Thailand May Lose Top Rice Exporter Title - Wall Street Journal (blog)

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SINGAPORE – Thailand has long been the world’s biggest rice exporter. But industry experts are increasingly concluding it may lose that title this year, in large part because of new government procurement programs that have pushed Thai rice prices above international levels.

The latest expert to weigh in: Korbsook Iamsuri, president of the Thai Rice Exporters’ Association, who said in an interview Monday that Thai rice exports could fall by more than 40% this year to multi-year lows on the back of uncompetitive prices and government buying above market rates. That would potentially put Thailand below Vietnam and India as the world’s top exporter of rice.

Thai rice exports reached a record 10.6 million metric tons in 2011, but are likely to fall to 6 million tons this year, Ms. Korbsook said. She said that in recent months, Thailand has lost most of its share in global trade of parboiled grades to India, whose offers are cheaper by up to $100 a ton. India resumed exporting non-Basmati rice in September after a gap of more than three years when they were banned to curb domestic inflation.

Before India lifted its ban on exports, Thailand was exporting up to 400,000 tons of parboiled rice each month but shipments are now less than 100,000 tons, Ms. Korbsook said. She said Thailand’s exports of white raw rice, too, have slowed because of a lack of supply.

Thailand’s potential drop in the rankings comes as it implements a new program promised last year that uses government money to buy unmilled rice from farmers at artificially high prices, which are well above market levels.

Economists warned the program would make Thai rice less competitive. But Thai officials have defended the scheme – which is part of a series of populist measures pledged by new Prime Minister Yingluck Shinawatra in her election campaign last year – as a way to generate more income for Thai farmers and help push international prices higher in the process.

To be sure, there are other reasons why Thai rice exports could disappoint this year. One big one: Thailand lost close to 20% of its main rice crop that was harvested between October and December due to last year’s floods.

Yet another 25% of its harvest last year was procured by the government as part of its program to boost growers’ earnings.

The next harvest will begin at the end of March, Ms. Korbsook said, and the level of government procurement may be even higher because of a rise in output and localized surpluses.

Indeed, the fall in exports is likely even as Thailand is set to reap a bumper crop of almost 8 million tons of unmilled rice in its secondary harvest, up from the usual 5 million to 6 million ton level. Close to 5 million tons may be procured by the government this year, Ms. Korbsook said.

The bulk of the secondary harvest is in central Thailand, where farmers produce large surpluses, whereas production in northeast is dominated by small growers who cultivate mostly for self consumption, Ms. Korbsook said.

One additional consequence of the government procurement program is that the stockpile of rice will rise sharply at the expense of exports to more than 8.5 million tons. This is equivalent to exports of over eight months.

Ms. Korbsook said the government already has 1.5 million tons rice in milled terms from previous years, has procured 3.5 million tons from the latest harvest and is likely to buy a similar volume from the next harvest.

The Thai government’s policy of disposing of its stockpile isn’t clear but exports may be higher than expected if the government sells to other governments overseas, Ms. Korbsook said.

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Edited January 31, 2012 by FarangFarang