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Published on March 3, 2008

Good news for fruit farmers! Popular exports - pineapples, durians, mangosteens and longans - will enjoy higher prices this year, according to an Office of Agricultural Economics forecast.

But there is bad news, too. In the annual report on forecast crop prices, the office said baht appreciation would minimise potential gains, as would higher fuel and transport costs on the back of skyrocketing crude-oil prices.

More bad news: the worst-case scenario is expected to come true, given the Bank of Thailand's decision on Friday to revoke the 30-per-cent capital-reserve requirement. The revocation is expected to draw more inflows into the Kingdom and further push up the baht against the US dollar.

Though a strong baht has reduced imported fertiliser costs and shipping rates, farmers' potential gains are diminished by the stronger baht pushing down export prices.

Meanwhile, high oil prices will push up fuel and transport costs for farmers.

"Supply will be greater than last year due to global warming," Apichart Jongskul, secretary-general of the office, said during an interview. "Prices could be under pressure."

In the summary of crop prices, the office expected export prices of canned pineapple and pineapple juice would increase due to growing demand. In the past five years, Thailand, a major canned-pineapple exporter, witnessed a 4.93-per-cent increase on the annual average of the export value to Europe, the US and Japan. In 2007 alone, export value was Bt12 billion.

While farmers will benefit from declining supply in the world market due to weather phenomena, they suffer from rising costs due to higher oil prices.

Diesel rose from Bt15.19 in 2005 to Bt28.94 in 2007. Fuel costs have risen 6 per cent on average per annum, from Bt341.97 per rai in 2005 to Bt389.54 per rai in 2007. Fertilisers also cost more, despite the lower cost of raw materials on the back of the stronger baht, due to higher freight rates. The strong baht will affect export prices, too.

"If the baht continues to strengthen from Bt33.49 per dollar in 2007 to Bt30, the export value in baht terms will fall 10.43 per cent. This could pressure the potential gains farmers reap from higher fresh-pineapple prices," the office said.

The situation is similar to that of other crops.

While fresh and dried longans are expected to be priced closely to 2007 levels of Bt9.7 per kilogram and Bt19.5 per kilogram respectively, the export value in baht terms will be hard hit if the baht appreciates.

In 2007, farmers sold fresh longans at Bt15 per kilogram. "The stronger baht will push export prices down, and given production costs, farmers look set to gain only Bt2.68 per kilogram if the baht strengthens to Bt30 per dollar this year," the report said.

Thailand exported 300,000 tonnes of durians in 2007. High oil prices could force merchandisers to quote lower prices for farmers this year. "If shipping freight rates could be capped at US$2,500 (Bt80,000) per a 40-foot container, the strong baht will reduce expenses. However, high oil prices could push up inland transport costs, and this could quote similar or lower purchase prices," the report said.

Mangosteens are expected to suffer similarly, as 95 per cent of exports are fresh. These need swift transport to markets.

Export volume could rise 40 per cent to 70,000 tonnes this year due rising demand from China. However, the price is expected to stay at the 2007 level of Bt9.84 per kilogram. Worse, if diesel keeps going up from Bt28.94 a litre in 2007 to Bt30 this year, fuel costs will rise by 45 satang per kilogram.

Diesel currently is at a historic high of Bt29.94 per litre. Oil-retailers will consider today whether to increase prices again as oil futures rose above $100 a barrel last week.

Rambutan-growers are expected to shoulder an increase of 39 satang per kilogram in fuel costs if diesel is Bt31 per litre. Though freight rates are expected to remain unchanged, fertilisers will become more expensive due to higher oil prices, while the strong baht will pressure export value in baht terms.

"This could lead to lower farm income from selling fruit," the report said.

Achara Deboonme

The Nation