Thai Rice Stirs the Global Pot03 October 2011
THAILAND - Thailand is preparing to stir the pot in the international rice market with its fragrant jasmine rice nurtured by a new policy. But while the new policy pays farmers a great deal more, there are fears that the high prices could make Thai rice uncompetitive.
"Thailand will be able to test consumer loyalty once its new rice policy impacts the global market," Samarendu Mohanty, senior economist at the International Rice Research Institute (IRRI) told IPS.
"Consumers will have to pay higher prices for jasmine rice and other rice brands," he said in a telephone interview from the Philippines, where the IRRI is based. "The markets have already started reacting, with rice prices steadily increasing from May through August."
Regular white rice has joined the long, tapering jasmine rice in putting this Southeast Asian kingdom on the map as the world’s leading rice exporter. Finally, says Mohanty, "it will be a matter of taste."
The trial with new Thai rice exports cuts across four continents. African countries like Nigeria, Cote d’Ivoire and South Africa are among the major buyers. In Asia, the Philippines, the world’s largest rice importer, and Indonesia lead the list. Europe and the United States are turning out to be steady markets for Thai rice in the developed world.
The spike in the price of rice could inch higher as the three-month-old administration of Prime Minister Yingluck Shinawatra ploughs ahead to implement an election promise: to buy rice from farmers in the poor, rural belts of the country’s north, central and northeastern regions at rates nearly 50 per cent higher than the current market rates.
Under this new rice policy, the government has promised to pay farmers directly 15,000 baht (517 dollars) per ton for unmilled white rice and 20,000 baht (689 dollars) per ton for jasmine rice. The prices mark a substantial increase from the 10-year average of the country’s benchmark white rice, which sold on the international market at 400 dollars per ton.
According to Thai agriculture officials, some four million rice farmers have registered for the scheme. The financial carrot comes at a time when farmers have been grappling with rising production costs of fertiliser, pesticides and oil.
The Thai Rice Exporters Association (TREA) says the price for Thai rice could reach 800 dollars per ton in the global market later this year, a figure dramatically higher than the $629 per ton in mid- September. That September figure for rice is the highest since December 2009. This, it warns, presents risks.
"The government is increasing rice prices by 50 per cent overnight. This will put Thai rice out of global competition," Vichai Sriprasert, former president of the TREA told journalists last week. "It is very strange that the government is spending billions of baht to intervene in the rice market."
But the government appears unruffled. Commerce minister and deputy prime minister Kittiratt Na-Ranong says government officials will join Thai delegations at international road shows to explain the new pro- poor policy of the government. "We want to help our farmers," Kittiratt told local media.
The Yingluck administration’s rice policy, which secured a thumping rural endorsement at the July 3 polls, will be launched at a time when there is no global shortfall in rice supply. Thailand, which ships close to 10 million tons annually, accounts for 30 per cent of global rice exports.
Neighbouring Vietnam is its main competitor, exporting 6.7 million tons of rice last year, accounting for 22 per cent of the export market. Other leading exporters are Pakistan, China and the United States.
Thai rice policy will also be up against India’s return to the international rice market following the end of a four-year-old export ban on non-basmati rice. Indian rice traders have been given the licence to export up to two million tons of rice.
"Normally if a player like Thailand implements a programme like this you would expect global prices to rise rapidly," says IRRI’s Mohanty. "But the prevailing supply and rice from emerging rice suppliers like Burma, Cambodia and Brazil will not see a repeat of the 2008 rice crisis."
In that year, the price of rice soared to more than 1,000 dollars per ton, hitting the stomachs of the world’s poorest, two-thirds of them, some 600 million, in Asia. Low rice stock was to blame, after major exporters like Vietnam and China placed restrictions to meet food insecurity at home.
"Thai farmers need to be helped to keep them growing rice," says Chanchai Rakthananon, president of the Thai Rice Mills Association. "The government pledge to offer high prices will keep them from shifting to crops that have better prices like tapioca and rubber."
TheCropSite News Desk