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USDA GAIN: Oilseeds, Cotton, Sugar, Grain and Feed

14 August 2012

USDA GAIN: Thailand Grain and Feed Update August 2012USDA GAIN: Thailand Grain and Feed Update August 2012

TH2081 MY2012/13 rice production forecast remains at 21.1 million tons, up 3.0 percent from the previous year, in anticipation of normal monsoon despite the development of El Nino conditions. Thai rice exports will likely lose ground to Vietnamese rice due to aggressive MY2011/12 Paddy Pledging Program. The overhaul of the Paddy Pledging Program and releases from rice stocks will help rice exports recover in 2013.
USDA GAIN Report - Oilseeds, Cotton, Sugar, Grain and Feed

1. Rice cultivation well underway due to a good monsoon.

MY2012/13 main-crop paddy is approximately 90 percent planted due to a good monsoon. Precipitation during January – June 2012 is around 25 percent above the normal average in most rice growing areas, except for some areas of the lower Northeastern Region that faces approximately 10 percent below-average precipitation (Figure 1.1). The Thai Meteorological Department (TMD) expects near normal precipitation in rice growing areas during the reproductive stage in August – September.

TMD’s assessment is based on the International Research Institute for Climate and Society’s (IRI) forecast of either warm-neutral conditions or borderline El Nino conditions during July – September 2012 (Figure 1.2). In addition, TMD expects one to two tropical depressions during the monsoon season in 2012, which will provide the necessary rainfall for main crop production without the massive damage. In addition, these depressions will likely increase water availability for the off-season crop in the lower Northern and the Central Plain Region as reservoir levels have been allowed to decline to around 46 percent of total major reservoirs’ storage capacity in August 2012, as compared to over 90 percent in January 2012. This is associated with the government flood mitigation program that calls for water discharge of the major dams in the Northern Region to their lowest possible level (45% of full capacity) by the end of dry season in April 2012 (Figure 1.3).

Post’s forecast of MY2012/13 rice production is 21.1 million tons (milled equivalent) which is a 3.0 percent increase from the previous year, unchanged from the previous forecast (TH2027, Grain and Feed Annual, March 2012). Main-crop production is estimated at 14.7 million tons, up 4.3 percent from the previous year. Meanwhile, off-season crop production will likely remain at 6.3 million tons, unchanged from the previous year.

2. Thai rice exports losing ground to Vietnam in 2012

Thai rice exports declined to 3.9 million tons in January 1 – July 27, 2012, down 46.2 percent from 7.2 million tons for the same period in the previous year, as Thai rice prices are $150 – 200/MT above Vietnamese prices due to the aggressive MY2011/12 Paddy Pledging Program. Meanwhile, according to the Vietnam Food Association, Vietnamese rice exports in January 1 – July 26, 2012 totaled around 4.0 million tons, down 11.0 percent from approximately 4.5 million tons in the previous year. Thai white rice and parboiled rice exports are adversely affected as the program has pledged 12.3 million tons of white rice paddy (8.1 million tons milled equivalent) out of the total pledged paddy of 16.6 million tons (11.0 million tons milled equivalent) during October 7, 2011 - July 29, 2012. Exports of white rice dropped 58.0 percent from the previous year. In addition, parboiled rice exports declined 36.0 percent from the previous year as Thai parboiled rice prices are $120-190/MT above Indian rice.

The Thai rice exporters Association expects total rice exports will likely decline to 6.5 million tons in 2012, down 39.0 percent from the previous year, of which 2.2 million tons will be white rice, and 2.0 million tons for parboiled rice, 1.8 million tons for fragrant rice, and 0.5 million tons for glutinous rice and Pathumthani fragrant rice. However, Thai rice exports are expected to recover to around 8.0 million tons in 2013 in anticipation of the government release of MY2011/12 rice stocks at competitive prices.

3. Paddy Pledging Program and stocks release to be overhauled but still conservative in 2012

The Government is considering overhauling the criteria of the Paddy Pledging Program for MY2012/13 crop which will begin in October 2012. A restriction will likely be imposed on the amount of paddy that can be pledged per farmer as the current program is reportedly biased in favor of large farmers.

Around 1.3 million farm households have participated in the MY2011/12 main-crop Paddy Pledging Program, which accounts for around 34.0 percent of total rice-farm households. The Government is also considering limiting the interest-free loan eligibility to 500,000 baht per farm household ($15,873 per farm household) for the 2012/13 Paddy Pledging Program. Meanwhile, the intervention prices will likely remain unchanged at 15,000 baht/ton ($476/MT) for white rice paddy, and 20,000 baht/ton ($635/MT) for fragrant rice paddy. Also, the Sub-committee on Rice Stock Releases agreed on August 1, 2012 to change the criteria for its rice stock releases during August – December 2012. The Government has yet to finalize the new criteria which will likely focus on the open tender that all exporters and traders/millers are able to participate. Taking procurement discounts and quality premiums for Thai rice into account, Post estimates the government would have to lose $100 – 150 per ton to be competitive in the 5% grade white rice market.

So far, the MY2011/12 Paddy Pledging Program has pledged 16.6 million tons of paddy (roughly 11.0 million tons milled equivalent), of which 6.8 million tons are main-crop paddy (4.5 million tons milled equivalent) and 9.8 million tons are off-season crop paddy (6.5 million tons milled equivalent) (Table 3.1). The program successfully raised domestic prices by around 30.0 percent from the previous year for white rice paddy, and 10.0 percent for fragrant rice paddy (Figure 3.1). The state-run Bank for Agriculture and Agricultural Cooperative (BAAC) has provided loans worth approximately 260 billion baht ($8.4 billion) for this program, of which 170 billion baht ($5.5 billion) have been covered by loans from government banks other than BAAC. Also, the Government still has the outstanding debt of around 52.0 billion baht ($1.7 billion) to BAAC for losses from the release of portion of the rice stocks of MY2007/08 – MY2008/09 Paddy Pledging Program (Table 3.1). The Government will likely release a significant portion of its stocks this year, particularly from the old-crop stocks of around 1.0 million tons. The Government will also probably need to provide additional loans to enable BAAC to continue the Paddy Pledging Program for the coming MY2012/13 main crop which will come onto the market October 2012 – February 2013. The stock release is expected to be more aggressive in 2013 because of limited warehouse space and limited credit availability for the MY2012/13 off-season crop and MY2013/14 crops.

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