VN poised to topple Thailand

Petchanet Pratruangkrai
The Nation January 17, 2012

Vietnam will eclipse Thailand as the world's biggest rice exporter this year as the government's pledging scheme artificially inflates Thai prices, exporters predicted.

The Thai Rice Exporters Association projects exports will drop to 6.5 million tonnes - their lowest level in a decade - this year. The country's share of the global market will fall to 20-25 per cent from 30.2 per cent last year, it said.

Other negative factors facing Thai rice exports include an expected increase in shipments from India as export quotas there expire in February; Vietnam's announcement that it would double jasmine rice exports to 800,000 tonnes this year; an increase in the number of countries exporting rice, including Brazil and Uruguay; Cambodia's projection that it will export 1 million tonnes this year; and an acceleration in exports from Burma, particularly of parboiled rice.

A few years ago, concerned private-sector groups had warned the government that there was a risk Thailand would lose its No 1 position if the government continued to subsidise rice prices, creating unreasonably high prices both domestically and for export.

Defending the policy, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong said yesterday that he did not believe rice exports would drop to 6.5 million tonnes. He insisted the government would not revise the rice-pledging scheme, because demand for Thai rice in the world market remained high.

"We believe in our bargaining power and have great confidence in the quality of Thai rice, which brings a high price, so Thailand should not worry about what export volume our rivals can achieve. Buyers will still have to buy Thai rice," Kittiratt said.

Thai exporters do not appreciate the country's bargaining power, he said. He also pointed out that Thai rice production was damaged by last year's floods, and insisted that exports by India will not affect Thailand's exports.

Exporters association president Korbsook Iamsuri said yesterday there is a strong possibility that Thailand will lose its No 1 ranking because the pledging policy was making Thai rice uncompetitive.

"Thai prices are too high compared with those of our rivals. The government's inflexibility in terms of adjusting the pledging project in accordance with the changing trading environment after India announced a return to exports has caused difficulties for Thai rice exports," she said.

The government will lose several billion baht through the price-subsidy programme, Korbsook said, adding that it will create a domino effect as farmers grow rice they cannot sell.

The total estimated export volume of 6.5 million tonnes of rice this year represents a drop of 38.1 per cent from last year's 10.5 million tonnes. Of the total exports this year, white rice is expected to account for 3 million tonnes, jasmine rice 2 million tonnes, parboiled rice 1 million tonnes, and other grains, sticky rice and Pathumthani Rice the remainder.

Chookiat Ophaswongse, honorary president of the association, said the government should revise its pledging policy in accordance with the current trading situation. He advised the government to turn back to a price-guarantee subsidy rather than proceed with the rice-pledging programme. A price guarantee would set a suitable price for Thai rice and ensure that farmers benefit, he said.

"Thailand accounts for only 7 per cent of global rice production; the country will not be able to set the price of rice and direct global trade as the government expects," he said.

Somkiat Makcayathorn, who sits on the association's board of directors, said association officials had tried to seek an appointment with Kittiratt, but were ignored. The private sector wants the government to find efficient ways to promote Thai rice exports, Somkiat said.

Association vice president Charoen Laothamatas said Thai jasmine rice exports could drop to 1 million tonnes this year due to expected price increases. Although the pledging project has not yet driven up the price of jasmine rice to US$1,300 (Bt41,366) per tonne as projected, the current trading price of $1,000 has reduced Thailand's competitiveness; Vietnam's price has been quoted at $700 per tonne.