Rice has been Thailand's dominant cash crop for decades, using more than half of the arable land as well as the labour force in Thailand.
"We need to improve our rice varieties to meet customer demand, such as offering soft-textured rice, and raise our productivity." — Chookiat Ophaswongse, Honorary President, Thai Rice Exporters Association
Thailand is also one of the world's largest exporters of rice, with shipments expected at 6 million tonnes this year, up slightly from 5.72 million tonnes shipped last year.
Yet Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, believes the rice trade is a sunset industry given the crop's high production cost, rising wages, expensive logistics costs and relatively low productivity.
STAGNANT OUTLOOK
Last year Thailand ranked third in global rice exports following India and Vietnam, which had 14 million and 6.3 million tonnes, respectively.
Thai rice production is expected to increase in the 2021/2022 harvest season, with milled rice production estimated at 20 million tonnes because of plentiful water supplies, up from 17 million tonnes in the 2020/2021 season.
Thailand's rice productivity averages 450 kilogrammes per rai, significantly lower than Vietnam at 900 kg per rai and India at 800 kg.
"Thai rice export volume is likely to gradually drop if we can't tackle such obstacles. We need to improve our rice varieties to meet customer demand, such as offering soft-textured rice, and raise our productivity," said the veteran rice exporter.
"We haven't tackled the problems at their root, focusing instead largely on price support, either via rice pledging or price guarantee schemes. Vietnam focuses on R&D to strengthen its rice industry."
Thailand also has a lot of bureaucratic red tape and lacks the will to upgrade the rice industry, said Mr Chookiat, who is also the managing director of Huay Chuan Group, once Thailand's leading rice exporter.
A VARIED BACKGROUND
Founded 60 years ago, the Huay Chuan Group originally engaged not only in rice and rubber exports, but also textile and bicycle businesses.
Thai Krieng, which handled the textile business for the group, used to employ 10,000 workers. It closed because it could not compete with other countries offering cheaper wages, he said.
The group also owns Pheasant Bicycle, once the best selling bicycle in the country. Pheasant Bicycle remains operational, but its sales dropped significantly once low-priced bicycles from China entered the market. The Chinese bikes sell for only 800 baht per unit compared with 2,000 to 2,100 baht for Pheasant bicycles.
"What happened to the family's businesses sound like a typical rise and fall," said Mr Chookiat, the eldest son of Smarn Ophaswongse, a pioneer in Thai rice exports who has handled the family's businesses since 1961.
"Our bicycle factory at Poochao Saming Prai, at Phra Pradaeng district in Samut Prakan, still exists but it does not manufacture bicycles. We are now the authorised distribution agent for premium bicycles from the US."
Huay Chuan Group also used to operate a hotel in Phuket from 1990 to 2010 called Metropole Hotel Phuket. It sold the hotel in 2010 to TCC Land, a property development company owned by the whisky and property tycoon Charoen Sirivadhanabhakdi.
During this period, Mr Chookiat was appointed president of the Thai Rice Exporters Association.
"Every Wednesday, I had a meeting with the association in the morning and had to fly to Phuket in the afternoon to oversee the hotel business. Then I came back to Bangkok on Saturday morning. I was completely exhausted," he said.
"Then my father decided to sell the hotel to Mr Charoen."
According to Mr Chookiat, rice exports remain the group's core business, but volume has significantly decreased from the past because of fierce competition in the global market.
PRESSING PAUSE
The group forged a 50:50 joint venture with Bernard of Malaysia to establish Asian Peninsula Corporation Ltd in 1997 to operate rice exports in place of Huay Chuan Rice Co. Then in 2004 the group acquired all shares held by Bernard of Malaysia.
Asian Peninsula still secures steady purchase orders from Malaysia, the Middle East and Africa, with an export volume of 50,000-60,000 tonnes per year, he said.
With the focus on Asian Peninsula, the group paused the business operations of Huay Chuan Rice Co and decided to sell the company's rice warehouse and land in the Rama III area to SET-listed L.P.N. Development, which wanted to build a condominium project.
"My decision to pause the operations of Huay Chuan Rice surprised many rice exporters, but they understood the move enables the group to stay afloat. Many old rice exporting firms such as Kaset Rungruang Co, Thanaporn Chai and Sengthong Rice (1968) have had to close their businesses over the past three years," Mr Chookiat said.
In the past 2-3 years, the rice shipment business has been difficult because of rising risks from fluctuating raw material prices, he said. Shippers also suffered losses from exchange rates because of the baht appreciation.
According to Mr Chookiat, price cuts to compete and relatively low margins mean even large rice exporters have to work harder and smarter to survive.
"I think profit margin is the most important factor in the current rice trading business," he said. "Every exporter is likely in trouble right now, but they should continue to compete."
Mr Chookiat said his company is now categorised as a medium-sized rice export firm that concentrates on happiness rather than size.
"Huay Chuan Group focuses only on the core business. We no longer diversify because the more we do, the greater the risk. We focus on rice exports to specific markets with steady purchase orders," he said.
"Though with many plots of land on hand, the group is studying the feasibility of developing a housing estate in the future."