Rising international demand will likely see Thailand come close to equalling last year’s record for rice exports, with strong sales supporting higher rural incomes and contributing to broader economic growth, though success could bring its own challenges.
In mid-August the Ministry of Commerce’s Department of Foreign Trade (DFT) announced that it expected outbound rice shipments to reach 11m tonnes this year – a 1.5-tonne increase over estimations issued earlier in the year – on the back of rising demand and a weaker baht.
Adul Chotinisakorn, director-general of the DFT, said sales had risen significantly across all international markets, particularly in Indonesia (679%), Malaysia (53%) and the Philippines (25%), and that the country had exported a total of 6.7m tonnes as of August 8.
Negotiations with China for the sale of an additional 1m tonnes of rice are also set to begin at the end of August, further boosting export expectations.
In total, overseas shipments are expected to account for more than half of Thailand’s rice harvest this year. Output is currently estimated at around 21m tonnes, according to the US Department of Agriculture’s Foreign Agricultural Service.
Earnings set to rise alongside exports
The improved outlook could make 2018 the second year running that Thailand has exported record volumes of rice.
Last year it shipped 11.48m tonnes of the cash crop, exceeding its previous high of 10.96m tonnes in 2014. The industry is also expected to generate higher revenues this year. As of early August, total sales had reached $3.4bn – a 9.8% increase year-on-year – putting the industry squarely on track to surpass last year’s sales total of $5.1bn.
Reducing the previous government’s stockpile
In addition to rising international demand and a more competitive currency, the stronger sales performance is also due in part to the government’s successful reduction of its 18.7m tonnes of stockpiled grain built up by the previous administration’s subsidised buying programme.
Supported by reduced output from its competitors due to drought conditions caused by the El Niño phenomenon of 2015-16, the government was able to release a substantial portion of its stored rice over 2016 and 2017 so that by mid-March this year only 2m tonnes remained.
Higher farm incomes raise economic prospects
The reduction of the government’s rice inventory and the increase in export sales has supported a steady rise in farm incomes in recent months, according to a report issued at the end of June by the Kasikorn Research Centre.
Second-quarter income rose by 8.7% in April, peaked at 10.3% in May and grew 7.9% in June, the report found.
This strong performance took half-yearly farm income into positive territory.
After a weak first quarter, agricultural household earnings rose by 2.4% over the first six months of the year. On the back of this rise, Kasikorn upgraded its forecast for domestic consumption growth from 3% to 3.5% for the year. While increasing its estimate, the report did flag a concern over the impact of a trade war between China and the US.
Kasikorn warned that a prolonged standoff between the two countries could impact demand in China, Thailand’s biggest export market, thereby putting pressure on future sales.
However, this could be partially offset by opportunities in new markets, such as Iraq. Water shortages brought on by a severe drought caused the Iraqi government to ban new rice plantings in June and offer an international tender for at least 30,000 tonnes of rice.
Exporters from Thailand submitted the lowest bids – $100 or more below most of their competitors and more than $200 clear of prices offered by US dealers – with the best-priced offer being $449.50 per tonne.
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