Highlights

MY2016/17 rice and corn crops are in good condition despite the planting delay as precipitation has returned to normal. MY2015/16 wheat imports were higher than expected, particularly for feed wheat due to the shortages of domestic supplies of broken rice and corn for swine and poultry feed rations.

Executive Summary

Post's forecast of MY2016/17 grain production remains unchanged at 17 million metric tons for rice and 4.9 million metric tons for corn, up 7 and 4 percent from MY2015/16, respectively. Cumulative precipitation has increased to normal levels since July 2016, which is 13 percent above last year.

MY2016/17 rice and corn crop conditions are good to excellent. Meanwhile, late supplies of irrigated water for the central plains will likely result in a slight reduction in main-rice production to 13.8 million metric tons as it is too late for cultivation, particularly in lower areas, due to the concern about possible flooding damage during the harvest in November. However, anticipated sufficient water supplies by the end of rainy season will likely result in some recovery of the MY2016/17 off-season rice production to 3.2 million metric tons as expected in the previous forecast.

MY2015/16 wheat imports were higher than expected at 4.7 million metric tons due to an increase in feed wheat imports to 3.3 million metric tons driven by the shortages of domestic supplies of corn and broken rice for poultry and swine feed rations. In addition, prices of imported feed wheat were 18 percent cheaper than domestic corn and 30 percent cheaper than broken rice.

Rice

Thailand's Rice Production, Supply and Demand

Rice, Milled

2014/2015

2015/2016

2016/2017

Market Begin Year

Thailand

Jan 2015

Jan 2016

Jan 2017

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

10270

10643

9444

9444

9550

9543

Beginning Stocks

11899

11899

10570

11207

6070

6807

Milled Production

18750

19404

15800

15800

17000

17000

Rough Production

28409

29400

23939

23939

25758

25758

Milling Rate

6600

6600

6600

6600

6600

6600

MY Imports

300

300

300

300

250

300

TY Imports

300

300

300

300

250

300

TY Imp. from U.S.

3

0

0

0

0

0

Total Supply

30949

31603

26670

27307

23320

24107

MY Exports

9779

9796

9800

9000

9000

9000

TY Exports

9779

9796

9800

9000

9000

9000

Consumption and Residual

10600

10600

10800

11500

11100

12500

Ending Stocks

10570

11207

6070

6807

3220

2607

Total Distribution

30949

31603

26670

27307

23320

24107


Cumulative precipitation has increased to normal levels since July 2016, which is 13 percent above last year. Tropical storms and depressions during mid-August 2016, which caused flash floods in the northern region, also helped recharge reservoirs, particularly for the Sirikit Dam. Meanwhile, the flood damage on rice and corn crops is reportedly marginal as the overflow of rivers quickly receded. Presently, water supplies in this reservoir, which accounts for around one third of total irrigation water for the lower northern and central plain regions, are well above critical low levels. However, water supplies in the other major reservoir (Bhumibol Dam) which accounts for around half of total irrigation remain critically low due to weak monsoon path in this area. Water supplies in major reservoirs in the northern region, which are the main sources of irrigated water supplies for rice planting in the lower northern region and central plains, increased to 3.8 billion cubic meters (as of August 24, 2016), compared to 2 billion cubic meters in July 2016. However, these reservoir levels are still lower than the ideal of 7 billion cubic meters. Nevertheless, the RID expected that precipitation during the remaining rainy season months of September and October will be enough to recharge reservoirs to levels that enable the RID to supply irrigated water for MY2016/17 off-season rice plantation.Precipitation well above last year

MY2016/17 main-rice crop still far below last year

MY2016/17 main-rice crop planting is approximately 13 percent lower than MY2015/16. This is mainly due to an acreage reduction in Chaopraya river basin, particularly in the central plains, as the RID did not supply water for these areas in order to preserve the water for household consumption while reservoirs were critically low during May - July. Farmers in these areas rely on canal water to irrigate their rice crop. Although the RID began to supply water in early August, some farmers in these areas decided not to plant their main-rice crop due to the concern about possible seasonal flooding damage during the harvest which is expected to occur in November 2016. Also, the Geo-Informatics and Space technology Development Agency (GISTDA) reported in early August that total planted areas of main-rice crop declined 19 percent from the same period last year due to the planting delays in the lower northern region and central plains. This is in line with Post's forecast in April that MY2016/17 main-rice crop areas are expected to decline by around 4 percent from MY2015/16 with a slight reduction in main-rice production to 13.8 million metric tons. Meanwhile, Post expects some recovery in MY2016/17 off-season rice production to 3.2 million metric tons in anticipation of sufficient water supplies from reservoirs. Post's forecast for the MY2016/17 rice production remains unchanged at 17 million metric tons, which is expected to increase 8 percent from MY2015/16.

Rice exports higher-than-expected in the first half of 2016 driven by sales of government stocks

Thai rice exports in the first half of 2016 totaled around 5 million metric tons, up 12 percent from the same period last year. This is mainly due to an increase in white rice exports totaling around 2.8 million metric tons, up 20 percent from the same period last year. Exports of white rice more than offset a reduction in parboiled rice which declined around 14 percent from the same period last year due to tight supplies of new-crop white rice. The increase in white rice exports is driven by the sales of old-crop white rice from the government stocks. The government sold approximately 3.2 million metric tons out of total tenders of 8.4 million metric tons during January – July 2016. Export prices of old-crop white rice were $75-80/MT lower than those of current crop. This is reportedly competitive in African market as it is approximately 10 percent cheaper than Vietnamese new-crop rice.

Post revised up Thai rice export estimates in 2016 to 9 million metric tons from the previous forecast. However, it is still 8 percent lower than last year's exports of 9.8 million metric tons due to tight supplies of new-crop white and parboiled rice and competition from Vietnamese and Indian rice, particularly in the third quarter of 2016. Also, the government is likely to slow down its sales of food-grade rice stocks for the rest of 2016 to avoid downward pressure on domestic rice prices during the harvest of new-crop rice in the last quarter of 2016. The government announced that the public tender for 0.7 million metric tons of food-grade rice on August 29-30, 2016 will be the last tender for food-grade rice in 2016. It will likely issue only non-food grade rice tenders for industrial uses in the remaining months of the year. Presently, it is still holding around 9 million metric tons of rice stocks.

Government measures to stabilize domestic rice prices

The government has introduced measures to stabilize domestic prices of rice paddy, for when large supplies of MY2016/17 main-rice crop will enter the market in November 2016. It aims to hold around half of the total main-crop rice supplies off the market during the peak harvesting season (November 2016 – February 2017). The measures which were approved by the cabinet in June 2016 will mainly consist of the following programs: (1) On-Farm Pledging Program (Farmer Loans to Delay the Sales of Rice Paddy) which aims to stabilize farm-gate prices for fragrant and glutinous rice paddy in the northern and northeastern regions. The target of this program is to pledge 2 million metric tons of fragrant and glutinous rice paddy. Farmers will also receive storage costs of up to 1,500 baht per metric tons ($42/MT). (2) Soft Loan for Farmer Institution to Stockpile Rice Paddy Program which will provide a 3 percent interest rate subsidy for farmer institutions to stock pile rice paddy of up to 2.5 million metric tons. (3) Soft Loan for Rice Traders and Millers Program which will provide a 3 percent interest rate subsidy to encourage rice traders and millers to stockpile rice or paddy up to 8 million metric tons for 2 to 6 months.

Corn

Thailand's Corn Production, Supply and Demand

Corn

2014/2015

2015/2016

2016/2017

Market Begin Year

Jul 2014

May 2015

Jul 2016

Thailand

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

1100

1100

1090

1090

1120

1120

Beginning Stocks

144

144

138

139

118

172

Production

4800

4800

4700

4700

4900

4900

MY Imports

600

600

600

600

600

600

TY Imports

600

600

600

600

600

600

TY Imp. From US

51

0

0

0

0

0

Total Supply

5544

5544

5438

5439

5618

5672

MY Exports

306

305

120

367

150

200

TY Exports

247

247

150

310

200

200

Feed and

5000

5000

5100

4800

5250

5250

Residual FSi

100

100

100

100

100

100

Total Cons.

5100

5100

5200

4900

5350

5350

Ending Stocks

138

139

118

172

118

122

Total

5544

5544

5438

5439

5618

5672

The MY2016/17 corn crop in key planting areas in the northern region which accounts for around 70 percent of total corn production is reportedly good to excellent due to favorable rain during the flowering stage despite the lack of rain during the seedling stage. Also, corn planted area increased significantly in some areas as cassava and sugarcane crops which were adversely affected by drought were reportedly replaced with corn due to a seedling shortage. In addition, farm-gate prices of cassava and sugarcane declined around 15 percent from last year. Post expects that MY2016/17 corn production is likely to increase to 4.9 million metric tons which is a 4-percent increase from MY2015/16.

The Thai Feed Mill Association's forecast of feed demand remains unchanged at 18.6 million metric tons in 2016, up approximately 4 percent from 2015. Feed industries rely more on imported feed ingredients which currently account for approximately 60 percent of total feed demand due to insufficient locally produced feed grains and co-products. Import demand for U.S. feed ingredients is expected to trend upward, particularly for soybean and soybean meal, and Distiller's Dry Grain with Soluble (DDGS).

MY2015/16 corn exports were higher than expected at around 0.4 million metric tons, mainly to the Philippines due to the advantage on transportation costs over the U.S. corn. This is also driven by larger exportable supplies of locally produced corn as feed mills reportedly used more imported feed wheat and DDGS in poultry feed rations due to its relatively cheaper prices compared to domestic corn by 18 and 10 percent in MY2015/16, respectively. In addition, demand for feed ingredients, particularly for corn, has outpaced domestic production of corn due to limited arable land and low incentives in using modern germplasm to locally develop high-yield seeds, compared to annual growth rate of 8 percent in feed demand over the past decade. As a result, imports of feed ingredients increased significantly in MY2015/16, particularly for feed wheat (3.3 million metric tons, mainly from Ukraine) and DDGS (0.5 million metric tons, mainly from the U.S.) for poultry and swine feed rations.

Wheat

Thailand's Wheat Production, Supply and Demand

Wheat

2014/2015

2015/2016

2016/2017

Market Begin

Jul 2014

July 2015

Jul 2016

Thailand

USDA

New

USDA

New

USDA

New

Official

Post

Official

Post

Official

Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

547

547

866

865

1371

885

Production

0

0

0

0

0

0

MY Imports

3488

3487

4800

4691

3800

3600

TY Imports

3488

3487

4800

4691

3800

3600

TY Imp. From US

646

666

0

632

0

650

Total Supply

4035

4034

5666

5556

5171

4485

MY Exports

219

219

235

235

250

220

TY Exports

219

219

235

235

250

220

Feed and

1850

1850

2900

3276

2400

2000

FSI Cons.

1100

1100

1160

1160

1240

1240

Total Consumption

2950

2950

4060

4436

3640

3240

Ending Stocks

866

865

1371

885

1281

1025

Total Distrib.

4035

4034

5666

5556

5171

4485

Distribution

Post's forecast for MY2016/17 wheat imports remains unchanged at 3.6 million metric tons. This is a 23-percent reduction from MY2015/16 in anticipation of a reduction in feed wheat imports due to anticipated recovery in domestic production of corn and rice from severe drought in the previous year. Meanwhile, imports of milling wheat are expected to continue trending upward due to growing wheat-based food consumption and expanding production capacity of bakery manufacturers. Import demand for U.S. wheat will likely continue to increase to around 0.7 million metric tons, up approximately 3 percent from MY2015/16.

MY2015/16 wheat imports are revised up to 4.7 million metric tons due to higher-than-expected demand for feed wheat in poultry and swine rations. MY2015/16 feed wheat imports increase significantly to approximately 3.3 million metric tons due to the shortage of domestic corn and broken rice production. In addition, prices of imported feed wheat were 18 percent cheaper than domestic corn and 30 percent cheaper than broken rice in MY2015/16.