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Thailand's agricultural sector this year has been the beneficiary of a worldwide phenomenon, with farmers' incomes rising along with product prices that have reached record levels for some key commodities.
''This year has been a golden year for Thailand as we have not encountered any natural disasters and we have sufficient water supply,'' said Apichart Jongskul, the secretary-general of the Agricultural Economics Office.
He said the prices of farm products in the first half were relatively good, particularly rice, as several rice-exporting countries reduced exports to ensure domestic supplies in the wake of natural events that curbed output.
Prices of rice and other staple grains have been pushed up by rising affluence in many emerging markets, where consumers are eating more meat, which increases demand for animal feed. At the same time, acreage devoted to some staples is shrinking as farmers turn to planting other crops that can be used in the production of ethanol.
However, farm product price appreciation is set to decelerate in the second half. Rice prices are already nearly $200 below their peak of around $1,080 a tonne set in May, as Vietnam and others have lifted export curbs and more supply is about to enter the market.
High prices are helping to offset fast-rising production costs linked to oil, which is pushing up the cost of fuel, transport and fertiliser for farmers. In response, the Agriculture Ministry is promoting water saving and urging farmers to use organic fertiliser.
Chookiat Ophaswongse, president of the Rice Exporters Association, said that in the first five months, Thailand's rice exports reached five million tonnes as major players including Vietnam, Egypt and India banned shipments abroad in the face of domestic shortages.
''The rice export target this year is nine million tonnes, but we already exported five million tonnes in the first five months,'' he said. ''This means we only need to export 570,000 tonnes a month on average, which is quite low when compared to exports at regular time of about 600,000 to 700,000 tonnes a month.''
Thailand's rice exports could exceed 10 million tonnes given the high demand, he said.
Rubber prospects still robust
Luckchai Kittipol, president of the Thai Rubber Association, said rubber prices in the first half also were strong. Natural rubber ribbed smoked sheets (RSS3) for December delivery hit a record high at the end of May on the Agricultural Futures Exchange of Thailand (Afet), at $3,200 a tonne. The average domestic price of rubber sheets rose to 103.7 baht a kilogramme and raw rubber to 99 baht.
Price increases have been due in part to speculation from international hedge funds, which have shifted more to rubber futures markets in light of bearish stock and bond markets.
Mr Luckchai projected that prices of rubber in the second half would stay high because of increased demand, though trading could be more volatile and the average could slip below $3,000 a tonne.
Higher rubber prices might result either in a slowdown in production or a shutdown of small-scale manufacturers of rubber-based products including tyres and gloves, as they could not afford to raise their selling prices fast enough to catch up with input costs, he said.
As well, rubber demand, especially for automotive tyres in China, is expected to be frozen as Chinese authorities are determined to reduce air pollution for a three-month period before, during and after the Beijing Olympics.
''But we expect prices are unlikely to drop as sharply as in 2006 when prices dropped to just $1,400 per tonne from $2,800 within three to four months, as the prices of all raw materials for plantations have moved up,'' said Mr Luckchai.
The association projects exports of 2.7 million tonnes this year, a rise of 2%, with export value expected to rise by 25% from $5.64 billion last year because of higher prices.
Tapioca: demand
still outstrips supply
Chen Wongboonsin, president of the Thai Tapioca Trade Association, said Thailand exported 2.4 million tonnes of tapioca pellets and chips from January to April, down 700,000 tonnes from last year because of lower yields, resulting in higher domestic prices of cassava roots.
Prices of cassava roots have been increasing in the past two years and are now in a range of 2.20 to 2.50 baht a kilogramme, compared to 1.37 baht last year, as demand exceeds supply. Cassava and tapioca demand has also been helped by higher prices of wheat, maize and grain, and China's ban on maize exports.
''The export volume this year depends on crop yields in the last four months of this year,'' said Mr Chen. Currently, output of tapioca is expected to decline to 25.9 million tonnes, from an earlier projection of 27.6 million tonnes.
Palm: no shortage likely
despite high demand
Palm oil production has also exceeded projections by 30% in the first half of this year, thanks to the continual rain, said Wiwan Boonyaprateeprat, secretary-general of Thai Oil Palm and Palm Oil Association.
''We project 1.5 million tonnes of fresh palm nut output this year, a 15% increase from the earlier projection of 1.3 million tonnes, and also up from 1.1 million tonnes last year,'' Ms Wiwan said.
About 70% of palm oil production will be used for food and 30% for biodiesel production.
''We won't face supply shortage this year,'' she said. ''Also, the use of palm oil in biodiesel production is not going to affect cooking oil as currently there's only one active biodiesel producer, which is PTT, out of nine authorised manufacturers.''
Selling prices of fresh palm nuts in the first half were 4.80 to 5.00 baht a kilogramme, when compared to 4.01 baht last year. Prices in May rose slightly to 5.30 baht due to reduced output, which is forecast to shrink by 30% after May.
Prices of fresh palm nuts in the second half are projected to rise to between 5.80 and 6.00 baht a kilogramme, leading to higher costs of production for crude palm oil and cooking oil.
On the back of higher palm nut prices, domestic prices of crude palm oil have reached 36-37 baht a kilogramme, on par with those of Malaysia.
''What we're concerned about is skyrocketing oil prices,'' Ms Wiwan said. ''The increase in palm oil prices is due to the fact that Malaysia, which is the world's biggest exporter of oil and palm oil, has set the price of palm oil based on prices of crude oil in the world market. Thus, Thailand, as a producer of palm oil, also needs to set similar prices to those of Malaysia so that not all output of palm oil would go for export.''
Improvement strategies
Nipon Poapongsakorn, dean of the Economics at Thammasat University, said that prices of more than 20 crops in Thailand have been on the rise.
But the plantation areas of cereals used in animal feeds, such as soybeans and maize, are on the decline as energy crops have taken over those of other crops including pineapples, sugarcane and off-season rice.
''The government shouldn't control feed prices because producers would cut costs by producing low-quality products which, in the end, would affect livestock farmers,'' said Mr Nipon.
The livestock product outlook could be poor this year due to rising costs of living that may slow meat consumption.
Longer-term, Mr Nipon says, the country needs more investment in irrigation development to help farmers to reduce production costs. He also advocates financial support for research of rice strains to increase yields and to develop breeds suited to the arid Northeast and other areas where irrigation is lacking.
As well, jasmine rice cultivated on the Thung Kula Ronghai plains, the world's largest jasmine-rice farming area, should be certified and labelled as a premium product with high prices, since farmers could only cultivate one crop a year.
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