News & Events

China still needs plenty of Thai Rice

Reuters, Singapore 
The Nation, February 28, 2005 

China will need to import large volumes of rice for a second year in a row in 2005 due to buoyant demand, but the purchases may be at least a third smaller than last year, a senior Thai rice trade official has said. 

Drought and a government price support scheme would cut exports from Thailand, the No 1 exporter in the world, further tightening Asian supplies, Charoen Laothamatas, secretary-general of the Thai Rice Exporters Association, sajd in a phone interview yesterday. 

China, until recently a major exporter, imported 761,000 tonnes rice last year after poor weather cut its harvest in 2003 to around 160 million tonnes, the lowest in many years.

Output in 2004 recovered to around 185 million tonnes, reducing the need for imports this year.

"China is going to be an importer this year.  Their production is still not enough to meet their consumption,” Charoen said. 

He added that China could import about 400,000-500,000 tonnes of the grain this year.  Prior to last year China had exported two million to three million tones of rice annually.

Charoen said rice prices might remain firm on tight supplies from Asia.

"This year because of a very unusual drought, I think most of the rice producing areas will see supply shortages and prices are very firm at the moment," he said.

"From my point of view, in Thailand, 30 to 40 per cent of the second crop will be reduced because of water shortages."

Thai rice was quoted at US$300 (Bt11,500) a tonne for 100 per cent grade B, free-on-board, against last year's $220, he said, adding that prices this year would be 30-40 per cent higher than last year.

A government offer to purchase local rice at higher prices to support farmers would also cut Thai exports and this may force buyers to turn to Vietnam for supplies, Charoen said.

The Thai government has bought more than three million tonnes of paddy since it launched the price support scheme in November. It has said it wanted to buy nine million tonnes by the end of March.

There was talk in the market that the government may extend the buying scheme to support the price for the second small crop, due to arrive on the market in early April, traders said.

Farmers, mainly in irrigated areas, started planting the much smaller second annual crop in December. Harvest is due at the end of March.

The Agriculture Ministry forecasts the second crop will yield 5.4 million tonnes, 14.1 percent less than the previous crop, due to drought.

Thailand exported a record 10.1 million tonnes in 2004, up a third from 2003. But drought could trim exports to 8.5 million tones  this year, officials say.

Thailand also expects a 10-20 per cent drop in exports of fragrant rice from last year's 1.8 million tonnes as the government was offering 30-40 per cent higher prices to farmers, Charoen said.

China, the Philippines and India are conducting field trials for genetically modified rice but Charoen played down the likelihood of Thailand following suit.

“I don't think we should venture into GMO rice," he said.

Trade officials expect Beijing to approve commercial planting in China as early as this year.

Charoen added that East Asian markets had many barriers against foreign rice. Also, consumers in Japan, South Korea and Taiwan prefer short-grain rice, not the long- grain varieties grown in Thailand.