Thailand yearly rice report

MY2009/10 rice production will increase to 30.8 million metric tons (MMT) of paddy, a 2.2 % increase from the previous year. So far, the off-season crop cultivation is expected to be 12.6 million rai (2.01 million hectares), up 1.4 percent from the previous year and far above the official target of 9.5 million rai (1.52 million hectares) due to attractive farm-gate prices. Off-season planted areas in the northeast more than doubled, particularly in the non-irrigated areas. The harvest started in early March 2010 with good yields. So far, total damage areas from drought are marginal at 3,431 rai (550 hectares) and damage from plant brown hopper is highly localized in some northern and central provinces at 30,000 – 40,000 rai (4,800 – 6,400 hectare). Meanwhile, farmers in the central plain have begun third crop cultivation, regardless of official warnings on limited water availability from major reservoirs. In view of this development, the off-season crop production has been revised downward to 1-2 percent, as damage to the third crop cultivation is expected to affect 10 percent of the crop (TH0052, “Dry Conditions Having Slight Impact on Off-season Rice,” 3/18/2010). MY2010/11 rice production will continue to increase slightly as cultivated areas will increase 1 percent to 1,103,000 ha. A new irrigation project, Khawe Noi Dam project, will be operating at full capacity at 800 – 1,100 million cubic meters. The project will benefit Phitsanulok Province in the lower north of Thailand and should increase irrigated areas by 155,000 rai (24,800 hectares) for off-season crops. The dam will also protect 75,000 rai (12,000 hectares) of main-crop paddy from flooding damage. As well, approximately 250,000 rai (40,000 hectares) in the central plain will benefit from additional water availability in the off-season. Currently, Khwae Noi Dam is operating at half its capacity but providing critical water needs to the central plain as water output from Bhumibol and Sirikit dams has significantly decreased. Average yield is expected to increase slightly to 2.78 mt/ha as favorable weather conditions will prevail due to the weakening El Nino phenomenon by June of 2010. Also, the Thai Meteorological Department forecasted normal average rain fall for May 2010, the beginning of the rainy season, which should provide 150-200 millimeters of precipitation for the north and northeast, major growing areas of the main crop season. Most rain-fed main-crop cultivation will begin in June – July, accounting for 60-70 percent of total main-crop cultivation. 1.2 Consumption Rice is the main staple food for Thais and for MY2010/11 rice consumption is forecast to increase slightly in line with economic recovery. Per capita consumption is expected to be 100 – 110 kilograms. In addition, industrial use will increase for both rice-based products for human food and animal feed. Demand for broken rice in animal feed, which hovers at 1.0 million tons, is expected to increase by 3 percent or 30,000 tons as more of it will be used to substitute corn as corn production is likely to decline. 1.3 Trade Annual rice exports are forecast at 9 - 10 million tons for MY2009/10 and MY2010/11 in anticipation of a larger crop harvest and high carry-over stocks from the government and private sectors. Parboiled rice and fragrant rice exports will continue to dominate the export market, accounting for 70 percent of total rice exports. Meanwhile, white rice exports are losing competitiveness to Vietnamese white rice. Presently, Thai white rice prices are over $100/MT higher than Vietnamese rice, as the government has been able to sustain high prices through stock interventions. In addition, millers/traders and exporters are also holding back stocks bought at record prices in November of 2009 as speculation abounded of India’s possible rice needs, as such they are waiting for prices to recoup. 1.4 Stocks MY 2009/10 and MY2010/11 rice stocks will likely remain high between 6 - 7 million tons despite the shift from the long-standing mortgage scheme to the price insurance scheme (TH9161, “Price Insurance Starts to Replace Mortgage Scheme”, Oct. 29, 2009). However, the government allowed for a direct purchase program as a measure to stabilize domestic prices in tandem with the price insurance scheme for MY2009/10 main crop and off-season crop. The government’s decision to release the old-crop rice intervention stock and paddy intervention stock is on hold due to concerns over low domestic prices. 1.5 Policy The government replaced the mortgage scheme by the price insurance scheme for MY2009/10 main crop and sustained it for the second crop despite objections from millers and some political operatives who benefited from the previous scheme (TH9161, “Price Insurance Starts to Replace Mortgage Scheme”, Oct. 29, 2009). The new price insurance scheme for MY2009/10 main crop reduced the government’s budget by more than half that was allocated during the same period for MY2008/09 of 67.1 billion baht ($2.1 billion). However, in a measure to stabilize prices, the Government authorized an allowable direct purchase program of 4.0 million tons of paddy for MY2009/2010 (TH0047, “Weekly Rice Price Update,” 3/2/2010). The program purchased 700 tons of white rice paddy during the main crop season as prices remained high, but has recently started purchasing second season crop paddy as prices have been facing a downward trend. To carry out this purchase, the government has provided a credit line of 20 billion baht ($615 million) through the Bank for Agriculture and Agricultural Cooperative (BAAC) to buy paddy at the benchmark prices, which are presently far below the insurance prices (Figure 2). The government has just changed its calculation of benchmark prices from a bi-weekly average to a weekly average in order to capture price swings on a timelier basis (TH0051, “Weekly Rice Price Update,” 3/8/2010). Under the program, farmers selling at benchmark prices will receive a compensation based on the difference between insurance prices and benchmark prices.