customers so when the rice price on the world market falls, importers force Vietnamese producers to sell at a lower price. Secondly, Vietnamese does not have an established trademark. Lastly, when farmers harvest rice they bag it at home. They do not have stores or warehouses and neither do rice traders, so only when businesses sign contracts can they sell the rise. This leads to a decline in rice prices. In short, the trading strategy is full of snags.
What measures could increase the purchasing and export prices to a reasonable level?
Mr Banh: If we have adequate warehousing we can stock up rice when the price is low and sell it later when the price is high.
By doing this we can keep purchasing and export prices at a reasonable level?
Mr Banh: Earlier, the export price of Vietnamese rice was US$20-40 a tonne lower than Thai rice. Now it hits a record low in the world, even lower than Pakistani rice which is poor quality. Is there any problem with management?
The management of the VFA and corporations is not good. Every year, Vietnam exports around 4-4.5 million tonnes but this year we may export 6 million tonnes because of too large volume of rice to keep in store. Foreign clients are aware of this and are forcing Vietnam to sell at a lower price.
The government has asked the Ministry of Industry and Trade to work out a "clear and transparent" framework for the export of rice by foreign businesses in Vietnam, according to a statement released by the Government Office recently.
"We benefit from the policy," said professor Vo Tong Xuan, former principal of An Giang University. "The biggest benefit will be the strengthening of the Vietnamese rice brand."
Although Vietnam is the world's second largest rice exporter after Thailand, weak branding has placed the price of the local grain far lower than Thai rice, he said.
The new policy will encourage state-owned firms to improve their competitiveness, "raising the quality of our rice, and then its prestige in the world market."
Economist Pham Chi Lan said permitting foreign firms to export rice would be "very good."
"It will create a better link to the international markets. Local firms' access to foreign markets has been too limited."
Lan said Vietnam has not yet infiltrated high-level markets, but only to countries facing food difficulties.
"Vietnamese rice exports are weaker than Thailand, both in terms of penetrating big markets and fetching good prices," she said.
The move could also boost transparency in the Vietnamese rice trade and prevent control of the market by just a few big traders, Lan said. "It would be in farmers' interest."
Professor Xuan said some weak local firms may sink if forced to compete with foreign companies.
But he said this was only a minor problem as the overall rice export situation needed to be improved.
He noted that Thailand allows foreign firms to export the grain.
Lan said the policy's impact on national food security would be negligible as the government had the right to interfere with shipments in special cases.
However, relevant agencies should closely monitor rice shipments to prevent foreign firms from conniving with large local players to control the market and bury small farmers, she said.
Deputy Minister of Industry and Trade Nguyen Thanh Bien said his ministry was drafting a decree on the issue that will cover regulations to ensure national food security.
Vice Chairman of Bac Lieu Province Nguyen Thanh Be is one of several rice producers who has voiced support of the new policy.
"My province will create all possible favorable conditions for foreign firms to export rice directly."
The director of a rice export company, who did not want to be named, told Thanh Nien that even if businesses purchased rice from farmers as requested by the food association, prices would not improve much.
"When there is a bumper crop, rice prices drop immediately," the director said, noting rice of the summer-autumn crop was usually unfavorable by foreign importers because of its lower quality compared to other harvests.
Nguyen Van Minh, deputy general director of the Hau Giang Food Joint Stock Company, said that although his company agreed to pay VND3,800-3,900 per kilogram, such prices were for high-quality rice only and farmers had to transport the rice to the company factory on their own. As many farmers didn't have high-quality varieties, and others couldn't transport the grain properly, Minh said he couldn't buy large volumes of rice at good prices.
Nguyen Dang Chi, deputy director general of the Import-Export Department at the Ministry of Industry and Trade, said falling global demand this year – two million tons less than last year – has pushed rice prices down.
Many other countries have reported bumper crops and others are using their old stockpiles, so demand is not high, Chi said in an interview with Tuoi Tre newspaper on Monday.
Chi also said local exporters were undercutting each other, driving prices even lower.
"When some exporters set their profit margin at US$3 per ton, others set theirs at only $2 or even just a mere $1 per ton. Foreign importers have taken advantage of the lack of teamwork to force prices down."
Chi said his ministry was drafting a decree to tighten control over rice trading.
The Vietnam Food Association said it plans to purchase another 500,000 tons this month to stabilize prices for farmers as soon as possible.
But foreign experts said low prices have helped Vietnamese rice do well on the global market.
Vietnam shipped 4.7 million tons of rice in the first eight months of the year, 43 percent more than a year earlier, according to preliminary estimates from the General Statistics Office in Hanoi. Exports totaled 4.65 million tons last year and reached a record 5.17 million tons in 2005.
Vietnam may boost shipments this year by as much as 49 percent to seven million tons thanks to an improved harvest, Deputy Minister of Industry and Trade Do Huu Hao said in August.
"Vietnam's price quotes are well below Thailand's, making Vietnam a very competitive supplier," Nathan Childs and Katherine Baldwin of the US Agriculture Department wrote in an August 13 report, according to Bloomberg.
Vietnam has also taken some market share from Thailand, whose shipments of white rice are trailing behind last year's pace by about a third, the agricultural attaché's office at the US embassy in Bangkok said in a report August.
Current export demand for Thailand's white rice remains quiet as "foreign buyers are sourcing Vietnamese rice, which is over $100 per metric ton cheaper," Bloomberg reported, citing an August 25 note by Ponnarong Prasertsri, an agricultural specialist at the US embassy in Bangkok.
"Number one is that you have to have the availability, and Vietnam is producing more," said Mamadou Ciss, chief executive of Singapore-based rice brokers Hermes Investments Pte Ltd.
The rice area planted for the autumn-winter crop has been increased in size over the last season, Quan Tran of the agricultural attaché's office at the US embassy in Vietnam wrote in a report released on September 4.
The autumn-winter crop would be Vietnam's most important rice crop this year, the Vietnam Food Association said in a July report, citing the Ministry of Agriculture and Rural Development.
Overall, Vietnam's paddy output would total 36 million tons this year compared with a previous estimate of 35.9 million, according to the American embassy in Vietnam.
Thai exports in 2010 would likely rebound by 10 to 15 per cent, according to the Commerce Ministry's forecast.
The ministry will have to adjust the plan to penetrate new markets by matching products and services with different foreign markets more suitably, Commerce Minister Porntiva Nakasai said on Monday.
"One of the main products being exported to Africa is parboiled rice. Therefore, we have to organise activities to increase parboiled rice sales there instead of promoting jasmine rice since its demand is still low and its price is high," Mrs Porntiva said.
Commerce permanent secretary Siripol Yodmuangcharoen said exports should fall 17 to 18 per cent in August and 15 to 19 per cent for the entire 2009.
The association said the Mekong Delta, Vietnam's main food-growing region, had produced two million tons of rice for this summer-autumn crop.
Last month, association members stockpiled 490,841 tons of the grain, higher than the planned 400,000 tons, according to the Nong Nghiep Vietnam (Vietnamese Agriculture) newspaper.
As of the end of August, Vietnamese companies had signed contracts to export about 5.6 million tons of rice this year, the newspaper said.
Nguyen Tho Tri, deputy chairman of the association, said his agency found that seven rice companies had shipped rice abroad at lower-than-market prices, "seriously affecting the country's exports".
He said the association would ask the government to ban these companies from exporting in a year.
Vietnam, the world's second-biggest rice exporter after Thailand, may boost shipments this year by as much as 49 percent to 7 million tons, Deputy Minister of Trade and Industry Do Huu Hao said last month.
"
He stated that Vietnamese exporters are doing harm to themselves by offering to sell rice at prices lower than the floor price (VFA sets floor prices at different times to keep export prices stable).
This has given foreign partners the "rod" to force prices down, Tri asserted, because they know about the large reserves in
Meanwhile, African countries, big markets for
One rice exporter argued that
Therefore Tri and other members of VFA believe that
"We have decided not to slash the export price," Tri revealed. He believes that
According to VFA, rice exporters purchased 500,000 tons already in the first collection campaign in August. Members of VFA will carry out the second collection campaign in September, with an estimated 500,000 more tons to be purchased at no less than 3,800 dong per kilo.
"We will have some 2 million tons in reserve. However, large stockpiles are not a concern, because they allow us to take the initiative in exporting," said a member of VFA.
The Centre has lowered the minimum export price (MEP) of basmati rice from $1,100 to $900 a tonne. The decision – notified by the Directorate General of Foreign Trade (DGFT) on Monday – comes even as the current standing crop is due for harvest in the next of months.
The new floor price is higher than the $800 a tonne that was recommended by the Empowered Group of Ministers headed by the Finance Minister, Mr Pranab Mukherjee, last month.
At the same time, the DGFT notification allows for a foreign commission of 12.5 per cent for computation of the MEP. What this means is that even if the shipment is formally invoiced at a price of $900 a tonne, an exporter can remit up to $112.5 in the form of discount/commission to the overseas buyers.
The effective MEP, then, works out $787.5 a tonne. This is way below the $1,400 a tonne free-on-board (f.o.b.) price that Indian exporters are currently quoting for 'Pusa-1121' variety. Traditional basmati varieties are currently being exported at between $1,300-1,400 a tonne for brown rice, with whites selling even higher at $1,700-1,800.
Even the Pusa Basmati-1 that is being exported to Europe is now fetching between $1,100 (brown) and $1,350 a tonne (white). "By allowing exports at $900 a tonne or Rs 41.40 a kg, the premium status accorded to basmati would stand undermined. The $900 MEP is at discount to even the Homi Mali Grade A Rice, which the Thai Rice Exporters' Association is now quoting at $994 a tonne. Implicitly, it means accepting basmati's inferiority vis-À-vis Thai Jasmine rice", a Delhi-based industry analyst pointed out.
According to him, it would have been a better idea to have fixed a uniform MEP covering all rice varieties, whether basmati or non-basmati. "If the Government feels that export of basmati does not present any food security threat, why not allow export of premium non-basmati varieties such as Sharbati and Swarna Masuri as well?", he quipped.
The analyst felt that the decision to slash the MEP now would impact basmati paddy prices at harvest time. A large area in Haryana, Punjab and western Uttar Pradesh has this time been sown under basmati, particularly Pusa-1121, which consumes less water. Although Pusa-1121 yields are somewhat lower than normal 'Parmal' varieties, farmers expect this to be more than offset through higher price realisations.
In 2010, Russia plans to increase rice production by 100 thsd tonnes, declared Elena Skrynnik, the Minister of Agriculture of the Russian Federation, on September 2.
According to her, to date, the general volume of rice consumption in the country totals 1.2 mln tonnes per year. At the same time, Russia produces 700 thsd tonnes of rice only. That is why, the country will increase rice production volumes, marked the Minister.
Due to federal and regional subsidies, agrarians of Russia increased profitability of rice production by 6-7%, added E.Skrynnik. The level of profitability of rice growing enterprises, dealing with production of seed material, exceeds the rate of 100%. Rice yield in such enterprises totals 80-90 c/ha. To date, Krasnodar Krai in Russia produces 80% of the general Russian rice volumes.
Russia intends to introduce a seasonal duty on rice imports, according to the Minister of Agriculture of Russia Elena Skrynnik.
During the last session of the Russian government it was decided to implement seasonal duties on rice starting from December, 1 2009 to 30 June 2010 amounting to 160 euros/tonne with a quota of 250 tons and 230 euros/ton in the absence of quotas.
In addition, Russia is planning to keep the subsidies for elite seed production of rice in the amount of 7000 rubles ($US225) in order to increase rice crop area.
According to the Minister, for the past five years, the gross yield of paddy rice in Russia increased by almost 2 times - up to 740 thousand tons, with a yield of 29-44 kg/ha. In the future, the volume of rice production in the country planned to increase by 100 thousand tons.
One of the main goals, according to the Minister, is import substitution. Every year, Russia consumes about 1.2 million tons of rice, while half of that amount is imported.
Elena Skrynnik informed that due to federal and regional subsidies, the profitability of rice production in the country increased by 6-7%. At present, the amount of subsidies is 5 thousand 400 rubles per ton. In 2008 more than 32 million of rubles were allocated from the federal budget for these purposes.
In an attempt to augment supplies for the domestic markets and in view of decline in kharif production due to the poor monsoon, the Centre is learnt to have decided to abolish import duty on rice.
Officials in the Commerce Ministry said that the government decided to act on the recommendation of the Empowered Group of Ministers on Food, headed by Union Finance Minister, Pranab Mukherjee to cut import duty on rice to zero from 70 per cent till September 2010.
The government had earlier in March 20, 2008 scrapped the customs duty on rice as part of measures to control inflation.
However, it was restored on April 1.
The empowered panel also agreed to continue with the ban on export of non-basmati rice, imposed in April last year.
The second round of the government's rice pledging scheme will start next Wednesday, Sept 9, to help farmers hit by low prices for paddy, Deputy Commerce Minister Alongkorn Polbutr said on Thursday.
Under the programme, farmers in 43 provinces can mortgage a total of 450,000 tonnes of second-crop rice, Mr Alongkorn said.
The mortgage prices are set at 11,800 baht a tonne for 5 per cent rice, 12,000 baht for Pathum Thani paddy and 9,000 baht for sticky rice.
Charoen Pokphand, the country's largest agribusiness conglomerate, says the country's rice exports this year should exceed 9 million tonnes, with the severe drought in India a major factor in pushing up demand.
"Thai rice exports are unlikely to lose their appeal even though the government's rice pledging programme, which offers relatively high prices, makes it tough for Thailand to export white rice at competitive prices," said Sumeth Laomoraphorn, chief operating officer of CP Intertrade.
"Thailand may lose the market for low-quality rice to Vietnam," he said, noting that Vietnamese 5% white rice now costs about US$380 per tonne against $530 for Thai rice. "But there is still demand for high-quality rice, for instance from Malaysia, and for parboiled rice."
Thailand exported about 5 million tonnes of rice in the first seven months of this year, with parboiled rice at 1.5 million, Thai Hom Mali 961,000 tonnes, and 20% white rice 588,000 tonnes. Shipments of 5-15% grade white rice were only 425,000 tonnes. Total rice exports for the period were worth 98.8 billion baht.
Even though the exports for the seven-month period were down from 6.8 million tonnes worth 131.29 billion baht in the same period last year, Mr Sumeth said market conditions were still normal.
He noted that rice exports last year surged because of a global panic about a rice shortage, which led several producing countries including India, Vietnam and Egypt to bar rice exports.
According to Mr Sumeth, India was highly likely to further bar non-basmati rice exports until next year due to insufficient rain.
India exported only 2.9 million tonnes of rice last year, well below normal annual levels of 5-6 million tonnes, roughly divided among basmati, parboiled and white rice.
"We are feeling upbeat that Thailand's rice shipments will surpass the target of 8.5 million tonnes set by the government by year-end. Shipments will probably as many as nine million tonnes," said Mr Sumeth.
CP Intertrade expects its rice exports to drop by 20% from a year earlier to about 400,000 tonnes, with export value of 8.5 billion baht. Local sales are forecast at 530,000 tonnes worth 12 billion baht.
Mr Sumeth warned the rice prices were expected to fall by 10-15% from now on until next year, given the government's high rice stockpiles and new output for the first crop due to be harvested in November.
The government is estimated to hold as much as 6 million tonnes of white rice currently.
First-crop paddy output is estimated at 23.5 million tonnes, up from 23.24 million in the previous season.
In a related development, the government yesterday agreed on farmers' calls to extend the price intervention scheme for paddy harvested from the 2008-09 second crop until the end of next month. The intervention scheme had been due to end on July 31.
From January to the end of August, Vietnam exported 5.6 million tons of rice, 67 percent more than during the same period last year.
But the rice exports generated only US$1.8 billion in revenue, compared to $1.9 billion last year, according to the Vietnam Food Association General Secretary Huynh Minh Hue.
Vietnam's export rice sold for an average of $325 a ton this year. Last year, rice from Vietnam, the world's second biggest rice exporter, sold for $562 a ton in the export market.
Rice from Thailand, the world's biggest rice exporter, sold for up to 62 percent more than Vietnamese rice this year. In August, five percent broken rice from Thailand sold for $525 a ton, while Thai 20 percent broken rice sold for $432 a ton.
Asian rice prices have fallen in the past week because of thin demand from traditional importers, but could pick up next month as Vietnam and the Philippines are due to finalize a big contract, traders said.
Last week a Vietnamese rice industry official said Vietnam may have struck an initial deal to sell 400,000 tons to the Philippines.
A Vietnamese trader with a foreign firm in Ho Chi Minh City said: ''A contract with the Philippines will revitalize the rice market and prices can pick up.''
An exporter said the rice deal with Manila could total 500,000 tons for shipment late this year, and it may have been struck at a price of $460 a tonne, cost and freight.
''But Vietnam has yet to finalize its free-on-board price, so they are still talking and the contract could be signed this week or next at a good price,'' he said.
January to August rice shipments from Vietnam, the world's second-largest exporter after Thailand, surged 43 percent from the same period last year to an estimated 4.7 million tonnes, the government said on Monday.
The total was pushed up by another big sale to the Philippines, totalling 1.5 million tons early this year.
Exporters said rice demand in African countries was constant and some buyers were in the market looking for small volumes but limited bank credit had restricted purchases.
''Buyers in Europe are on holiday, Middle Eastern countries have Ramadan, so demand is very thin,'' a second trader in Ho Chi Minh City said, referring to the Islamic holy month, when Muslims worldwide fast during daylight hours.
Prices were also lower in Thailand. Apart from thin demand, they cited the absence of government buying as a factor.
The last government intervention scheme ended on July 31, at which point stocks stood at a record 7.0 million tons.
Monsoon rains made a shaky start this year with the driest June in 83 years and unusually low rain in early August, making the seasonal rainfall 23 percent below average so far, which is the worst since 1972.
Last week's normal rains helped water levels in India's main reservoirs fill up to 45 percent of capacity, rising three percentage points in a week, which is the normal rate for the period.
But because of past dry spells, the water level was still short of the normal 60 percent of capacity, which would hurt winter irrigation and hydropower generation that accounts for a quarter of India's generation capacity of 150,000 megawatts.
| The Centre, on August 20, increased the minimum support price for 2009-10 season to Rs 950 per quintal for average quality, and to Rs 980 per quintal for higher grade. In 2008-09, the government procured paddy at Rs 900 per quintal for fair average quality and at Rs 930 for higher grade. This included the bonus of Rs 50 per quintal over and above the MSP. |
Asian rice prices have fallen in the past week because of thin demand from traditional importers, but could pick up next month as Vietnam and the Philippines are due to finalize a big contract, traders said on Wednesday.
Last week a Vietnamese rice industry official said Vietnam may have struck an initial deal to sell 400,000 tonnes to the Philippines.
A Vietnamese trader with a foreign firm in Ho Chi Minh City said: ''A contract with the Philippines will revitalize the rice market and prices can pick up.''
An exporter said the rice deal with Manila could total 500,000 tonnes for shipment late this year, and it may have been struck at a price of $460 a tonne, cost and freight.
''But Vietnam has yet to finalize its free-on-board price, so they are still talking and the contract could be signed this week or next at a good price,'' he said.
January to August rice shipments from Vietnam, the world's second-largest exporter after Thailand, surged 43 percent from the same period last year to an estimated 4.7 million tonnes, the government said on Monday.
The total was pushed up by another big sale to the Philippines, totalling 1.5 million tonnes early this year.
Exporters said rice demand in African countries was constant and some buyers were in the market
looking for small volumes but limited bank credit had restricted purchases.
''Buyers in Europe are on holiday, Middle Eastern countries have Ramadan, so demand is very thin,'' a second trader in Ho Chi Minh City said, referring to the Islamic holy month, when Muslims worldwide fast during daylight hours.
Prices were also lower in Thailand.
Apart from thin demand, they cited the absence of government buying as a factor.
The last government intervention scheme ended on July 31, at which point stocks stood at a record 7.0 million tonnes.
Last month the government unveiled plans to sell 500,000 tonnes of milled rice and 600,000 tonnes of paddy from the stockpiles, but there has been no further announcement.
Prices have dropped between $10-$20 per tonne this week in big exporting countries.
Thailand's benchmark 100 percent B grade white rice fell to $540 per tonne from $550 last week, exporters and traders said.
''Demand is generally low and trading is thin because exporters are not active,'' a trader said.
Thai rice prices were not competitive when compared with Vietnam, traders added.
Exporters were quoting Vietnamese 5 percent broken grade rice at between $385 and $390 a tonne, free on board, below the $400 a tonne floor set by the Vietnam Food Association, while overseas buyers were offering $380 to $385 a tonne, compared with $385 last week.
The country's rice harvest reached 7.38 million metric tons during the first 6 months of the year, a 3.65% growth from the same period in 2008, the Department of Agriculture (DA) said Wednesday.
According to Director Frisco Malabanan of DA's GMA Rice Program, the government is on track to meet its full-year target of 17.48 million metric tons given the healthy rise in rice production during the first half.
Last year, the Philippines produced 16.82 million metric tons of rice.
The Philippines has become the world's top rice importer as the country continues to suffer from rice shortage. Last year, the government was forced to import 2.4 million tons of rice from other east Asian countries and the United States.
To respond to this problem, the government has launched the GMA rice self-sufficiency program, with the aim to make the country an independent rice producer by 2013.
A group of farmers in Vadakkencherry is elated by the high yield from their farms after they switched over to organic paddy cultivation last year. The crops are more resistant to pest attack and water usage is less.
The jubilant mood among the farmers was evident at the Vadakkencharry padasekharam, comprising a group of 40 farmers, as their second organic paddy harvest festival began on Friday on a 75-acre farm land, which has secured 'C-1,' the first stage certification, of Indocert, the Indian organic certification agency.
The initiative, promoted jointly by the Vadakkencherry grama panchayat and the State Agriculture Department and backed by technical assistance from the POABS Group which introduced a buy-back scheme ensuring a premium price for the growers, has already spread to over 200 acres covering Palakkad and Alappuzha districts, the granaries of Kerala. The POABS Group expects to bring at least 500 acres under organic paddy cultivation in Kerala in a phased manner, said POABS Group director Joseph Jacob.
Promotion of large-scale organic paddy cultivation in Kerala is part of the efforts of the Group, which owns the country's largest multi-crop organic plantation at Nelliampathy in the district, to ensure a buffer zone to support its policy of organic product exports to the world market.
The harvest festival was inaugurated by M. Chandran, MLA. Principal Agriculture Officer A.K. Sivanandan; K.E. Usha of Kerala Agricultural University, Mannuthy; and Mr. Jacob, among others, attended the festival. Vadakkencherry Padasekhara Samithi treasurer R.N. Sankaran presented the report and secretary P.K. Madhavan welcomed the gathering. Mr. Chandran handed over the harvested paddy to Mr. Jacob, as part of the latter's paddy buy-back scheme. The farmers are offered Rs.12.50 a kg, which is 25 per cent above the market price. Vadakkencherry grama panchayat president P. Gangadharan presided.
Vadakkencherry Padasekhara Samithi, which is concentrating on organic paddy cultivation in Palakkad and Kuttanad, has requested the Union Agriculture Ministry to lift the blanket ban on rice exports.
The Samithy's spokesman and Treasurer, Mr R.N. Ramakrishnan, said that the farmers would be forced to give up organic paddy cultivation mid way through if the Government failed to extend the necessary support in the form of export facility for the produce.
He expressed reservation in continuing with organic cultivation without matching support from the Government to export the rice as it was found to be difficult to sell the produce in the domestic market due to its enhanced price.
He was speaking at the reception organised here by the Poabs Group in Kochi to honour the farmers who had received the Kerala Government's Nelkathir (corn ear) award for being adjudged as the State's best Padasekharam for the year 2007-08.
The award has brought little cheer to the farmers.
They are worried over stockpiling of the previous crop, he said adding that, inconsistency in Governmental policies has driven the organic paddy cultivators in the State in distress following the recent ban on rice exports.
The Vadakkencherry Grama Panchayat President, Mr P. Gangadharan, said that the farmers group had switched over to organic paddy cultivation just two years ago with the support of the local Panchayat, the State Agriculture Department and the private sector Poabs Group, which owns multi-crop organic plantation in Palakkad district. With the shifting to organic cultivation, the paddy crop yield had improved considerably and it had become more resistant to pest attack while the water usage in the field had also come down, emboldening more farmers in the vicinity to enter the organic way, he said.
Organic paddy cultivation, with the support of the Poabs Group, has been extended to an estimated 121 hectares of land in the State with 60 hectares covering Vadakkencherry in Palakkad district and another 60 hectares at Kuttanad in Alapuzha district. This is proposed to be extended to 202 hectares in a phased manner, according to Poabs Group Director Mr Thomas Jacob. The Group had extended manure subsidy, technical advice and paddy buy-back scheme at 25 per cent premium price for the crop, besides offering 50 per cent premium price when the crop attained international organic certification from the third year of the crop.
He pointed out that only 20 tonnes of organic rice has been exported in 2007 after which the ban came into existence. The ban came at a time when the organic rice was finding a good market in France, Belgium and other European countries. At present, Poabs has around 100 tonnes of accumulated stock, he said.
"It is our expectation that the Kerala Government's announcement of the organic farming policy coupled with central support is bound to create a favourable atmosphere for the growth of organic farming movement in the State in the days to come, as it is essential for the growers to fetch a better income in tune with the growing input cost and cost of living, he said.
