The world is witnessing an alarming surge in global food threats. Devastatingly high temperatures caused by the El Niño weather phenomenon are wreaking havoc on farms across the globe, from the United States to China. Adding to the crisis, Russia's withdrawal from a crucial deal that facilitated the safe flow of Ukrainian grain across the Black Sea has exacerbated the situation.
Moreover, the last couple of weeks has witnessed additional concerns as India, the world's largest rice exporter, has taken the unprecedented step of banning shipments of non-basmati white rice, which accounts for around a quarter of its total.
As rice is a staple food for nearly half of the world's population, this move, initiated in a bid to stabilise domestic prices and address the mounting food crisis, has raised concerns that it could potentially impact Thailand's rice industry, leading to a possible 10% increase in domestic prices.
Q: To what extent will the impact of El Niño affect Thai rice?
Based on a forecast by the Agricultural Economics Department, Thailand's total rice cultivation area in 2023 (2023/24 harvest season) is estimated at 62.3 million rai, down by 602,000 rai or 0.96% from the previous year, with rice production at 25.7 million tonnes of paddy, down by 871,000 tonnes or 3.27% compared to the previous year.
The reduction in cultivated area is due to changes in weather conditions, resulting in delayed and lower rainfall compared to the previous year.
The Meteorological Department predicts that total rainfall during the rainy season will be less this year than last year, and there may be periods of drought, leading to water shortages in agricultural areas, particularly in rain-fed areas outside irrigation zones.
Consequently, some farmers may leave their fields fallow, and in some regions rice cultivation might be limited to only one season.
Rice productivity per rai is also anticipated to decrease due to the limited water supply caused by reduced rainfall from August to October due to the El Niño phenomenon. This dry period affects seed germination and rice grain formation, leading to an overall reduction in rice production.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said lower production is expected to affect rice exports, particularly for white rice and parboiled rice for which demand from importing nations remains strong. At the same time, the decrease in rice production would also lead to an increase in prices for both paddy and milled rice.
According to Mr Chookiat, India's recent announcement that it will ban the export of non-basmati white rice with immediate effect, resulting in a decrease in the availability of white rice in the market, would impact the global rice industry.
This is because India, the largest rice exporter, holds more than 40% of the global rice trade, which amounts to 55 million tonnes annually. Consequently, buyers have had to turn to other sources for their rice imports, such as Thailand, Vietnam and Pakistan.
Nevertheless, Mr Chookiat noted that following India's ban, Thai rice exports are also likely to encounter some difficulties, particularly with regard to the pricing of different varieties for which purchase contracts are still pending.
Rice exporters and domestic traders may need to hold off on purchase contracts, as they expect India's move may drive global prices higher.
The marketing of Thai rice for the latter half of the year is expected to be challenging. However, it is believed that during this short-term period both rice exporters and the domestic rice market may have to quote prices carefully, according to Mr Chookiat.
Q: Will Thailand have to worry about a potential rice shortage?
There should be no worries in terms of facing a rice shortage as Thailand is capable of producing rice beyond domestic consumption each year. Farmers engage in rice cultivation in both the rainy season and dry season, ensuring a continuous supply to the market.
Additionally, the current price situation for unmilled rice is high, especially for white rice paddy, which motivates farmers to keep cultivating rice consistently.
Thailand produces 19-20 million tonnes of milled rice annually, with domestic consumption accounting for about 11 million tonnes per year. This leaves a surplus of 8-9 million tonnes that can be exported.
Q: Do we need to ban the export of certain types of rice?
Mr Chookiat said this would not be necessary because Thailand has sufficient rice surplus for both domestic consumption and export. Moreover, imposing a ban on exports could erode the confidence of rice buyers in Thailand, which has a long-standing reputation for its high-quality rice.
Aat Pisanwanich, former director of the Center for International Trade Studies at the University of the Thai Chamber of Commerce, added that the direction of rice prices in the global market is increasing due to reduced production volume in several countries caused by drought, floods, along with export bans to maintain high domestic prices.
Additionally, the conflict between Russia and Ukraine has also contributed to a decrease in food exports.
According to Mr Aat, Thailand is not facing any rice shortages, therefore there is no need to impose export bans.
Nevertheless, there could be concerns regarding higher retail prices within the country due to the rising global demand. Therefore, the government should carefully monitor and manage the retail price of rice domestically to prevent it from becoming unreasonably high and causing hardship for consumers.
Q: What is the current global situation regarding the rice trade, and how are demand and supply?
According to the US Department of Agriculture's estimates, the world's rice production is projected at 512.4 million tonnes in 2023 and 520.7 million tonnes in 2024 compared with 513.7 million tonnes in 2022.
Meanwhile, global rice consumption is projected to reach 521.3 million tonnes in 2023 and 523.9 million tonnes in 2024, up from 518.6 million tonnes in 2022, with the global rice trade estimated at 55.6 million tonnes in 2023 and 56.3 million tonnes in 2024, compared with 56.1 million tonnes in 2022.
Q: What are the concerns for the Thai rice industry regarding natural disasters and political instability?
Mr Chookiat said Thai rice still requires a lot of development, especially in terms of production and cultivation systems. This includes improving varieties that currently have low yields, optimising the use of fertilisers and pesticides, as well as adopting various production technologies to enhance efficiency and reduce costs, enabling Thailand to compete with rival countries.
The development of irrigation systems must be stepped up and made more efficient in allocating water for both consumption and agricultural purposes. This is crucial due to the highly volatile weather conditions in recent years, resulting in alternating periods of drought and floods, which damage crops and reduce their quality.
Agricultural data systems need to be accurate and reliable, allowing stakeholders to use the information for future planning.
The government must support and promote increased agricultural research and exploration. Adequate funding must be allocated for research and the continuous development of new researchers.
Regarding environmental concerns, rice cultivation is a significant contributor to greenhouse gas emissions, affecting the climate worldwide. Therefore, urgent measures must be taken to mitigate global warming, making the reduction of methane emissions from rice fields a pressing issue.
In the future, importing countries may impose trade barriers based on greenhouse gas emissions, making this issue even more critical.
However, Mr Chookiat insists rice remains a crucial economic crop for farmers and stakeholders in the rice industry. Political parties often use rice-related policies to gain popularity, focusing on increasing income and commodity prices but may not always create sustainable benefits for the entire rice industry.
As a result, a considerable amount of the budget is sometimes lost to ineffective policies, such as the rice-pledging scheme and farmer income guarantee schemes, which require substantial funds each year.
