Report Highlights:

The Thai Government is considering measures to support MY 2014/15 rice prices but at much lower prices than in previous years and with stricter conditions. Estimated rice exports for MY 2013/14 and MY 2014/15 have been increased to 10.5 million metric tons and 11.0 million metric tons respectively. The result of the survey of government-owned rice stocks remains controversial.

Executive Summary: 

The Rice Policy and Management Committee, which is chaired by the Prime Minister, is seeking Government approval for a new on-farm pledging program for MY2014/15 main-crop fragrant and glutinous paddy rice in order to limit downward price pressure. This proposed program would only be available in northern and northeastern production areas and under limited conditions. Reports indicate that complaints are already arising from rice producers ineligible for the proposed program. Meanwhile, the Government continues to sell its rice stocks for exports amid its controversial survey of government-owned stocks. The estimate of MY 2013/2014 Thai rice exports has been increased to 10.5 million metric tons due to higher sales and shipments that previously expected. This pace is expected to continue in MY 2014/15, with exports now forecast to reach 11 million metric tons. Production estimates for MY2014/15 rice and corn crops remain unchanged.

1. Pledging Program May be Back but Minimally 

On October 24, 2014, the Rice Policy and Management Committee, which is chaired by the Prime Minister, agreed to a proposal for an on-farm pledging program for MY2014/15 main-crop fragrant and glutinous rice in the northern and northeastern regions. Reportedly this would be effective from November 2014 through the end of February 2015. The proposed intervention price would be set at 14,400 baht per metric tons ($450/MT) for fragrant rice paddy, which is around 10 percent below current market prices. Meanwhile, the proposed intervention price for glutinous rice paddy would be set at 11,700 baht per metric tons ($365/MT) which is 5-10 percent above current market prices. 

Under the proposed program, farmers could pledge only about 20 metric tons of rice at a maximum value set at 300,000 baht/household ($9,375/household). In addition, the rice must meet strict moisture content requirements. Farmers will be required to store the paddy rice in their warehouses at least 30 days. They can redeem their rice paddy within 120 days without interest rate charge. Also, they will receive 1,000 baht per metric ton ($31/MT) for storage cost. The total pledging target is 2 million metric tons of paddy which accounts for around 15 percent of total fragrant and glutinous rice production. The program will be administrated by the Bank for Agriculture and Agricultural Cooperatives (BAAC). The Government is likely to consider this proposal on November 4, 2014 and is part of the effort to limit downward price pressure in advance of the seasonal main-crop rice harvest. 

The Government is considering this action because it was unsuccessful in enticing rice millers to buy rice paddy at above market prices through a soft loan program. Traders expect that this on-farm pledging program will likely prevent the market prices of fragrant rice paddy from falling below the intervention prices in the next couple of months. Also, the market prices of glutinous rice will likely increase in the coming months as supplies of premium glutinous rice come onto the market. In other words, market prices of glutinous rice are likely to be above the intervention prices in the next couple of months. 

This proposal is already meeting with criticism from producers, such as those growing white rice paddy, that will be excluded from the program. Sources indicate that currently the Government holds only minimal amounts of fragrant and glutinous rice in its stockpile. Given the premium value of these varieties, it is unlikely that this program would result in a long-term increase in government-owned rice stocks. 

On October 1, 2014, the Thai Government approved 40 billion baht ($1.3 billion) for direct payment to rice farmers as part of its overall economic stimulus package of 364 billion baht ($11.4 billion). These funds will be disbursed from October to December 2014. The government hopes that these direct payment will help cushion anticipated downward price pressure for rice farmers in advance of the main-crop rice harvest which will begin in November. Payments under the program will be based on farm size. The first group comprised of 1.8 million households with farmland of no more than 15 rai (2.4 hectares) will receive 1,000 baht per rai ($195/hectare). The second group consists of about 1.6 million households who hold more than 15 rai (2.4 hectares). They will receive 15,000 baht (roughly $470) per household. The payments will be administered through the BAAC. This direct financial assistance to farmers is in addition to the Rice Farmer Assistant Program that encouraged fertilizer traders to discount the prices. 

2. Rice Exports Forecast to Increase in MY 2013/14 and MY 2014/15 

Estimated Thai rice exports are revised up to 10.5 million metric tons for MY 2013/14 based on continued sales of government stocks for export and expected 4th quarter shipments of about 970,000 metric tons per month. According to the Thai Custom Department, rice exports from January – September 2014 totaled 7.6 million metric tons, up 53 percent from the same period last year. Exports of white rice increased to around 4 million metric tons, up approximately 70 percent from last year driven by the sales of government stocks. Also, parboiled rice exports doubled from 1.2 million metric tons last year to 2.3 million metric tons due to larger supplies of white rice paddy for parboiled rice production as the government suspended the pledging program. These increases were the result of export prices for white and parboiled rice declining 20-30 percent from 2013. 

The Thai Government has continued to sell its rice stocks for export only while limiting its domestic sales to avoid downward pressure on domestic prices. Reportedly, the government has targeted sales of its rice stocks to exporters through closed and public tenders since late September 2014. This is also associated with the shipments under the government-to-government contracts (with China (100,000 MMT) and the Philippines (300,000 MMT) signed in August - September 2014) which were subcontracted to exporters with an export subsidy of approximately $20-30/MT that will be paid in kind with rice from the government stocks. In the public tender for white rice (5% grade) and broken white rice (A1 Super) of 207,899 metric tons held on October 28, the government reportedly accepted offers of around 203,000 metric tons which account for 98 percent of total tender. This compares to sales of only 40-50 percent of the total amount in the last two tenders. The bids were reportedly 8 percent below market prices for white rice and 20 percent for broken rice. Anticipated further sales of white rice from the government stocks will likely accelerate exports of white rice in the last quarter of 2014 and into 2015. This is expected to offset anticipated seasonal slowdown of parboiled rice exports to Nigeria in the last quarter of 2014. 

With expectations of continued strong exports and competitive prices driven by new crop sales and export subsidies linked to sales of government held rice, forecast rice exports for MY 2014/15 have been increased by approximately 5 percent to 11.0 million metric tons. 

3. Size and Quality of Government Held Rice Stocks Still Being Debated 

On October 28, 2014 results of the survey of government-owned rice inventory was published. The report said that only 10 percent of 18 million metric tons of rice stocks was in good condition. Meanwhile, 70 percent of the stocks was reportedly below quality standards. The remainder was deemed not good for human consumption. Missing rice totaled around 100,000 metric tons which is marginal compared to initial report of 3 million metric tons by the Finance Ministry in June 2013. The result of the stock inspection will be submitted to the National Anti-Corruption Commission for further investigation of fraud allegations about the previous government. 

Traders indicate that since the date of the survey in June 1st, about 2 million metric tons of rice has been sold out of the total 18 million metric tons. They estimate that about another 2 million metric tons of rice in good condition remains in government hands. Further, about 10 million metric tons could be reprocessed for domestic consumption or export. The remaining 4 million metric tons are not fit for human or feed consumption or unaccounted for. The government is considering the sales of non-edible rice for ethanol production. Thailand’s ethanol consumption more than doubled to 2.6 million liters per day in 2013 and continues on this upward trend. 

4. Harvest Approaching 

The forecast of MY 2014/15 rice and corn production remains unchanged. These include a 2 to 3 percent reduction due to unfavorable weather conditions, particularly in the northern region and central plain. The seasonal MY 2014/15 main-crop rice supplies will be peaking during November – December 2014, particularly in the northeastern region which accounts for 70-80 percent of total main-crop production. Farmers are likely to begin the cultivation of the off-season rice crop as early as November, particularly in the central plain as their farmland is not flooded this year due to below normal precipitation. According to the Ministry of Agriculture and Agricultural Cooperatives’ Office of Agricultural Economics, the MY2014/15 off-season rice production is forecast at 8.4 million metric tons which is closed to Post’s estimate. 

5. Precipitation remained low 

According to the Thai Meteorological Department, average precipitation for the whole country was 9 percent below normal in September 2014. Thus far, cumulative 2014 rainy season rainfall (May – October) is reportedly 8 percent below normal in the northern region and 22 percent below normal in the central plain. The Royal Irrigation Department (RID) expects possible water shortage in the dry season (November 2014 – April 2015) in these regions as major reservoirs are critically low. 

The RID announced on October 7, 2014 that it would restrict farmers in these regions from growing off-season rice crop by cutting water discharges from reservoirs for off-season rice production. This action will likely have limited impact on areas planted to off-season rice because most farmers in these regions have already prepared the land for their off-season rice production. Also, their farmlands are located around public canals where the RID has to supply water for multi-uses of households and ecological control. Most farmers in the northeastern regions are still able to grow off-season rice crop as reservoirs are in good conditions due to normal rain in the irrigated areas in this region