More stability foreseen for key commodity prices

The growth of Thailand's agricultural sector in 2009 is forecast to decline to between 3% and 4% this year from an estimated 4.4% in 2008 amid concerns of falling export prices of many products.

 

But some exporters remain confident that export prices of key farm products have already reached bottom and exporters are confident the industry next year will not do as badly as some analysts believed.

High grain prices could spur shift to tapioca: Maize prices started picking up after a drought damaged plantations in Argentina, the world's second largest maize exporter.

"I could say that grain prices have dropped to their lowest level four weeks ago and they are now heading up," said Chen Wongboonsin, president of the Thai Tapioca Trade Association.

The situation would benefit tapioca pellets as buyers in the European Union would use them instead of expensive grains for animal feed. However, the demand over the first half is expected to be not too bullish considering recent offered prices at only US$100 to $105 per tonne of tapioca pellets.

The average export price of tapioca pellets in 2008 was $150 per tonne, and $130-140 for a tonne for chips.

China is expected to be a strong importer of tapioca chips with an estimated two million tonnes from Thailand.

Low freight rates, strong dollar help rice industry: While Thai rice export prices will not be strong as in 2008, exporters see the industry gaining this year largely from low freight rates as a result of less expensive fuel. Freight costs have plunged to $20 per tonne, from a peak of $140 early this year, according to Sumeth Laomoraporn, president of C.P. Intertrade Co.

Moreover, the anticipated stronger US dollar in 2009 would weaken the Thai baht, bringing in more income to rice exporters, while exporters could offer lower prices in terms of dollars to buyers.

Mr Sumeth noted that Thai rice prices in December bottomed out at $450 per tonne, especially rice from exporters who won state rice bids and were obliged to export everything they bought.

The prices were the same as quoted by Vietnamese traders, drawing foreign buyers to resume purchases from Thailand as they believe Thai authorities will not release more rice over the months ahead in order to stabilise Thai prices, Mr Sumeth added.

 

Chookiat Ophaswongse, president of the Thai Rice Exporters Association estimated export prices of Thai rice would stay at an average of $450-500 per tonne this year.

"It's hard to maintain prices at $700 to $800, the average rice price of 2008," he said.

Affected by low-priced rice, at $450 to $460 a tonne sold by the Commerce Ministry recently, the market price for the first quarter of 2009 is likely to be below $500 a tonne.

Exports would continue to slow over the first quarter at no more than 600,000 tonnes a month, compared with 800,000 to one million tonnes a month in the same period of 2008, due mainly demand declines around the world.

China in particular has dropped purchases of Thai fragrant rice, citing expensive prices above $750 a tonne right now and turned to cheaper grades and locally grown rice.

Rubber production controls start this year: By the first quarter of 2009, Thailand, Malaysia and Indonesia will start curbing rubber exports by a total of 270,000 tonnes, in an effort to prevent a further price slump, affected greatly from falling automotive industry demand worldwide.

About 130,000 tonnes of the cutbacks will be borne by Thailand, 20,000 tonnes by Malaysia, and the rest by Indonesia.

The three countries, whose production accounts for 70% of global supply, agreed in October to jointly trim output by 215,000 tonnes, mainly by replanting trees.

They further decided to cut exports by a combined 700,000 tonnes in 2009 and keep stockpiling. In 2008, the three countries exported about 5.5 million tonnes of rubber.

Luckchai Kittipol, president of the Thai Rubber Association, expects prices of raw rubber sheet will move in a range of 26 to 60 baht per kilogramme through 2009, compared with a volatile range of 30 to 105 baht in 2008.

Smoked ribbed smoked rubber sheet No. 3, traded on the Agriculture Futures Exchange of Thailand, is expected at between 30 and 70 baht per kilogramme.