Blommberg
Mar 23, 2011 6:51 PM GMT+0700
Thailand, the world’s largest rice exporter, plans to reduce planting to curb pests and improve quality, an official from the Thai Rice Mills Association said.
The plan started in October may eventually reduce exports by about 2 million metric tons a year, or about 20 percent of Thailand’s shipments, Pramote Vanichanont, honorary president of the Bangkok-based association, said in an interview, without giving a timeframe. The nation plans to set a global benchmark price through a centralized auction, the government said.
A drop in supplies from the country, which represents one- third of global shipments of 30 million tons, may boost prices in Chicago, which have dropped 3 percent this year, trailing wheat and corn. World food costs rose to a record in February, the United Nations estimates, contributing to riots in Libya and the toppling of leaders in Tunisia and Egypt.
“I doubt whether it is a good policy, as cutting the supply may lead to food shortages,” Kiattisak Kanlayasirivat, a director at the Thai office of Novel Commodities SA, which trades about $600 million of rice a year. “By reducing the supply, this will bring up prices.”
Rice for May delivery gained 0.3 percent to $13.900 per 100 pounds at 7:05 p.m. Singapore time today. The most active contract increased 9.1 percent in the past 12 months as wheat climbed 52 percent and corn advanced 89 percent.
A privately run auction will help establish a global benchmark price that reflects demand and supply, Wichai Phochanakij, deputy director general of the Internal Trade Department, said in an interview. Under existing rules, rice buyers seek bids directly from suppliers and prices for individual transactions aren’t published, he said.
Prevent Pests
Thailand’s plan to reduce planting encourages farmers to grow rice twice a year, instead of the usual three times, farm minister Theera Wongsamut said by phone on March 22.
“The government wants to stop the spread of pests and disease, cut production costs and improve productivity,” Theera said. “Benefits from price increases will follow.”
Removing one crop a year will interrupt the life cycle of pests like plant hoppers and reduce production costs from use of fertilizers and pesticides, Theera said.
The country produces about 20 million tons of milled rice a year, half of which is for domestic consumption. Exports from Thailand may advance as much as 5.2 percent to 9.5 million tons this year, according to the Ministry of Commerce.
Provide Incentives
“Talk of helping Thai farmers boost productivity, quality and profits is all well and good, but historically they only respond to price signals,” said Tom Slayton, an Alexandria, Virginia-based rice analyst and former publisher of The Rice Trader. “Unless the government can provide incentives, the policy will be ignored and there will be no change in production or export levels.”
Thailand plans to increase exports of premium-grade varieties and reduce shipments of low-quality grain, which represent more than half of exports, said Pramote, who is also a member of the National Rice Policy Committee. The group, headed by Prime Minister Abhisit Vejjajiva, helps set farmer prices and oversee the sale of government inventories.
Thai rice, the benchmark for Asia, declined 6.5 percent this year to $519 a ton on March 16 as overseas demand declined and the new crop from Vietnam pushed prices lower, according to the Thai Rice Exporters Association. The price surged to a record $1,038 a ton in May 2008.
Farmers are being encouraged to plant soybeans and green beans -- also known as mung beans -- which act as a natural fertilizer and can be sold in domestic markets as a substitute for exports, Theera said.
Cambodia, Myanmar
If the program fails, the government may consider other measures such as paying farmers not to plant rice, Pramote said.
“We don’t aim to be the world’s largest exporter,” he said March 21. “We’ve learnt from past experiences of being a key player in the market that farmers have been suffering losses because we can’t set appropriate prices by ourselves.”
Rice exports from Cambodia and Myanmar, which have lower production costs, could increase to offset any decline from Thailand, Pramote said. The two countries are Southeast Asia’s third- and fourth-largest shippers, according to the U.S. Department of Agriculture.
The government plans to increase rice productivity by 10 percent, boosting average yields to 500 kilograms per rai (0.16 hectare) in the crop year starting October 2015, Prasert Gosalvitra, head of Thailand’s state-run Rice Department, said on March 21. That will raise rough-rice output to 34.5 million tons from 31.4 million tons in the current crop year, he said.
Output of high-quality jasmine fragrant rice is expected to surge 20 percent by 2015, Prasert said.
To contact the reporters on this story: Supunnabul Suwannakij in Bangkok atssuwannakij@bloomberg.net; Alan Bjerga in Washington at abjerga@bloomberg.net
To contact the editor responsible for this story: James Poole in Singapore atjpoole4@bloomberg.net