Expensive Thai rice: Who will buy it?

Thai rice exporters may opt to buy from Vietnam and Cambodia if above-market farmer payments force prices up.

rice prices

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Rice exporters feel threatened, Cheaper neighbours' supplies may be tapped by Phusadee Arunmas

Thai rice exporters are already looking for alternative supplies from Vietnam and Cambodia in case the new government makes the price too dear for export, which could halve volume to only 5 million tonnes next year for a revenue loss of 60-70 billion baht.

Thea confluence of events that drastically aggravates a situationa confluence of events that drastically aggravates a situationa confluence of events that drastically aggravates a situation Thai Rice Exporters Association (TREA) has been crying foul for a while now regarding Pheu Thai's announced policy to allow farmers to mortgage their entire harvest at 15,000 baht a tonne for white rice and 20,000 baht for fragrant or Hom Mali rice.

Even though the party has said purchases would not start until November, rice prices have been rising each week since before the July 3 general election (see table).

Thai rice prices, the benchmark for Asia, rose by 0.7% yesterday from a week earlier on optimism the new government will buy the grain at above-market rates, said the TREA after its weekly price-setting meeting.

It said the price of 100% grade-B white rice reached $567 a tonne, while 25% broken rice rose to $506 a tonne from $502 last week.

Vice-president Charoen Laothamatas said that if the mortgage programme returns, the free-on-board price of Hom Mali would reach US$1,400 a tonne, making it difficult to market

"If Thai exporters cannot buy such expensive rice for export, they may opt for much cheaper rice from Vietnam, Cambodia or Burma, as they must maintain their market bases and customers. With the Asean free-trade agreement, such an alternative would be possible," he said.

Some rice exporters and millers have already established trading firms or representative offices in Cambodia and Vietnam to purchase rice for export to foreign customers.

"We have to accept that Vietnam's rice quality has improved a lot. Fragrant rice in Vietnam is $400 to $500 a tonne cheaper than Thai Hom Mali rice and $150 to $200 lower than Thai Pathum Thani rice," said Mr Charoen.

He said competition from Vietnam had resulted in Thai Hom Mali's share of traditional markets such as Hong Kong dropping to only 50% from 85% normally.

Thailand is also at disadvantage in terms of logistics, as the cost for shipping a 20-foot container to the US is $1,700 to $1,800 from Thailand but only $1,350 from Vietnam. Rice exports to China would be $220 more than the $100 cost of shipments from Vietnam.

Chookiat Ophaswongse, the TREA honorary president, predicts exports could be cut in half if the government has no measures to assist exporters.

That means export revenue losses of 60-70 billion baht based on this year's expected 10 million tonnes.

"The government must have measures to support exporters such as offering the government's stockpile at special price or open bidding for the stocks rather than asking only some exporters to offer prices," he said.

TREA president Korbsook Iamsuri said that while exports should be able to meet this year's target of 10 million tonnes, three areas of concern remain.

They are the government's rice mortgage policy jacking up prices; the baht appreciating further, also making Thai rice more expensive; and India's plan to export at least one million tonnes of rice from next month, as its price beats Thailand's by $100 a tonne.

As well, India's stockpile, normally about 20 million tonnes, is now unusually high at 60 million tonnes.

Thailand exported 6.3 million tonnes of rice in the first half of this year, up by 58.3% year-on-year.

(Source: Bangkok Post, Rice exporters feel threatened, Cheaper neighbours' supplies may be tapped, 28/07/2011, Phusadee Arunmas, link

Rice Industry Vocabulary

feel threatened - feel that they face some danger or risk

tap - use
tap supplies - use supplies

alternative - another choice, another possible way, different from the usual ways  ตัวเลือก / ทางเลือก
too dear - too expensive

volume - the quantity or amount of something
halve volume - reduce the amount by 50% (to one half)

revenue - income from taxes or business activities รายได้

- extremely unpleasant น่ารังเกียจ
crying foul - complaining (saying that what is happening should not be happening)

- a set of plans or action agreed on by a government, political party, business, or other group นโยบาย (See Wikipedia)

mortgage - borrowing money by giving something of value as security (that can be taken by the lender if the loan is not paid back) การจำนอง
rice mortgage - when the farmers deposit their rice with the government and are given a payment (but the farmers never pay the money back, so it is not really a loan)

- gather in ripe crops เก็บเกี่ยว การเก็บเกี่ยวผลผลิต

- the process of choosing a person or a group of person for a position, especially by voting elect (v) electoral (adj) synonym: the polls การเลือกตั้ง
general election - a big election that includes all MPs and the position of Prime Minister

benchmark - a standard for comparison; a standard that other things can be compared to and measured by
benchmark price - an important price used to calculate and set other prices (by subtracting or adding a fixed amount for example)
optimism - a feeling that good things will happen in the future มีทัศนคติที่ดี
grain -  1. a crop like rice or wheat; 2. the seed from cereal crops such as rice, wheat, or corn เมล็ดพืช

market rates -
market prices for a good (the price at which supply meets or equals demand)
above-market rates - prices that are above the price at which supply meets demand

- when a group of people come together to discuss issues and make decisions การประชุม
weekly price-setting meeting - a meeting that the organization has every week to set the price of rice

board - to get onto a ship, aircraft, train, or bus ขึ้น(เรือ รถเมล์ รถไฟ เครื่องบิน)
free-on-board price - when the buyer of goods is responsible for the goods they bought once they are put on the ship

difficult to market - difficult to sell

opt for - to make a choice or a decision from a range of possibilities เลือก

maintain - keep in good condition รักษา
market bases - the main groups of customers that the company sells to
maintain their market bases and customers - keep good relationships with existing customers (don't do anything to make them switch to another rice seller or "vendor")

trade - the buying and selling of goods การค้าขาย
Asean free-trade agreement - the agreement that began at the beginning of 2010 that lowered tariffs on many goods bought and sold between ASEAN countries

trading firms -
companies that buy and sell goods as their business

millers - rice mills, factories that take the rice harvested by farmers and turn it into a product that can be sold in markets and stores (in stores after a rice packer packages the rice in plastic bags)

established - has existed for a long time ก่อตั้่ง be in a successful position over a long period of time มีตำแหน่งที่มั่นคง
established trading firms - companies that buy and sell a certain type of goods for a long time (here: buying and selling rice internationally, so they know the needs of their customers very well)

representative offices - offices in a foreign country that "represent" the company (do business for the company)
purchase - buy  

share - market share
market share - the percentage of customers in a market that a company has (example: Toyota has the largest market share in Thailand's market for automobiles)
traditional - things that have existed for a long time (been around for a long time)

disadvantage - something that makes someone or something less effective, successful or attractive ข้อเสียเปรียบ ข้อด้อย

- moving goods from place to place (transportation), coordinating movements, and storing goods in warehouses until needed or sold (See Wikipedia) การขนส่งและจัดจำหน่ายสินค้า
shipping - the transport of goods especially on ships

container -
the standard metal container seen on the back of trucks and loaded onto ships for transport to other countries (See Wikipedia)
container ship - a large ship that can ship containers to other countries (See Wikipedia)

measures - actions taken to deal with a problem มาตราการ
expected - believe will happen คาดว่า (จะเกิดขึ้น)
support - help, by giving money, for example สนับสนุน
stockpile - store large amounts of something for future use จำนวนสินค้าที่เก็บตุนไว้เป็นจำนวนมาก

- making an offer in an auction (here trying to offer to do project for lowest cost and thus win contract)
open bidding - when all companies can make a offer (or bid to buy what is for sale)
closed bidding - when only some companies can make an offer

- large amounts stored for future use

target - the amount you are planning to achieve เป้าหมาย
concern - a worry ความกังวล

jack up - increase, raise
jacking up prices - increase prices, raise prices

baht appreciating - baht increasing in value (making Thai exports more expensive and less competitive)

beat - win a contest (here: offer a lower price so "win" a rice contract)
its price beats Thailand's by $100 a tonne - its price is lower than Thailand's price by $100 a tonne

About the author

Writer: Jon Fernquest
Position: Online Writer