Report Highlights: 

TH4054 – MY2014/15 rice and corn cultivation is off to a slow start due to the lack of rain while the military government replaced the MY2014/15 Rice Pledging program with subsidy and price stabilization measures.

Executive Summary: 

MY2014/15 rice and corn cultivation is off to a slow start due to the unusually low precipitation in May, around 31 percent below average. Post’s corn and rice production forecast remains unchanged, however, corn production could be adversely affected if the dry conditions continue into July. Meanwhile, rice exports continue to grow despite uncertainties caused by the military government’s increased inspection of government rice stocks. The military government replaced the MY2014/15 rice pledging program with the subsidies to help reduce the cost of rice production. Post’s forecast for wheat and pluses remain unchanged. 

1. MY2014/15 crop cultivation facing rain deficiency 

Cultivation of the MY2014/15 rice and corn has been hampered by drought conditions. The Thai Meteorological Department (TMD) reported that precipitation is 31 percent below normal in May 2014. Precipitation in every region is far below normal levels. In the upper northeastern part of the country, the average precipitation hit a 30-year low. The TMD expects precipitation in major rice and corn producing areas to be approximately 10 percent below average in June and 4-9 percent below average in July. Corn production will likely be adversely affected if the unusually low precipitation continues into July, which is the flowering stage for corn. Post’s MY2014/15 rice and corn production forecast remains unchanged from the previous estimate, which expects a 2 to 3 percent reduction in rice and corn production from the previous year. 

2. Corn and rice exports likely on track despite uncertainties during the coup 

Post’s forecast for MY2013/14 corn and rice exports remain unchanged from the previous estimate (1 million metric tons and 9 million metric tons, respectively). According to Board of Trade of Thailand, corn exports totaled approximately 1 million metric tons during the period between July 2013 to May 2014, up significantly from the same period last year. Thai corn is mostly exported to China and the Philippines due to its relatively lower prices compared to other competitors. However, corn exports for the remainder of the year will likely be marginal as domestic corn prices have increased significantly to 9-10 baht/kg. ($276-307/MT) in June 2014 compared to around 6 baht/kg. ($185/MT) in January. The higher prices are mostly due to strong demand from local feed mills. 

According to Thai Custom Department, total rice exports from January 1 – May 31, 2014 totaled 3.8 million metric tons, up 52 percent from the same period last year. The increase in exports is attributed mainly to the increase of white and parboiled rice exports. Exports of white rice nearly doubled to approximately 2.2 million metric tons due primarily to the sales of government rice stocks. Average export prices for 5% grade white rice declined to $395/MT, down 30 percent from the same period last year. Exports of parboiled rice increased to approximately 0.9 million metric tons, up 70 percent from the same period last year. Parboiled rice exports are likely to trend higher as the military government has eliminated the MY2014/15 rice pledging program. White rice exports will likely slow during July - August as the military government increases its inspections of warehouses that store government rice stocks. Exports of government-owned rice stocks, particularly white rice, are likely to pick up again in the next couple of months after the military government completes its inspections. 

3. Input subsidy and price stabilization program for MY2014/15 

On June 24, 2014 the military government approved a 4.7 billion baht ($145 million) budget to fund the MY2014/15 Rice Farmer Assistance Program. The program will consist of input subsidies and price stabilization measures, which is expected to be a short-term measure to help reduce the cost of rice production. The input subsidies will comprise mainly of soft loans that the government will subsidize through the Bank for Agriculture and Agricultural Cooperatives (BAAC). Farmers will be eligible to apply for six-month loans with 3% interest rates through the program compared to 7% in the open market. Each farmer will be eligible for up to 50,000 baht. The program is expected to help reduce rice production costs by 150 baht per rai ($29/hectare). In addition, the government is encouraging the private sector to discount farm inputs and equipment supplies, including land and combine harvesters, to support the program. The discount is expected to lower the production costs by another 432 baht per rai ($83/hectare). In addition, the Ministry of Commerce has been tasked by the military government to come up with measures to keep the price of rice paddy between 8,500 – 9,000 baht per metric ton ($262-277/MT)