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10 Mar 2009

Agriculture

Rice Price Outlook 2009: Many Factors to Be Considered (Business Brief No.2451)

Thailand's rice exports have recorded a slowdown for five consecutive months from October 2008 to February 2009. Presently, Thailand is the world's largest rice exporter with a market share of around 30.0 percent. Many questions have been raised as to why global rice prices continue to plunge, even though Thai rice exports have so far dropped almost 40 percent.
The slowing Thai rice shipments are attributable to both domestic and external factors. Thai rice has been uncompetitive in the global market due to the high prices set under the government's paddy-pledging program, which exceed the actual market prices. On the external front, our trade partners have turned to buying cheaper rice from Vietnam and other rice producing countries – e.g., Myanmar and Cambodia – which have seen unprecedented increases in rice production this year. Moreover, the global rice market is experiencing dwindling rice trade as many rice producing and importing countries opt to expand their own domestic rice cultivation for the sake of national food security.
Over the remainder of this year, it should be noted if and when importing countries will resume their rice purchases. This will be a sign that the global rice prices are bottoming out. However, other important factors for the global rice market will also lie in off-season rice production, weather conditions – including drought or insufficient rainfall – as well as the rice exporting policies of major rice producing countries. Also of note will be the resumption of Indian rice exports, Vietnam's delayed rice exports, Thailand's paddy-pledging scheme and disposal of stockpiles.
The deepening global downturn, which is unlikely to see a turnaround by the end of this year, will continue to dampen the rice prices throughout the year. All in all, the global rice prices will remain volatile, especially amid the unfavorable climatic conditions and food security concern.

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