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9 May 2008

Agriculture

Rice Prices: Fluctuating with Good and Bad News…Psychological Impact (Business Brief No.2159)

The global rice market is expected to experience further price fluctuations. After a sharp fall in early May, paddy prices at the Chicago Board of Trade have finally recovered. This indicates that rice prices are quite sensitive to any related breaking news, good or bad, that comes out of rice producing and importing countries, not to mention rampant speculation on the US Dollar and other commodities.
Amid volatile rice prices around the globe, the local rice market is no exception. Despite recent upsurges in paddy prices at the Chicago market, the Thai grain market has seen declining prices across the board. Falling rice prices can be attributed to high moisture content in newly-harvested rice from the second crop season, which has affected farmers' incomes. Rice exports in 2Q08 are expected to decrease from the previous quarter due to exporters' avoidance of purchase orders at risky prices and the impact of the easing Baht. This will result in drops in export and wholesale rice prices in Bangkok. Other negative factors include rice mills failing to purchase rice due to their lack of working capital and rice importers' delays in concluding rice deals, awaiting easing prices.

Looking ahead, global rice prices are expected to continue escalating in a volatile course. Despite hefty demand in the global market, what should be studied with caution is the resumption of Vietnamese rice exports – Thailand's major rival in the global rice market mid-year, thanks to their ample mid-year harvests. In the final quarter, the summer crop harvests of major key rice producing countries, i.e., Thailand, Vietnam and India will hit the market. Concern has been raised that local rice prices may continue to drop if the government does nothing to spur them amid ongoing uncertainties and a lack of confidence, Thai rice prices may fall back to a range of Baht7,000-8,000 per ton. Certainly, this is good news for consumers, but may have a wide-ranging impact on producers that include farmers, millers and exporters. Stabilizing the local rice market is therefore a major challenge for the Ministry of Commerce.

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