News / Economy

Thai Rice to Flood Global Markets as Subsidy Ends

Kittisak Ratanawarahal, chairman of the Northern Farmers Network, stands in warehouse of rotten rice abandoned ten years ago in Phichit province under price-support scheme by then-prime minister Thaksin Shinawatra Feb. 6, 2014.
Kittisak Ratanawarahal, chairman of the Northern Farmers Network, stands in warehouse of rotten rice abandoned ten years ago in Phichit province under price-support scheme by then-prime minister Thaksin Shinawatra Feb. 6, 2014.
Reuters
Millions of tons of Thai rice are set to flood into already oversupplied international markets when the government's controversial subsidy scheme grinds to a halt later this month.

The country's caretaker government last week said it did not have the power to renew the program, which has paid farmers in one of the world's top exporters of rice nearly double market rates and is due to expire at month-end.

That will force farmers to offload the March harvest into a market currently dominated by India and Vietnam. With Bangkok already shifting grain from record government stockpiles, the sales threaten to worsen a supply glut that has dragged on international prices.

While many rice farmers are expected to remain loyal to Prime Minister Yingluck Shinawatra, who swept to power in 2011 on the back of rural votes generated in part by the subsidies, a slump in prices that could be blamed on her leadership would erode her support base and be another blow for her embattled government.

The bulk of the around 5 million tons of milled grain that is expected to be produced from next month's crop, equivalent to more than 10 percent of all rice traded globally last year, is likely to be sold to exporters as farmers and millers have limited capacity to hold back stocks.

"It's like farmers are being set adrift. We will have to sell rice to millers at prices lower than what we got in the past," said Boonserm Thongsook, a farmer in the province of Suphan Buri, around 40 km north of Bangkok.

"I may not vote for Yingluck again as she ignores us. The scheme is about to end and she does nothing to support us."

The subsidy program has been mired in allegations of corruption and faced growing losses, becoming a target of a Bangkok-based protest movement bent on ousting Yingluck and the caretaker government she has led since December.

Unrest is spreading to her party's natural supporters in the countryside, where many farmers have gone unpaid for their rice for months as the program scrambles for funding.

Hundreds of unpaid Thai rice farmers this week swarmed around Yingluck's temporary office and threatened to storm the building.

Any possible reintroduction of the rice-buying scheme would be off the cards until the completion of disrupted elections, which the country's Election Commission said was unlikely until late April.

Most market participants expect some sort of program to re-emerge no matter who wins at the polls, though it is likely to be far less generous than the current scheme. Thailand has had different forms of rice support scheme for around three decades.

"From the world market's point of view, the end of the scheme could be bearish because it implies a potentially large boost to world export availability," said Darren Cooper, senior economist with trade body the International Grains Council in London.

Global glut

Traders and officials said Thai rice prices, which have already dropped 14 percent since January, won't fall much further as they are already cheaper than competing varieties.

"Exporters will not offer prices that are lower than their costs of production," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

Thai exporters said prices could fall to $350 ($1 = 32.4 baht) a ton for the benchmark 5-percent broken variety, the lowest in seven years, from $375 a ton currently offered on a free on board basis.

That compares with $410 a ton being quoted for similar varieties in top exporter India and $400 a ton in No.2 seller Vietnam.

Thailand paid farmers 15,000 baht ($463) per ton of paddy under the intervention scheme that started in October 2011, compared to the 8,000-9,000 baht per ton they can expect in the open market this year.

Most Thai farmers live in poor and remote areas that lack access to large storage silos, meaning they have little opportunity to hold back rice in hope that prices will climb in future.

As well as sales from the upcoming harvest, authorities will open a tender this week to sell 500,000 tons of rice from state warehouses, after a previous 400,000-ton offering attracted healthy interest.

Extra supply from Thailand comes as India is looking to shrink reserves swollen after bountiful monsoon rains and Vietnam starts to harvest the highest-yielding of its three annual crops.

The world's top rice buyers in Southeast Asia and Africa, who have stayed out of the market since January, are likely to make the most of their purchases from Thailand, hitting Indian and Vietnamese exports.

"Demand in the start of the first quarter has been subdued but we expect buyers to be back in the market in March or April," said a Singapore-based trader, who declined to be named.

"They will any day prefer Thai rice over other origins even if the prices are at par."

Thailand, which was the world's top exporter of rice until Yingluck's intervention scheme derailed shipments in 2011, is known for its high quality grains.

Vietnam has said it expects its rice exports in January-March to decline by a quarter with African buyers switching to cheaper Thai cargoes.

You May Like

Obama: Alaskans Feel Signs of Climate Change

They're seeing bigger storm surges as sea ice melts, more wildfires, erosion of glaciers, shorelines More

1855 Slave Brochure Starkly Details Sale of Black Americans

Document lists entire families that were up for sale in New Orleans, offering graphic insight into the slavery trade More

Katrina Brought Enduring Changes to New Orleans

The city’s recovery is the result of the people and culture the city is famous for, as well as newcomers and start-up industries More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Colombians Flee Venezuela as Border Crisis Escalatesi
X
August 27, 2015 2:08 AM
Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Is China's Economic Data Accurate?

Some investors say China's wild stock market gyrations have been made worse by worries about the reliability of that nation's economic data. And some critics say the reports can mislead investors by painting an unrealistically-strong picture of the economy. A key China scholar says Beijing is not fudging ((manipulating)) the numbers, but that the economy is evolving quickly from smoke-stack industries to services, and the ways of tracking new economic activity are falling behind the change. V
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Shipping Containers Provide Experimental Housing

Housing prices around the San Francisco Bay area are out of reach for many people, so some young entrepreneurs, artists and tech industry workers are creating their own houses using converted shipping containers. But as VOA's Mike O’Sullivan reports from Oakland, the effort requires ingenuity and dealing with restrictive local laws.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video Technique May Eliminate Drill-and-Fill Dental Care

Many people dread visiting dentists because they're afraid of drills. Now, however, a technology developed by a British firm promises to eliminate the need for mechanical cleaning of dental cavities by speeding a natural process of tooth repair. VOA’s George Putic reports.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.
Video

Video French Experiment in Integrating Roma Under Threat

Plans to destroy France’s oldest slum have sparked an outcry on the part of its Roma residents. As Lisa Bryant reports from the Paris suburb of La Courneuve, rights groups argue the community is a fledgling experiment on integrating Roma who are often outcasts in many parts of Europe.
Video

Video Kenyans Turn to Agriculture for Business

Each year Kenyan universities continue to churn out graduates for the job market despite the already existing high rate of unemployment among youth in the country. Some of these young men and women have realized that agriculture can be as rewarding as any other business or job, and they are resorting to agribusiness in large numbers as a way of tackling unemployment. Rael Ombuor reports for VOA.
Video

Video First Women Graduate Elite Army Ranger School

Two women are making history for the U.S. Army by proving they are among the toughest of the tough. VOA's Carla Babb reports from Fort Benning, Georgia as 94 men and those two women rise as graduates of the difficult Ranger school.

VOA Blogs

World Currencies

EUR
USD
0.8874
JPY
USD
120.83
GBP
USD
0.6497
CAD
USD
1.3271
INR
USD
66.162

Rates may not be current.