Production

MY2015/16 rice production is forecast at 19.8 million metric tons, up 1.6 percent from the previous year in anticipation of improvement in average yield. Meanwhile, planted area is expected to decline around 0.6 percent as farmers will likely shift some area to sugarcane crop because of the government incentive under the 5-year Agricultural Restructuring Program (2015 – 2019). In MY2015/16, rice farmers will likely shift around 0.2 million rai (32,000 hectares) to sugarcane based on the registration of rice farmers with sugar mills, particularly in the northeastern and western regions. However, overall rice harvested area is expected to increase by 0.4 percent in anticipation of the recovery of the off-season rice crop from severe drought in 2014/15.

The Thai Meteorological Department (TMD) expects normal precipitation in 2015, compared to below normal precipitation in 2014. This is based on the International Research Institute for Climate and Society's latest estimate of higher probability of neutral weather phenomenon during the monsoon season in Thailand. Consequently, average yield of 2.8 metric tons per hectare in MY2015/16 is expected, compared to 2.762 metric tons per hectare in the 2014/15.

For MY2014/15, rice production is revised down to 19.4 million metric tons due to lower than expected harvested area of the off-season rice crop caused by drought. The Ministry of Agriculture and Agricultural Cooperative reported (as of February 20, 2015) drought-damaged area totaling 1,203,552 rai (192,568 hectares), of which 1,145,390 rai (183,262 hectares) are rice crop.

Presently, MY2014/15 off-season rice area is approximately 40 percent above the government estimate despite the official warning on low reservoirs. Around 15 percent of the MY2014/15 off-season rice crop has been harvested so far. Reports indicate that average yield dropped 20 to 30 percent, particularly in the lower northern region due to unusual cold during the flowering stage. Farmers who already have harvested their off-season rice crop are preparing the land for new off-season crop (second off-season crop), particularly in the irrigated areas. They are likely to grow another 1 to 2 million rai (0.2 – 0.3 million hectares) before the end of the season in March 2015.

The Royal Irrigation Department (RID) reported on February 24, 2015 that off-season rice cultivation continues to increase in irrigated areas, particularly in the Chapraya basin in the lower northern region and central plain despite warning of water restrictions. Despite short-term increases in reservoir levels in major dams in the northern region and central plain, the RID still expects to prioritize its water discharge for consumers and the ecological system rather than agriculture in 2015. The RID expects additional drought-damaged area to be around 133,000 rai (21,280 hectares) in rice growing areas due to continued restriction of water discharge until June 2015.

MY2014/15 off-season rice production is likely to decline to 4.9 million metric tons, down 14 percent from the previous year. This reflects anticipated reduction in harvested area by 14 percent due to drought and a decline in average yield.

Consumption

Rice is the main staple food for Thais with per capita consumption ranging from 80 kilograms for city households, around 155 kilograms for rural household, up to 125 kilogram for low-income households. MY2014/15 and MY2015/16 rice consumption is forecast to increase by around 1 percent in anticipation of the increase in feed use of broken rice in swine rations. Prices of broken rice declined around 30 percent in 2014 due to the sales of the government stocks. Broken rice prices are likely to continue to trend downward as the government sells off its rice stocks in 2015. The government expects to sell feed-grade rice stocks throughout the second half of 2015 and 2016.

Thai rice market is dominated by medium quality rice (5-10% broken rice) which accounts for around 50-60 percent of total rice consumption. High quality rice, especially fragrant rice, accounts for around 10 to 15 percent of total rice consumption. The balance is low quality rice.

Trade

In MY2014/15 and MY2015/16, Thai rice exports are likely to remain at least at 11 million metric tons due to continued heavily subsidized sales of government stocks. During January – March 2015, the government sold around 1.3 million metric tons of its rice stocks, of which 146,205 metric tons were fragrant rice and the balance were white rice. However, Thai rice exports in January 2015 declined to 608,506 metric tons, down approximately 13 percent from the same period last year. The reduction mainly reflected price competition from Vietnamese rice. Export prices of new-crop Vietnamese rice are around $365/MT (FOB) which is approximately 5 percent cheaper than old-crop Thai rice (from the government stocks) and 10 percent cheaper than new-crop Thai rice. Price competition is likely to continue throughout 2015 – 2016, particularly for medium to low quality white rice as the Thai government plans to sell off its rice stock by 2016. On March 2, 2015, Vietnamese Government decided to cut its minimum export prices of 25% grade white rice to $350/MT, reportedly in order to compete with Thai rice in African market, the main market for inferior rice. Despite this price competition, Thailand will continue to push rice out of stocks and onto the world market.

In general, high quality rice accounts for around half of total Thai exports. High quality rice includes (1) fragrant rice (Hom Mali Rice) which accounts for 25 % (2) parboiled rice (60%), and (3) white rice (15%). Meanwhile, medium quality rice (5-10% broken rice) accounts for around 25 percent of total rice exports. The balance is low quality rice.

Stocks

According to the Ministry of Finance's audit result as of September 30, 2014, the government official rice stocks totaled 17.5 million metric tons. Of the total, around 10 million metric tons, mostly white rice, could be reprocessed for domestic consumption or exports. The remainder is not fit for human or feed consumption or listed as unaccounted for. Trade sources expect that non-edible rice stocks will be not suitable for ethanol and swine feed production due to low starch content and other reasons. The government may have to destroy them to save the storage costs after the conclusion of the fraud case is closed against the previous government pledging programs.

Actual MY2014/15 and MY2015/16 rice stocks are forecast to decline by one-third as the government continues to sell off its stocks, particularly those which can be reprocessed for domestic consumption or exports. Sources expect that the government will sell up to 5 million metric tons in the public tenders in 2015, of which around 2 million metric tons will be used for food processing and feed industries domestically.

Policy

The Committee on Rice Policy and Management agreed on a 5-year Rice Cultivation Restructuring Program (2015 – 2019) with a proposed budget of 50 billion baht ($1.5 billion) to reduce rice planted areas and increase sugarcane area. The long-term target is to cut planted area of rice by 0.7 million rai (112,000 hectares) from MY2015/16 to MY2017/18. In MY2015/16, rice farmers are expected to shift to sugarcane crop by around 0.2 million rai (32,000 hectares) based on information between sugar mills and farmer registrations.

In MY2015/16, the government expects to continue the on-farm pledging program that was implemented in MY2014/15 (TH4120, Grain and Feed Update – November 2014). It is known as the "Farmer Loans to Delay the Sales of Rice Paddy" which aims to stabilize farm-gate prices of fragrant and glutinous rice paddy. MY2014/15 on-farm pledging program received around 350,000 metric tons, mostly fragrant rice paddy, as of February 25, 2015. The Bank for Agriculture and Agricultural Cooperatives (BAAC) who operates the program expects the program will receive around 500,000 metric tons of paddy by the end of the program which was scheduled for February 28, 2015. This is far below the 2 million metric tons the government expected to receive when the program was announced in November 2014.