Rice production in Thailand will probably shrink to a five-year low as drought hurts yields and farmers curb planting after the end of a subsidy programme, according to the Thai Rice Packers Association.
Farmers tend to their rice farms in Bang Sa-ai district of Ayutthaya. This year's rice crop is expected to be the smallest in five years due to the end of the rice-pledging scheme and drought across most the kingdom.
Output in the largest shipper after India may drop 10% to about 34 million metric tonnes in 2014-2015, said Somkiat Makcayathorn, the group's president. That would be the lowest level since 2009-2010, when the Southeast Asian nation produced 32.4 million tonnes, according to data from the Office of Agricultural Economics, the Bangkok-based state forecaster.
While a smaller harvest would curb farm incomes, a decline in supply may ease the challenge faced by the country's military junta as it seeks to sell off record stockpiles that built up under the now-defunct subsidy programme. Dry weather may also hurt rice output in India this season, according to the Rome-based Food & Agriculture Organization, which forecasts the first contraction in global stockpiles in a decade.
"Production has been affected by both drought and the lack of a price subsidy," Mr Somkiat said in a phone interview in Bangkok on July 21. "The prospect of a production decline provides an opportunity for the junta to release stockpiles."
Drought spread across 49 of Thailand's 77 provinces since September, with rainfall in May 31% below the 30-year average, according to government data. Yields may decline 20%-50% because of below-normal rain and inadequate water supplies, according to a Bloomberg survey of 10 farmers in the biggest growing provinces.
El Niño
An El Niño weather pattern, which can parch South and Southeast Asia and hurt farm production, remains likely later this year, Australia's Bureau of Meteorology said July 15, while adding that odds of a strong event are increasingly unlikely.
Rice farmers in Sukhothai province suffer from drought as the Yom river has almost dried up,affecting farming areas. This year's rice crop is expected to be the smallest in five years due to the end of the rice-pledging scheme and drought across most the kingdom. - Surapol Promsaka Na Sakolnakorn
Former Thai prime minister Yingluck Shinawatra, who was deposed by the junta in May, introduced the subsidy in 2011, spurring record output and reserves and ending the country's 30-year reign as the biggest exporter. The programme — which paid farmers a guaranteed above-market rate for their crop — lapsed in February and the junta is now checking warehouses nationwide to assess the quantity and quality of the grain reserves.
Thai reserves increased from 5.62 million tonnes in 2011 to 12.8 million tonnes last year, as exports fell from 10.6 million tonnes to 6.72 million tonnes in the same period, according to the US Department of Agriculture. Output may drop to 30.5 million tonnes in 2015 from 31 million tonnes, the US agency predicts.
Biggest Shippers
Global ending stockpiles may contract 0.9% to 179.7 million tonnes in 2014-2015 on a milled basis, the United Nations' FAO estimated in a quarterly report last week. The agency forecast a 1.2% drop in Indian supply to 157.5 million tonnes on a paddy basis.
Should India's crop decline significantly from last year on a poor monsoon, it would play quite favourably for Thailand, according to Darren Cooper, senior economist at the London-based International Grains Council. Thailand may reclaim its position of the leading rice exporter, Mr Cooper said.
Between July 3 and July 8, more than 100 teams checked 343 warehouses out of 1,787 in Thailand, junta leader Gen Prayuth Chan-ocha said on July 18. Irregularities, including rice missing from warehouses and quality deterioration, were found in 65 warehouses, Gen Prayuth said in his weekly televised address.
The price of Thailand's 5% broken white rice, a regional benchmark, rebounded after the junta suspended sales for the inspections. The grade was at $427 a tonne on July 16, compared with $384 on May 28, the lowest since at least 2008. The price slumped 23% last year.
"Thai rice is still competitive at current prices, which could boost exports to 10 million tonnes, becoming the top exporter," said Mr Somkiat, who's also secretary general of the Thai Rice Exporters Association. "Even without impact from dry weather, we should see a production decline because farmers barely make a profit from planting rice."