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6 Jan 2022

Econ Digest

Rice prices set to rise amid challenges in 2022


        In 2021, Thai rice prices are projected to decline steadily from the beginning of the year. For the full year 2021, it is expected that Thai rice prices will plunge to the lowest in 4 years on average due to the COVID-19 pandemic that is bound to hurt domestic consumption, flooding and the fact that Thai rice exports may hit the lowest level in 10 years due to container shortages. Additionally, limited varieties of Thai rice do not meet demand in the global markets, causing Thai rice prices to fall further. Looking into 2022, KResearch views that Thai rice prices will likely increase slightly, as container shortage problem is expected to ease and the Baht may depreciate against the US dollar, which would in turn help boost Thai rice exports. At the same time, demand for Thai rice is expected to increase both at home and abroad in line with food security trends. Given this, rice prices may move up within a narrow range amid pricing competition in the world markets and the COVID-19 situation that remains highly uncertain. KResearch projects that rice prices will increase to a range of THB8,900-9,400/ton in 2022, a contraction of 1.6% to an increase of 4.0%, due to the low base of 2021.

        However, close attention must be paid to various challenges, including intense competition in global markets, especially from rivals like India and Vietnam that are likely to grab more market shares from Thailand through cheaper rice prices and competitive production costs although their rice yields per rai (a rai is equal to 0.4 acres) are higher than Thailand’s. These rivals also conduct research and development on rice varieties that are more responsive to the market’s needs, such as soft ground rice and organic rice. Moreover, Thai rice still faces complex price structure problem which affects the prices of Thai rice for a long time. As a result, rice farmers have had to sell their crops at a not very high price. Concurrently, they have been facing rising production costs including labor and fertilizers amid inflation and labor shortage problems. Given this, the government policy, aimed at maintaining rice prices and assisting rice farmers over the immediate and short-term remains necessary in helping shore up their income. Additionally, medium- and long-term guidelines to address slumping rice prices should be implemented as they are key engines that will help steer the Thai rice industry, particularly enhancing rice production, developing rice varieties with high yields and responding to consumers’ needs, applying agricultural technology (AgriTech) to increase production efficiency as well as using marketing channels like E-Commerce.

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