The El Niño weather phenomenon is not only affecting crop production and prices, but also the mining and livestock industries.
Drought is expected to result in higher consumer goods prices, energy prices, and inflation, while raising international shipping costs, according to the latest study released by the Trade Policy and Strategy Office.
Poonpong Naiyanapakorn, the office's director-general, said the weather phenomenon has created concerns about potential damage to Thailand's agricultural sector and a decrease in income from agricultural and agro-industrial exports. Weather conditions have negatively affected the mining and livestock industries, according to the report.
The rising costs of shipping goods by sea given the effects of El Niño adds to the country's economic challenges, he said.
"The El Niño phenomenon will definitely bring about reduced agricultural production, leading to higher agricultural prices. However, if the reduction in production outweighs the increase in prices, it could lead to a decrease in farmers' income," said Mr Poonpong.
He said El Niño is expected to result in reduced production of key farm crops in the 2023/24 season including rice, maize for animal feed, oil palm, and sugar cane.
"Rice production for the 2023/24 season, in particular, is expected to decrease compared to the previous year, but it will be sufficient for domestic consumption and export," said Mr Poonpong.
"Indonesia has a food security policy that requires rice reserves, while India has imposed export taxes on rice and restricted the export of all types of rice except Basmati, while Vietnam has a policy to reduce the number of rice exports, focusing on high-quality rice. These factors may impact Thailand's rice exports."
On June 16, Indonesia signed an agreement with India allowing the importation of 1 million tonnes of rice from India to secure rice supplies in case of disruptions caused by El Niño. This situation needs to be monitored in order to identify trade opportunities for Thailand, he said.
Thailand must accelerate efforts to enhance the efficiency of rice production, improve crop varieties for higher yields and quality, use market-driven approaches, and promote innovation to increase income and maintain sustainable competitiveness, said Mr Poonpong.
From January through July this year, the value of Thailand's rice exports grew by 20.6% year-on-year.
Mr Poonpong said the Commerce Ministry had established a war room to address the impact of El Niño on agriculture. Business operators will need to monitor relevant information and prepare to mitigate the effects, as well as plan their business operations carefully and efficiently, he added.
The first meeting of the war room held recently agreed that special measures related to the export and import of products affected by El Niño may not be necessary this year, as trade activities remain unaffected by it.
Keerati Rushchano, the permanent commerce secretary, said the impact of El Niño on trade is unlikely to be felt this year, but close monitoring of rainfall and the availability of water during September and October would be necessary.
He said next year, when drought is expected, such monitoring will continue and, if necessary, measures would be considered, including regulations pertaining to exports and imports.
