According to Business Insider, the recent heat wave and subsequent drought in Asia may help Thailand to reduce its huge unsold rice inventory.
In 2011, Thailand was the world’s largest exporter of rice, accounting for about 30% of the global market.
But then prime minister Yingluck Shinawatra introduced a controversial rice scheme where the government would pay farmers almost 50% more than market prices.
The idea was that since almost 40% of Thailand’s labor force worked in agriculture, then it would make the average Thai wealthier while also creating a rice shortage by taking supply off of the market.
Thailand’s rice subsidy scheme was the previous government main populist policy, but within two years of highly subsidised prices it has turned into a political and economic disaster.
Unsurprisingly, Thailand’s military leader, General Prayuth Chan-Ocha, dismissed the program adding that alternative measures were needed to boost agricultural development and support to farmers.
A two fold plan that never unfolded
The rice subsidy policy, known domestically as the rice-pledging scheme, was a two fold plan. First, the price offered to Thai rice farmers was to be raised through direct government purchase to levels about 50 per cent above the prevailing market price, creating a strong electoral basis for the Pheu Thai ruling party of Yingluck Shinawatra.
Second, the international price was to be raised by reducing Thai exports, as Thailand is normally the top rice exporter in the world.
But the second part of the plan didn’t work so well, and Thailand was left with a huge stockpile of unsold rice rotting in packed warehouses, while India and Vietnam were expanding their market shares betting on lower prices.
Prices didn’t rise as much as the Thai government was anticipating, and then competitors — India and Vietnam — began to flood the market and lower their prices.
That left Thailand with a massive unsold inventory of rice and warehouses filled to the brim.
Thailand’s warehouses could be holding as much as 18 million tons of rice, some of them smuggled from neighbouring rice-producing countries, especially Cambodia, to take advantage of the above-market prices being offered by the Thai government.
But there might finally be some relief in sight. The El Niño of 2015-16 has caused drought conditions across much of China, India, and Southeast Asia.
And while farmers in Thailand and elsewhere in the region are being devastated by the weather, the Thai government has an opportunity to unload a good portion of its stockpile.
Here’s Deutsche Bank (emphasis added):
According to the US Department of Agriculture (USDA), Thailand’s rice inventory is set to drop by almost 50% to 5.2mn MT in 2016 on the back of a projected decline in domestic output to a five-year low of 15.8mn MT.
And the good news doesn’t stop there. Deutsche Bank says (emphasis added):
It is highly plausible, in our view, that Thailand would take this El Niño episode as an opportunity to clear its huge stockpile and regain market share as shipments of rival exporters will likely be curbed by reduced domestic output.
Thai Mango growers complain of low prices and fewer exports
Because of the global COVID-19 pandemic, their mangoes are not being exported, due to fewer buyers, and their prices have plunged to between 10 and 20 baht per kilogram, depending on size.
Mango orchard owners in Thailand’s northern province of Phitsanuloke are seeking help from the provincial administration to promote the sale of their sweet fruit, particularly Barracuda Mango variety.(more…)
Covid-19 and food security: can emerging economies mitigate rising prices?
The Food Price Index, established by the UN’s Food and Agriculture Organisation (FAO) to track monthly changes in international food prices, rose for the eighth consecutive month in January, primarily as a result of Covid-19.
An increase in food prices following the coronavirus pandemic has intensified concerns related to global food security. For emerging markets, this has further underlined the importance of regional cooperation and innovative solutions to help overcome the challenges.(more…)
Thailand Approves Package to Attract Wealthy Foreigners and Professionals
Thailand’s Cabinet has approved an economic stimulus and investment promotion package aimed at attracting wealthy foreigners and highly skilled professionals...
The Role of Telemedicine Today: During and Beyond the COVID-19
Lockdowns, quarantine periods, and hospitals fast filling to the brink needed the medical community to come up with solutions fast....
Malaysia, Thailand banks to join the ASEAN Banking Integration Framework
Banking institutions from Thailand and Malaysia are invited to join the ASEAN Banking Integration Framework and indicate their interest to...
Climate Change Could Force 49 Million People to Migrate in East Asia and the Pacific
Out-migration hotspots in agricultural areas of central Thailand and Myanmar coincide with areas expected to see declines in both water...
Thailand BOI Approves Measures to Support Carbon Reduction
greenhouse gas emission as well as an enhanced scheme for electric vehicles and measures to mitigate Covid-19 impacts and support...