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Up To 8 Per Cent Of Thai Rice Crop Hit By Flooding

Up To 8 Per Cent Of Thai Rice Crop Hit By Flooding

19 October 2011

THAILAND - At least two million metric tons of unmilled rice or about 8 per cent of Thailand's main harvest has been hit by severe flooding in the northern and central parts of the country, potentially lowering output this year, trading executives and industry officials said.

However, according to this is unlikely to have an immediate impact on global prices as Thai rice is already priced out of the market following a controversial decision by the new government earlier this year to buy rice from farmers at sharply higher prices, making exports un-viable.

Rice prices in Thailand and Vietnam, two of the biggest exporters of the grain, have already been around three-year highs for more than a month, prompting most buyers to turn to cheaper sources such as India, Pakistan and Myanmar.

Rice from India and Pakistan is offered at least $100/ton below Thai and Vietnamese prices.

Moreover, it is too early to estimate the real damage to the crop as that would depend on how long the flooding continues.

Unless flood waters stay at current levels for long, which seems unlikely, any further increase in rice prices will be short-term and limited, said Santitarn Sathirathai, an economist with Credit Suisse.

"Most of the damage is in the central Thailand and production may fall this year but we are hopeful of making up with the secondary harvest in April because the water has actually benefited the crop in the north-eastern highlands," said Chookiat Ophaswongse, former president of Thai Rice Exporters Association.

While Thai government estimates show more than 1.3 million hectares or 13 per cent of the total rice acreage affected by flooding, Chookiat said serious damage may occur only in half that area. He said the harvest will gather momentum only in December-January and waters may recede by then.

Some traders said there could still be further upside potential in prices, although that would be more a result of a new government procurement program that got underway. Under the program, the new government is buying rice from farmers at prices that are some 50 per cent higher than last year.

The other wild cards are supply fro Vietnam and demand in the Philippines.

The Philippines had cut back imports last year but Typhoon Nesat has damaged part of the local crop this year, potentially raising the need for higher imports.

Rainfall has also been high in Vietnam's Mekong Delta which accounts for most of the rice is exported from the country, although only a small third crop is currently being harvested in the region.

Still, such developments will only have limited impact on prices as there are plentiful stocks elsewhere, said Concepcion Calpe, a senior economist with United Nations' Food and Agriculture Organisation.

TheCropSite News Desk

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