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8 Jul 2009


Rice, 2H09: Export Prices Dictating Thai Rice Shipments Worldwide (Business Brief No. 2552)

Thai rice exports in 2009 have so far encountered the toughest competition in five years. In previous years, we normally competed head-on with Vietnam – our archrival – during the first half of each year. This year, however, Vietnam has adopted new rice export tactics by shipping huge volumes of rice in 1Q09. After meeting their export target for 1H09, Vietnam banned the signing of new export contracts for rice shipments in 2Q09. The country later resumed rice export contracts for 2H09. As Vietnam is projected to yield a higher-than-expected rice output this year, exporters there have called on the Vietnamese government to raise their rice export target to 6.0 million tons, or around 20.0 percent higher than the target set earlier this year. Vietnamese rice shipments are expected to beat their Thai and US counterparts – the other major rice exporters – thanks to their lower export prices.
In 2H09, Thai rice exporters will likely face rising competition from India, which is expected to resume rice shipments thanks to sufficient domestic rice stockpiles for emergencies. Over the past two years, the Indian government has placed restrictions on their rice exports, especially non-Basmati shipments, to cope with supply shortages in the country. The ample monsoon rainfall is also expected to result in higher Indian rice output. Competition in the global rice market will become more intense in light of the resumption of Indian rice exports.

It is undeniable that Thai rice exporters will continue to face tough rivalry in the market over the rest of this year into next year. Thai rice export prices will therefore be key to garner our share of the global market. Aside from our rice output, the government's paddy policy, especially regarding price intervention through the rice mortgage program or price guarantee and disposal of rice stockpiles will play a major role in establishing export prices. Thai rice prices are thus likely to be volatile for the foreseeable future.

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