Highlights

The majority of main-crop rice and corn supplies have entered the market creating downward pressure on farm-gate prices. In response, the government implemented an on-farm pledging program for all varieties of rice and restricted feed wheat imports. White rice prices will likely remain under downward pressure in anticipation of bountiful MY2016/17 off-season rice production.

Executive Summary

Post's rice and corn production forecast remains unchanged. The majority of MY2016/17 main-crop rice and corn supplies have entered the market creating downward pressure on domestic prices. Rice farmers have begun to plant off-season rice in irrigated areas despite government incentives to shift from rice production to alternative crops like corn. The government is also implementing an on-farm pledging program for all varieties of main-crop rice. The pledging program's target is 3 million metric tons of paddy which accounts for approximately 15 percent of total main-crop rice production. Additionally, the government decided to restrict feed wheat imports in order to raise falling farm-gate corn prices.

Rice exports totaled approximately 7.8 million metric tons from January – October 2016, down 1 percent from the same period last year largely due to a reduction in parboiled rice exports. Exports of white rice have slowed as the government has suspended sales of rice stocks since September 2016.

Post's rice export forecast remains unchanged at 9 million metric tons in 2016 and 10 million metric tons in 2017.

Wheat imports totaled 1.3 million metric tons during the first quarter of MY2016/17, up 15 percent from the same period last year. This increase reflects high import demand for feed wheat. However, imports of feed wheat are expected to decrease in the second half of MY2016/17 due to the government's new import restrictions. Post's MY2016/17 wheat import forecast is unchanged at 3.6 million metric tons which is a 23 percent decline from MY2015/16 due to the anticipated reduction of feed wheat imports.

1. Rice

1.1 MY2016/17 Main-Crop Rice Harvest Almost Complete

The majority of MY2016/17 main-crop rice supplies have entered the market. Farmers in the northern and northeastern regions, which are major growing areas of fragrant and glutinous rice, are likely to complete their harvest by the end of November 2016. Production of fragrant and glutinous rice, which is mainly grown in non-irrigated areas, is estimated at around 8 million metric tons (milled basis) accounting for approximately 60 percent of total main-crop rice production. Average yields reportedly increased 5 percent from MY2015/16 due to favorable weather conditions. Cumulative precipitation in these regions increased around 24 percent from last year. However, production of white rice, which is mainly grown in irrigated areas in the lower norther region and the central plains, is expected to decline due to a reduction in planted area. Planted area of MY2016/17 main-crop rice declined 8 percent from MY2015/16 as the RID did not supply water for rice planting during May – July 2016 due to critically low reservoirs . Presently, around half of main-rice crop in irrigated areas have been harvested which is far below normal due to planting delays. Post's forecast of main-crop rice production remains unchanged at around 14 million metric tons, down slightly from last year as the increase in fragrant and glutinous rice production is offset by a reduction in white rice production.

The water supplies for irrigation in major reservoirs in the northern region increased to 10.2 billion cubic meters, up significantly from 4.2 million cubic meters last year. The RID's water supply target for MY2016/17 off-season rice area has increased to around 6 million rai (roughly 1 million hectares). This target would include areas where the government has encouraged farmers to shift to alternative crops. Where possible, farmers continue to grow off-season rice instead of alternative crops like corn due to sufficient water supplies for rice cultivation. Post's forecast of MY2016/17 off-season rice production remains unchanged at around 5 million metric tons which is a significant increase from the approximately 2 million metric tons produced last year. As a result, domestic prices of white rice will likely remain under downward pressure through the first quarter of 2017.

1.2 Rice Exports Decrease in October 2016

Thai rice exports declined to 0.9 million metric tons in October 2016, down 24 percent compared to the same period last year. This reduction reflects the government's suspension of rice stocks sales. Rice exports during January – October 2016 totaled 7.8 million metric tons, down approximately 1 percent from the previous year due largely to a reduction of parboiled rice exports. Exports of parboiled rice declined around 18 percent due to tight supplies of white rice paddy for parboiled rice production and export competition from India. Meanwhile, export growth of white rice has slowed as the government has suspended rice stocks sales since September 2016. The reduction in parboiled rice exports is more than offset by the increase in fragrant rice exports which increased around 16 percent from the same period last year.

Post's forecast of rice exports in 2016 is 9 million metric tons which is an 8 percent decline from last year. This is due to a slowdown in white rice exports in the last quarter of 2016 caused by the suspension of old-crop rice sale from government stocks. Also, large-volume shipments of new-crop white rice have been limited, mostly to China under the government-to-government agreement. Under this agreement, the first shipment of 100,000 metric tons of 5% grade new-crop white rice will be shipped to China between October 25 and November 22, 2016. The shipment's FOB prices were finalized at $394/MT for 50 kilogram packages and $399/MT for 25 kilogram packages. This is the first shipment of the agreed upon two million metric tons in the December 2015 government-to-government agreement between Thailand and China. The government allocated the shipment tonnage to private rice exporters as the government does not hold stocks of new-crop rice.

Export prices of new-crop rice were volatile in November 2016 as the majority of new-crop fragrant and white rice supplies were entering the market. Fragrant rice prices declined by 100 USD/MT in the beginning of November and then increased by 40 USD/MT to around 576 USD/MT during the last week of the November 2016 once traders realized that their forecasts of MY2016/17 fragrant rice production were overly optimistic. Meanwhile, foreign buyers reportedly took a “wait and see" position during the recent price volatility.

Post's forecast of rice exports in 2017 remains unchanged at 10 million metric tons, up 11 percent from 2016. This is mainly due to a recovery in parboiled rice exports following an anticipated increase in MY2016/17 off-season rice production. Also, the government is likely to continue sales of food-grade rice stocks and has announced plans to sell 8 million metric tons in 2017. Previous year's plans to sell off government rice stocks have fallen well short of announced targets. However, the sale of government rice stocks will help maintain the Thai white rice export market in African countries as old-crop rice prices are much cheaper than new-crop white rice prices.

1.3 Pledging Program to Cover All Varieties of Rice

The government approved a 41 billion baht (1.2 USD billion) budget for the MY2016/17 On-Farm Paddy Pledging Program which is to include all MY2016/17 main-crop rice varieties, from November 2016 until February 28, 2017. The program aims to stabilize domestic prices during the peak main-crop rice harvest. The program's target is set at 3 million metric tons of paddy, accounting for approximately 15 percent of total main-crop rice production. The intervention prices for the program have been set below market prices.

Farmers participating in the pledging program will receive a subsidy on storage costs of 1,500 baht per metric ton (42 USD/MT) as well as a direct payment of 2,000 baht per metric ton (57 USD/MT) for certain harvest and postharvest handling costs (up to 12,000 baht (340 USD) per farm household). In total, participating farmers will receive 13,000 baht per metric ton (368 USD/MT) for Hom Mali fragrant and glutinous rice paddy, 10,500 baht/MT (300 USD/MT) for white rice paddy, and 11,300 baht/MT (323 USD/MT) for Pathumthani fragrant rice paddy. While the intervention prices are below market prices, when supplemental subsidies are included the total amount received by farmers is 20-40 percent above current market prices. Meanwhile, farmers who do not participate in the pledging program will still be eligible for the direct payment of 2,000 baht per metric ton (57 USD/MT) for certain harvest and postharvest handling costs (a maximum of 12,000 baht (340 USD) per farm household).

On November 15, 2016, the government agreed to subsidize farmers who are willing to reduce their MY2016/17 off-season rice planting area. The program's goal is to replace off-season rice area of 200,000 rai (32,000 hectares) in 19 provinces in the central plains with legumes as well as 2 million rai (320,000 hectares) in 35 provinces throughout Thailand with corn. Participating farmers will receive seeds (5 kg/rai, a maximum of 20 rai (3.2 hectares)) and 1,000 baht/rai (177 USD/hectare) for land preparation. Additionally, farmers who are willing to shift to corn will receive a soft loan of 4,000 baht/rai (714 USD/hectare) with a low interest rate of 4 percent. All corn production under this project would be purchased by participating feed mills at a price no less than 8 baht/kg (229 USD/MT).

2. Corn Production and Policy Update

Post's forecast of MY2016/17 corn production remains unchanged at 5.2 million metric tons, up 11 percent from MY2015/16 due to acreage expansion and favorable weather conditions. Around 60 percent of this year's corn has already been harvested. Average yield is expected to increase by 3.2 percent as precipitation has been favorable. Farm-gate prices declined to 6 baht per kilogram (170 USD/MT) in October 2016, down 19 percent from the same period last year.

The downward pressure on domestic corn prices led the cabinet to decide on November 8, 2016 to restrict feed wheat imports (HS 1001.99.90). Under the new regulations, import permits will be required for the import of feed wheat. Also, feed wheat imports will be subject to a 3 to 1 domestic corn absorption requirement meaning that in order to import a ton of feed wheat a mill would have to use 3 metric tons of domestic corn. In addition, the government set the minimum purchase price for domestic corn at 8 baht/kg (227 USD) for feed mills. Moreover, the Department of Livestock Development will review compound feeds containing feed wheat due to alleged concerns about aflatoxin and radiation contamination of imported feed wheat. Thailand's feed wheat imports come mainly from Ukraine and Argentina. Imports of feed wheat from January – September 2016 totaled 2.7 million metric tons which is a 20 percent increase from the same period last year. The increase in feed wheat imports reflect their competitiveness compared to domestic corn for meeting the growing feed demand in poultry and swine industries.

3. Wheat Import Update

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 due to the government's restrictions on imported feed wheat. Also, domestic corn production is expected to increase significantly due to favorable weather conditions. Meanwhile, imports of milling wheat are expected to continue to trend upwards due to consumption growth of wheat-based foods, particularly for breads and instant noodle products. Import demand for U.S. wheat is expected to increase to around 0.7 million metric tons which is a 3 percent increase from MY2015/16.

During the first quarter of MY2016/17, wheat imports totaled 1.3 million metric tons which is a 15 percent increase from the same period last year. Imports of feed wheat totaled around 1.1 million metric tons, up 29 percent from the same period last year. However, feed wheat imports are likely to slow down in the second half of the MY2016/17 as the government has restricted the import of feed wheat since November 2016 as feed wheat imports have adversely affected domestic corn prices. Meanwhile, imports of milling wheat declined to around 0.2 million metric tons, down 25 percent from last year, mainly due to a reduction of imports of Australian and Canadian wheat. Imports of U.S. wheat doubled at the expense of Australian wheat. U.S. wheat imports are likely to account for more than half of total import demand for milling wheat in MY2016/17 due to competitive prices.

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

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

10270

10643

9444

9444

10080

10083

Beginning Stocks

11999

11999

10770

11307

7870

8907

Milled Production

18750

19404

15800

15800

18600

18600

Rough Production

28409

29400

23939

23939

28182

28182

Milling Rate (.9999)

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

31049

31703

26870

27407

26720

27807

MY Exports

9779

9796

9200

9000

9500

10000

TY Exports

9779

9796

9200

9000

9500

10000

Consumption and

10500

10600

9800

9500

10600

11500

Ending Stocks

10770

11307

7870

8907

6620

6307

Total Distribution

31049

31703

26870

27407

26720

27807

Corn

2014/2015

2015/2016

2016/2017

Market Begin

Thailand

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

1100

1100

1090

1090

1170

1168

Beginning Stocks

144

144

139

139

172

172

Production

4800

4800

4700

4700

5200

5200

MY Imports

600

600

600

600

600

600

TY Imports

600

600

600

600

600

600

TY Imp. from

51

0

0

0

0

0

Total Supply

5544

5544

5439

5439

5972

5972

MY Exports

305

305

367

367

400

300

TY Exports

247

247

439

310

400

300

Feed and

5000

5000

4800

4800

5250

5450

FSI

100

100

100

100

100

100

Total

5100

5100

4900

4900

5350

5550

Ending Stocks

139

139

172

172

222

122

Total

5544

5544

5439

5439

5972

5972

Wheat

Market Begin

Year

Thailand

2014/2015

2015/2016

2016/2017

Jul 2014

Jul 2015

Jul 2016

USDA

Official

New

Post

USDA

Official

New

Post

USDA

Official

New

Post

Area Harvested

0

0

0

0

0

0

Beginning Stocks

547

547

866

865

985

885

Production

0

0

0

0

0

0

MY Imports

3488

3487

4814

4691

3600

3600

TY Imports

3488

3487

4814

4691

3600

3600

TY Imp. from

646

666

679

632

0

650

Total Supply

4035

4034

5680

5556

4585

4485

MY Exports

219

219

235

235

250

220

TY Exports

219

219

235

235

250

220

Feed and

1850

1850

3300

3276

2400

2000

FSI

1100

1100

1160

1160

1240

1240

Total

2950

2950

4460

4436

3640

3240

Ending Stocks

866

865

985

885

695

1025

Total Distribution

4035

4034

5680

5556

4585

4485