Rice exporters brace for fluctuations amid oil volatility, climate change

Rice

WITH UNPREDICTABLE oil prices and climate change, Thai rice exporters foresee fluctuations in their business this year, expecting export volume to decrease slightly to 9 million tonnes worth US$4.3 billion (Bt154 billion).

The Thai Rice Exporters Association (TREA) yesterday reported that Thailand had lost its crown as the world's largest rice exporter, with India claiming top spot last year. By volume, the Kingdom's rice shipments dropped by 10.8 per cent to 9.79 million tonnes, lower than India's 10.23 million tonnes. Thailand's rice export value also decreased by 15.2 per cent to $4.61 billion in 2015.

Despite expected lower export volume, Thailand could again be the world's largest rice exporter this year, as India expects to export only 8.5 million tonnes, and Vietnam will remain third with 7.3 million tonnes.

TREA president Charoen Laothammatas said rice trading would fluctuate this year since many importing countries would be affected by falling oil prices, while rice production in many countries would be unpredictable because of drought.

"Thailand's rice shipment this year will not increase. Although world rice production and stockpiles will decrease from the drought impact and more trading, the falling oil price will hit the purchasing power of many rice-importing countries, mainly in Africa and the Middle East," he said.

Charoen said the price of rice would also be unpredictable, but should not go lower than it is now, as the end of the harvest season is approaching next month.

From the current level, the price could gradually increase by 10 per cent on a lower supply of rice in the world market, including Thailand, as expected production from the second crop will be down by 40-50 per cent or 2 million tonnes because of drought, the association predicts.

However, the price will not be able to increase a lot as the baht is expected to weaken further, and the world market has acknowledged that Thailand has large stockpiles of rice remaining.

The average domestic price of paddy white rice is expected to be about Bt8,000 per tonne, while the price of paddy jasmine rice is expected at Bt10,000-12,000 a tonne.

The average export price of white rice is now $365 a tonne, while the price of jasmine rice is $700-$720 a tonne.

Stockplies

Thailand's high stockpiles of rice, about 13.5 million tonnes, will continue to pressure the price of rice in the world market, and the price of Thai rice will not increase much this year, Charoen said.

Moreover, as Vietnam is expected to be hit only slightly by drought, rice trading in the world market will still face tough competition.

To reduce pressure on the price of Thai rice, the TREA suggested that the government gradually sell rice from its stocks soon in small lots so that Thailand could clear out its stockpile within two years.

Charoen said Thailand could negotiate with many countries for government-to-government (G2G) deals to sell rice from the stockpiles. About 4 million to 5 million tonnes of rice are expected to be released from the government's warehouses this year.

Chookiat Ophaswongse, honorary president of the TREA, said there was still high demand for rice in many countries in Asia, mainly China, for about 4.5 million tonnes, and about 2 million tonnes each for the Philippines and Indonesia. Rice is also in demand in countries in the Middle East.

The government's trade mission to Iran late this month should also open an opportunity for Thailand to sell about 300,000 tonnes of rice to that country under a G2G contract this year, he added.

However, some countries in Africa, mainly Nigeria, could lower imports of rice this year as the falling global oil price affects their purchasing power.

Normally, Nigeria is expected to import about 2 million to 3 million tonnes of rice a year. However, with its economy relying mainly on oil trading, the falling oil price could decrease its ability to import rice this year.

According to the US Department of Agriculture's estimates, world rice trading is expected to increase slightly, by 0.3 per cent this year, from 41.95 million tonnes in 2015 to 42.1 million tonnes.

World rice production will decrease by 1.9 per cent from 478.19 million tonnes to 469.32 million tonnes, while demand will improve by only 0.5 per cent from 482 million tonnes to 484.64 million tonnes.

Because of drought, total rice stocks will decrease by 14.8 per cent from 103.74 million at the end of last year to 88.42 million tonnes at the end of this year, the first time in eight years that the world's rice stockpiles have dropped lower than 100 million tonnes.

China will still be the world's largest importer, buying about 4.7 million tonnes of rice this year from overseas, up by 4.4 per cent from 4.5 million tonnes last year.