Signs of drought in 2019 are imminent as the summer has come sooner and is expected to last longer than in previous years, affecting rainfall amounts and lowering water levels in the country's major reservoirs. KResearch holds the view that this year's drought could persist through the month of May. The central and northeastern regions are expected to be hardest hit because the drought may adversely affect off-season rice and sugarcane plantations, which are nearing harvest during this period. This will pose a threat to farm income and exacerbate the challenges facing farmers.
Nonetheless, KResearch views that the effects of the drought this year may be limited, due to factors related to plantations and types of affected crops. Although the drought may cause damages to overall agriculture, it may not be a key factor to significantly hike rice and sugarcane prices. In fact, their prices may be restrained in the short term amid stronger competition in the rice and sugarcane markets. Ultimately, Thai farmers' income in 2019 may decline 1.2-1.6 percent YoY due to a drop in farm production.
Based on primary estimates, KResearch forecasts that the drought will chiefly impact off-season rice and sugarcane, with economic losses totaling around THB15.3 billion or 0.1 percent of gross domestic product (GDP). However, when damages to other crops are added, economic losses may be worse than the initial estimate. Thus, it is recommended to regularly monitor whether the drought period will be extended, and which areas will be affected. Related statistics will also be reviewed as deemed appropriate, with weather conditions being monitored, as the dry season lingers. Moreover, the severity of the drought may vary each month.
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