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20 Aug 2010

Agriculture

New ASEAN Members: Our Rice Exports Rivals To Be Monitored (Business Brief No.2911)

Currently, Vietnam and other new ASEAN members – Cambodia, Laos, Myanmar (CLMV) – are seizing greater rice market shares from Thailand. We are facing somewhat greater competition from Vietnam. In 2010, we found it necessary to decrease our rice export target to 8.3-8.5 million tons, versus the previous target of as high as 9.5 million tons. Meanwhile, Vietnam has increased their target to 6.4-6.5 million tons – versus their previous target of 6.1 million tons – because of record-breaking exports to the Philippines and their plan to expand their export markets to Bangladesh within this quarter.
In the future, Cambodia and Myanmar will likely become new rice export rivals for Thailand because they have increased their rice cultivation and exports continuously. They are now in the process of their rice milling capacity development, as well as improving irrigation system and other infrastructure. Also, Laos will become a new rice exporter. Cambodia, Myanmar and Laos will thus likely become significant rice export rivals in the future. Although their export volumes are not yet high, the way that foreigners, such as people from Middle East, Chinese and Vietnamese are interested in investing into those countries will help enhance their competitiveness somewhat. In addition, some importing countries are offering them tariff reductions, of note being the EU market.
Thailand, the world's leading rice exporter, should urgently consider strategic adjustments to suit changing market conditions and customer demand, particularly the successful market penetration and expansion strategies of Vietnam. (They have employed pricing to capture a greater share of the global rice market from Thailand.) In addition, Vietnam has tried to find greater acceptance of their jasmine rice and parboiled rice, and that could significantly affect the Thai rice industry, particularly if rice prices drop even more.
In our rice cultivation, adjustments by farmers will likely be difficult because they have little chance to access investment funding or new technology (via updates and information) to improve their competitiveness. The authorities should encourage farmers to form groups to improve production efficiency and reduce cultivation costs, by gathering together to cultivate and harvest larger paddy fields. This will allow them to lease or hire large farming machinery (such as harvesters), buy other cultivation factors, access funding and receive assistance from the government sector more easily. Thailand should undertake more efficient land management and improve water resource management for rice cultivation.
As for export markets, the group of ASEAN rice exporters is difficult to be formed because monopolized rice pricing would be difficult to achieve (unlike OPEC), so intense competition over rice exports will likely continue. We will have to maintain our strength as high-quality rice and premium-grade Thai Hom Mali rice. Although other types of jasmine rice have shown satisfactory sales performance, their quality is inferior to Thai Hom Mali rice. We have to communicate our product quality to rice exporters worldwide. Meanwhile, Thailand has other advantages over other rice exporters, such as advanced rice mills, precise rice grading and high-capacity processing infrastructure.

Although the rice import demand in the global market is relatively high, we have to brace for competition from new ASEAN members (CLMV) that are increasing their export volumes. As a result, those countries will likely become our rivals in the future.

Agriculture