Govt to continue rice pledging next year despite complaints

Although rice exporters complain vociferously that pledging has damaged trading competitiveness, the government will prolong the policy next year to drive the price of white rice up to the target of US$800 per tonne.

Yanyong Phuangrach, permanent secretary of the Commerce Ministry, yesterday said the government would focus on continuing the measure as a method of promoting better incomes for farmers.

Despite the large volume of stockpiled rice, which could adversely affect exporters, the government will also consider a plan to promote trading with a limited impact on rice prices, he said.

The ministry announced that it would continue to release stockpiled rice to traders in the market. It will focus on releasing the commodity in small lots so as to avoid a negative effect on domestic prices at a time of higher demand from exporters, he added.

Yanyong declined, however, to give the exact volume of rice in the government's stockpiles.

The authorities will also emphasise government-to-government rice deals with partner countries in a further attempt to minimise the impact on domestic prices.

The government aims to get the price of white rice up close to its target of $800 a tonne, and to $1,200 for jasmine rice.

Yanyong said pledging in the 2011-12 main-crop harvest season and the second-crop harvest season this year had raised rice prices by about $50-$150 per tonne over the past year.

Currently, the price of new-crop jasmine rice is quoted at $1,073 per tonne, while the price of 100-per-cent white rice is quoted at $616.

The price of 5-per-cent white |rice is $606 per tonne, while the Vietnamese equivalent currently comes in at $420, and Indian rice |at $415.

According to the Thai Rice Exporters Association, exports have dropped continuously since late last year after the start of the pledging measure.

As of May 28, export shipments this year had dropped to 2.86 million tonnes, down 43.1 per cent from 5.03 million tonnes during the same period last year.

Exports in May alone fell to 610,157 tonnes, a year-on-year decline of 42.5 per cent from 1.06 million tonnes.

Meanwhile, after a recent meeting with Ivory Coast Trade Minister Dagabert Banzio, Commerce Minister Boonsong Teriyaphirom said Thailand had agreed to sell 200,000 tonnes of rice to the West African country this year under a government-to-government contract.

Ivory Coast needs to import about 930,000 tonnes of rice each year. Last year, more than 60 per cent of these imports were supplied by Thailand, mostly in the form of jasmine rice.

Rice Poised for Third Record Crop as Food Prices Retreat

The third consecutive year of record rice production is poised to expand inventories to the most in more than a decade, driving down prices and helping to contain the more than $1 trillion spent on food imports annually.

Farmers will harvest 466.4 million metric tons in the 2012-2013 season, boosting stockpiles by 0.7 percent to 104.9 million tons, the largest since 2001-2002, says the U.S. Department of Agriculture. Prices of 5 percent white rice in Thailand may drop as much as 14 percent to $520 a ton by the end of July, said Mamadou Ciss, who is the president of Alliance Commodities SA in Geneva and has traded the grain for more than a quarter century.

Rising supply will contribute to the biggest grain crop ever, according to the United Nations, whose gauge of world food costs fell 10 percent since reaching a record in February 2011. Lower grain prices will help contain inflation because rice is a staple for more than 3 billion people. The global food-import bill was already expected by the UN to drop by about $50 billion in 2012 from an all-time high of $1.29 trillion last year.

“There is enough supply to meet all the demand in the world,” said Concepcion Calpe, a senior economist at the UN’s Food & Agriculture Organization, where she is also secretary of the Rome-based group’s inter-governmental body on rice. “There will be ground for a further slide in prices.”

Support Farmers

The cost of benchmark 100 percent grade-B Thai rice fell 7 percent since reaching a three-year high of $663 in November. The grain is still 5.7 percent higher this year after the government began stockpiling supply to support farmers. Prices are now dropping because the harvest will be so big that exports can still expand 23 percent, allowing Thailand to overtake India and Vietnam as the world’s biggest shipper, the USDA estimates.

Rough-rice futures on the Chicago Board of Trade declined 7.2 percent this year to $13.825 per 100 pounds. Ciss said prices may drop to $13.25. The Standard & Poor’s GSCI Agriculture Index of eight commodities fell 10 percent this year, and the MSCI All-Country World Index (MXWD) of equities retreated 2.3 percent. Treasuries returned 2.3 percent, a Bank of America Corp. index shows.

The global stockpiles projected by the USDA would be 30 percent above the level reached in 2007-2008, when curbs on exports by countries including India drove the Asian benchmark to a record $1,038 a ton. With harvests now expanding across the region, demand for imports will drop 1.5 percent to 32.4 million tons, the first contraction in four years, the USDA estimates.

Nigerian Supply

India, the second-biggest grower after China, has lifted a three-year ban on non-basmati sales overseas and will ship 6 million tons, USDA data show. That’s enough to supply Nigeria, the largest importer, for about 2 1/2 years. More exports will also come from Pakistan, China, Cambodia, Myanmar, Brazil and Australia, the USDA estimates.

Extreme weather is the greatest threat to lower prices. Indian farmers rely on a favorable monsoon for the so-called kharif crop, which is sown in the rainy season from June and accounts for more than 80 percent of annual output. Rain from this year’s monsoon, the farmers’ main source of irrigation, will probably be about 99 percent of the 50-year average, the India Meteorological Department said in April. The rains should reach the Indian mainland during the next 48 hours, according to the weather bureau yesterday.

El Nino weather conditions, which can parch parts of Asia including Vietnam, Thailand and Indonesia, may develop this year as the Pacific Ocean warms, Australia’s Bureau of Meteorology warned last month. All seven models used by the Melbourne-based bureau show conditions are likely to approach or exceed El Nino thresholds, according to a report on May 22.

Profitable Crops

In the U.S., the fifth-largest shipper, production is forecast to slump to the smallest in 14 years as farmers plant the least in a quarter century in favor of more profitable crops including soybeans and corn, the USDA estimates. Exports will decline for a third year, dropping 7.9 percent to 2.8 million tons, the lowest since 2000-2001, predicts the department.

Thailand’s stockpiling program runs until mid-September and there is no limit on the amount that can be bought. The government wants export prices at $800 a ton and will stop buying when they reach that level, Yanyong Phuangrach, permanent secretary at the Commerce Ministry, said on June 1.

The Thai program may be less effective than planned because inventories already exceed 10 million tons, space is scarce and funding is constrained, Alliance Commodities’ Ciss said. The country will have accumulated more than 12 million tons of reserves by the end of this season, the USDA estimates.

Grain Supply

That’s mirroring gains in the availability of combined grain supply worldwide, with the FAO predicting a 1.1 percent advance to 2.37 billion tons. Rice and corn will more than compensate for smaller wheat harvests.

Vietnamese rice production will expand for a 12th straight year, reaching an all-time high of 26.5 million tons, the USDA predicts. Exports will match the previous year’s record 7 million tons, making them the second-largest after Thailand.

Stockpiles in India, underpinning the scale of exports, will rise 2 percent to a record 25.5 million tons by the end of the season, USDA data show. State-run warehouses held 32.92 million tons as of May 1, 19 percent more than a year earlier, according to Food Corp. of India, the country’s biggest buyer of food grains.

Typhoon Season

The Philippines, formerly the largest importer, has been promoting self-sufficiency. More irrigation means land can be planted earlier, allowing harvests before the typhoon season, Agriculture Secretary Proceso Alcala said in April. The government anticipates imports of 500,000 tons this year, from a record 2.47 million tons in 2010. Purchases by Indonesia may drop to a three-year low of 1.45 million tons, USDA data show.

Smaller producers are also boosting output for sale overseas. Cambodian shipments may climb to 950,000 tons, 19 percent more than a year earlier and up from 10,000 tons a decade ago, the USDA estimates. Myanmar, which is now opening up its economy after decades of isolation, may ship 750,000 tons, from 600,000 tons a year earlier, the department predicts.

“With record output, the market will be bearish this year,” said Ciss, who correctly predicted in 2006 that prices would double. “The crop is very good in Vietnam and the government in Thailand is sitting on over 10 million tons, which they will soon have to release.”

Future of Thai rice and Thai farmers

This year is the fourth anniversary since Thailand designated today,
June 5, as National Rice and Farmers Day. As Thailand has been the
world's top rice exporter for a long time, questions about the future of
Thai farmers and their improved livelihood remain unanswered.

From the onset of the rainy season, farmers started ploughing to
prepare the soil for seasonal rice planting in hope for a good price for
their produce, which is now guaranteed by the government under the rice
mortgage scheme, beginning last year.

Despite some problems in implementing the plan, farmers are generally
satisfied with the government's project.

"Taking into account higher rice prices in the market, and farmer
satisfaction, I believe the government's rice mortgage scheme must be
considered successful," said Yanyong Puangrach, Permanent Secretary for
Commerce.

Losses that might be incurred by the government is not the point, as the
government aims to raise rice prices to increase farm income," Mr
Yanyong added.
The government is confident that Thailand will be able to retain the
status quo as the world's top rice exporter.

In the first four months of this year, Thailand ranked first, exporting
the largest volume of 2.7 million tonnes of rice. It is believed that
each year, there is demand for at least seven million tonnes of Thai
rice, so the country's target to export 8.5-9 million tonnes is possible.

"Farmers are satisfied—to a certain extent— but it must be admitted that
some problems remain, such as delays in issuing warrant documents in
many areas," said Prasit Boonchueay, chairman of the Thai Rice Farmers
Association.

"If the government cannot sell mortgaged rice, it won't have money to
buy rice in the next round. Then, farmers have to sell their rice
produce to rice mills at low prices," he said.
However, it needs more time to prove whether the rice mortgage policy
will be accomplished.

Under the rice mortgage scheme, management of rice reserves in
stockpiles is a difficult task as the government must strike a balance
between releasing rice in stock and preventing a drop in global rice
prices and at the same time, it must oversee rice prices in the domestic
market to prevent a rise that could hurt Thai consumers.

Although the National Rice and Farmers Day was designated to highlight
the importance of farmers, the so-called backbone of the nation, the
future of Thai farmers remains uncertain.

According to a survey by the Thai Rice Foundation, the number of farmers
continues to drop. And 90 per cent of farmer's children—the future of
Thai agriculture—said they would not carry on their forebear's work in
rice paddies.

Another threat to the future of agricultural occupations is the issue of
land. Rice paddies have changed into residential estates, commercial
buildings, and industrial factories. Many remaining rice paddies belong
to business investors and farmers become renters and workers on rice
farms that used to be their own.

Since the long ago past until now, Thai governments have always had
policies to increase farmers' income and improve their quality of living
but to achieve the goal, more needs to be done seriously besides price
guarantee and rice mortgage schemes and designation of the National Rice
and Farmers Day.

Govt to continue rice pledging next year despite complaints

Although rice exporters complain vociferously that pledging has damaged trading competitiveness, the government will prolong the policy next year to drive the price of white rice up to the target of US$800 per tonne.

Yanyong Phuangrach, permanent secretary of the Commerce Ministry, yesterday said the government would focus on continuing the measure as a method of promoting better incomes for farmers.

Despite the large volume of stockpiled rice, which could adversely affect exporters, the government will also consider a plan to promote trading with a limited impact on rice prices, he said.

The ministry announced that it would continue to release stockpiled rice to traders in the market. It will focus on releasing the commodity in small lots so as to avoid a negative effect on domestic prices at a time of higher demand from exporters, he added.

Yanyong declined, however, to give the exact volume of rice in the government's stockpiles.

The authorities will also emphasise government-to-government rice deals with partner countries in a further attempt to minimise the impact on domestic prices.

The government aims to get the price of white rice up close to its target of $800 a tonne, and to $1,200 for jasmine rice.

Yanyong said pledging in the 2011-12 main-crop harvest season and the second-crop harvest season this year had raised rice prices by about $50-$150 per tonne over the past year.

Currently, the price of new-crop jasmine rice is quoted at $1,073 per tonne, while the price of 100-per-cent white rice is quoted at $616.

The price of 5-per-cent white |rice is $606 per tonne, while the Vietnamese equivalent currently comes in at $420, and Indian rice |at $415.

According to the Thai Rice Exporters Association, exports have dropped continuously since late last year after the start of the pledging measure.

As of May 28, export shipments this year had dropped to 2.86 million tonnes, down 43.1 per cent from 5.03 million tonnes during the same period last year.

Exports in May alone fell to 610,157 tonnes, a year-on-year decline of 42.5 per cent from 1.06 million tonnes.

Meanwhile, after a recent meeting with Ivory Coast Trade Minister Dagabert Banzio, Commerce Minister Boonsong Teriyaphirom said Thailand had agreed to sell 200,000 tonnes of rice to the West African country this year under a government-to-government contract.

Ivory Coast needs to import about 930,000 tonnes of rice each year. Last year, more than 60 per cent of these imports were supplied by Thailand, mostly in the form of jasmine rice.

Thailand Commerce Ministry believes it can sell rice stockpile

The Commerce Ministry will sell mostly white rice from its huge stockpile, says permanent secretary Yanyong Phuangrach.

The sales could involve calling bids, government-to-government transactions, or so-called special methods.

The ministry holds 10.7 million tonnes of various types of rice acquired through the pledging programme, acquired at prices far above real market rates.

About 14.6 million tonnes of paddy will translate to 9.6 million tonnes of milled rice accrued from the 2011-12 season, with 6.8 million tonnes from the main crop and 7.8 million tonnes from the second crop.

It is expected that mortgaged paddy from the second crop will rise further as the programme will finish by the end of next month.

The government has paid 15,000 baht a tonne for white rice paddy, and 20,000 baht for fragrant Hom Mali paddy.

Despite the massive stocks, Mr Yanyong said the government would continue with pledging as 17 million farmers have benefited from the programme. "If these people earn a high income, it will eventually prop up the economy," he said.

Several agencies including the National Economic & Social Development Board have suggested the government dismantle the programme, citing huge losses as Thai rice prices are much higher than global prices.

But Mr Yanyong remains confident Thailand will be able to export up to 9 million tonnes of rice this year.

Rice prices have been increasing following reports that some producing countries have had smaller output this year due to weather patterns.

Thailand is on course to produce about 30 million tonnes of paddy this year despite last year's floods ravaging several rice fields, he said.

The National Rice Policy Committee approved the ministry taking out 100,000 tonnes of rice from the stock to sell domestically, he added.

Half will be set aside for the Public Warehouse Organisation to repackage for sale at cheap prices. The balance will go to state-backed Took Jai shops and Blue Flag shops that sell consumer products at discount prices.

Commerce Minister Boonsong Teriyapirom said Cote d'Ivoire had expressed interest in buying 200,000 to 300,000 tonnes of rice from Thailand.

Cambodia to ship rice to China

Local rice miller Mega Green said it planned to export about 240 tons of milled rice to the Chinese market by the end of June – a second round of test exports to Cambodia’s northern neighbour.

Renne Outh, owner of Mega Green Imex Cambodia, told the Post yesterday that he signed an agreement with a Chinese company in Shanghai during a business trip there last week.

“I already signed an export agreement with a Chinese company’s Shanghai office. Now, we are working on some paperwork with [the Chinese inspection bureau] to approve us on the certification of the quality of the export to them,” he said.

The shipment would be Mega Green’s first trial to China, and would consists of just 10 containers – a container holds 24 tons of milled rice, said Outh Renne. “We will start to export them by the end of June – it is just a test export, because they want us to eventually export 200 containers per month.”

“Now we are milling our paddy and preparing packaging for them,” he added.

The Post reported last week that China approved local rice miller Golden Rice to export milled rice to China. A trial run the company sent to China earlier this year was refused by the Chinese government upon arrival in the southern port of Shenzhen.

Chan Tong Yves, secretary of state at the Ministry of Agriculture, said the ministry also has a quality testing laboratory, but it does not comply with the standards for exporting milled rice.

“Now, if we want to export to them [China], we have to get their service on testing and inspect the quality of our products,” he said. “What is important is that we need to get ratified by the Chinese side. If they accept and buy our milled rice, it sounds great.”

Cham Prasidh, Cambodia’s Minister of Commerce, told the Post on Tuesday that China offered $1 million to Cambodia to upgrade its testing laboratory so it complies with Chinese standards.

“We have agreed with China for a long time on the export of milled rice with no duty, but the barrier for us is the quality standards issue,” he said.

Outh Renne said that for the Chinese market, Cambodia can sell medium-grain sized rice at $510 per ton and long-grain at $425 per ton – but the Chinese market prefers medium sized, which differs from the European market, which prefers long-grain rice.