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14 Jul 2022

Econ Digest

“Thai rice” is at risk of a tighter supply amid lower production, causing rice prices to rise continually

คะแนนเฉลี่ย

        KResearch views that Thailand is at risk of a tighter rice supply in 2022 due to the decline in rice production in Thailand as a result of chemical fertilizer prices that have hit multiple record highs amid the Russia-Ukraine conflict. While the global market demand for rice has increased due to pent-up demand, the resolution of the container problem and the tendency of the Thai Baht to depreciate against the US dollar are expected to help boost Thai rice exports to grow by about 15.5% YoY. This will further depress the remaining domestic rice supply, and the impact will last until 2023, resulting in a continual increase in rice prices from the previous year.

        Looking back at Thai rice production in 2019-2021, it can be found that the average Thai rice production is about 21 million tons per year. After deducting the rice exports and domestic rice consumption, and adding Thailand’s rice stocks, Thailand’s remaining domestic rice supply will be approximately 6 million tons per year.

        In 2022, Thai rice production is expected to decrease by 1.2-1.8 million tons, compared to the previous year, resulting in a combined rice production and rice stocks of approximately 24.3 million tons. Since rice exports will slightly increase to about 7 million tons, and domestic rice consumption will be about 13 million tons, the remaining domestic rice supply will only be 4.3 million tons, which is even tighter when compared to the previous period. The remaining domestic rice supply in 2023 is expected to decline to only 0.9-2.4 million tons.

        From the above forecast, the remaining domestic rice supply will be significantly reduced in 2022-2023, which, coupled with a steady increase in production costs, will continually drive up domestic rice prices.

#Did you know? Pent-Up Demand refers to a sharp increase in demand from consumers who want to re-consume after having halted or reduced spending in the previous period due to certain events.

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