At the time of introduction of the rice pledging scheme, which pays farmers a 15,000 baht (US$476) a tonne for ordinary rice which is higher than the market rate, then Commerce (and now Finance) Minister Kittirat was quoted by Bloomberg conceding that the quantity of rice Thailand exported would fall, but there would be other benefits:
“I believe that if we have to suffer with smaller export amounts, the total value of exports will be more,” Kittiratt said in Bangkok.
Earlier this year, the Commerce Ministry repeated this, as also quoted by Bloomberg:
The value of rice shipments may grow 20 percent this year to more than 200 billion baht ($6.6 billion), Yanyong Phuangrach, the top Commerce Ministry bureaucrat, said Feb. 24.
BP: To be honest, BP doesn’t think the actual quantity of rice exports is as relevant as the value. There is no international award for selling a large quantity of rice. Now, if sacrificing quantity meant an overall higher value in exports then the scheme could still be successful (yes, you also have to take into account the amount of government money used to achieve these goals and will talk the costs). So what has happened?
In July, The Nation on news that Thailand has lost its position as the top rice-exporting nation:
As of July 10, India had eclipsed Thailand as the world’s largest rice exporter, with year-to-date overseas shipments of 3.61 million tonnes.
Thai exports in the period slumped by 45.8 per cent to 3.6 million tonnes, while Vietnam is breathing down the Kingdom’s neck in third place with an impressive 3.52 million tonnes.
This is the first time in half a century that Thailand has lost its position as top rice-exporting nation.
BP: So what about value?
Matichon reports that in the first 6 months of 2012 that exports declined to 3.45 million tonnes or a drop of 45%. The value of Thai rice exports declined from 107.644 billion baht to 71.438 billion baht or a decline of 34%.
BP: For the first 6 months, the rice pledging scheme has not gone to plan. It is one thing for there to be a decline in quantity, but now there has also been a decline in value.
However, Thailand is not the only country whose exports of rice have declined. Nhan Dan on Vietnamese rice exports over a same period for a comparison:
Vietnam exported over 3.4 million tonnes of rice worth US$1.6 billion in the first six months of 2012, according to the Vietnam Food Association (VFA).
In June alone, Vietnam gained US$408.3 million from the shipment of 866,792 tonnes of rice.
The VFA said that rice exports from January to June fell sharply compared to the same period last year when the country shipped 4.03 million tonnes worth nearly US$1.98 billion.
According to the Ministry of Agriculture and Rural Development, fierce competition from India and Myanmar has resulted in a decline in the Vietnam’s rice shipments.
The VFA predicted that Vietnam will export 2.1 million tonnes of rice in the third quarter of 2012. The export target for 2012 stands at 6.5-7 million tonnes.
BP: So Vietnam has seen a decline of 15% in volume and 19% in price.
That Vietnam has not benefited so far is interesting because at the launch of the rice pledging scheme last year there were a number of articles that Vietnam was going to be the main beneficiary of the scheme. The Nation on September 5, 2011 quoting TDRI with an article entitled “Rice scheme will hurt Thais and help Vietnam”. The major reason that Vietnam has not benefitted and a major problem for Thailand is India lifting its export ban on non-Basmati rice in September 2011.
India’s Business Standard on May 5, 2012 with this chart showing what has happened to Indian rice exports :
BP: So as you can see there has been extra supply of 4.5 million tonnes of non-Basmati Indian rice in the marketplace over the last year. At the same time though, the amount of rice being traded globally has not increased and estimates by the US Department of Agriculture in their Rice Outlook for July 2012 (PDF) show it will actually decrease for 2012:
Also, a recent report (PDF) from the International Grains Council on world trade in rice for 2012:
FAO’s Food Outlook Global Market Analysis from May 2012 (PDF):
And on page 24 of that FAO report:
At 34.3 million tonnes, the volume of rice trade in calendar 2012 would be almost 3 percent smaller than the record of 35.2 million tonnes exchanged last year.
BP: So a forecast decline in global trade for rice in 2012 compared with 2011 and India’s re-entrance into the non-Basmati rice exporting scene and well the problem is obvious. What now? Next post will look at what is going to happen for the rest of the year for Thailand, for 2013 (see the first two charts and you will see a forecast increase in global rice trade for 2013), what the government is saying about the scheme, its cost compared with previous schemes, and also what is happening with India.