Supply shortage mars exporters

Despite being the world's biggest rice-exporting country, Thailand's rice exporters are facing problems with escalating prices and shortages.

This has led to stagnant trading in both internal and external rice markets.

There is intense international demand for Thai rice this year, but exporters are reluctant to commit to contracts out of fear that unpredictable prices and supplies may bring them financial losses.

Since last December, following last year's main harvest, domestic rice prices have jumped to record-high levels. White rice that cost Bt1,170 per 100-kilogram sack in December rose to Bt1,400 last month, the price of jasmine rice increased from Bt2,100 per sack on January 9 to Bt2,300 this month, and broken rice has also risen from Bt1,100 per sack to Bt 1,310 early this month.

"We [exporters] are waiting for the second rice crop, which will enter the market early next month, to see whether it will solve the serious supply-shortage problem. It is a problem of 'overheating'," said Korbsook Iamsuri, CEO of export firm Kamolkij.

She said the present baffling situation of supply shortage existed despite the country's main crop having just been delivered. Most of the rice had "gone missing".

The main crop delivers an average of 15 million to 17 million tonnes of paddy rice, or 7 million to 8 million tonnes of milled rice. Even though some rice is damaged, the amount of paddy rice entering the market can be expected to total between 10 million and 20 million tonnes, she said.

Korbsook accused rice mills, farmers and traders of "using market mechanisms" to shore up prices. She said this group would currently be holding the country's rice stocks. As a result, it was difficult to foresee any drop in prices.

Exporters are expected to sell an average of 800,000 tonnes of rice per month during this year's first quarter, but the rest of the year is unpredictable, with exporters hoping to see good production.

She said the supply shortage and rising prices were preventing exporters from taking advance orders. Instead, they are taking orders on a month-by-month basis. They must make sure they have enough rice for delivery, or else they  their reputations will suffer in export markets.

Kamolkij, which recorded revenue of Bt6 billion last year, focuses on exports of parboiled rice, for which the price earlier this month was US$450 (Bt14,600) per tonne. Local supplies have recently risen Bt300 per tonne.

Korbsook said the industry ran on very low margins. Exporters are also facing the double-edged sword of the stronger baht. Each time the local currency strengthens Bt1 against the US dollar, the export price of rice increases $15 per tonne.

She said exporters had taken many orders earlier this year but found they were unable to build up large stockpiles, due to uncertain supplies and prices.

Low world supplies but rising demand from many countries has brought buyers to Thailand's door. India is unable to export parboiled rice this year, while Vietnam has already sold 1 million tonnes and is unable to take any more orders. Egypt has also suspended exports, because its production has fallen by 500,000 tonnes.

So far, the Philippines has sought 500,000 tonnes and been able to buy only 400,000 tonnes. Indonesia wants to import 1 million tones but has not yet found a supplier. Iraq and Iran both want to import 500,000 tonnes.

Korbsook said buyers were opting for lower grades of rice, in order to avoid higher costs.

"I don't think the market will crash because of the current problems, but rather will gradually correct itself. Any-one who handles stockpiles will release them before new supplies enter the market, both in Thailand and other rice-exporting countries," she said.

Achara Pongvutitham

The Nation