In the 2009/10 crop year, Indian rice output has dropped by 600,000-700,000 tons due to drought. In early September, the Indian government announced a ban on non-basmati rice shipments to cope with that situation. Thai exporters of parboiled rice have, as a result, received a windfall from higher purchases by African countries at the expense of Indian shipments. Despite the decline in our parboiled rice exports throughout 8M09, bright prospects seem to lie ahead for this category to the African market between 4Q09 and mid-2010. This will likely raise our parboiled rice exports. Nonetheless, Thai white rice shipments are expected to encounter intense competition from Vietnamese counterparts. Since early this year, Thai rice exports have been vigorously beaten by Vietnamese shipments, and our white rice shipments have experienced unprecedented contractions.
With good opportunities ahead for parboiled rice exports, Thai rice millers have expanded their production of this lucrative rice product. However, oversupply may be a long-term concern as parboiled rice sales rely entirely on the export market. Exporters of parboiled rice may be vulnerable to losses during market volatility as the payback period on parboiled rice milling is as long as three years; meanwhile, India is expected to resume exports in 2H10. In addition, demand for premium-grade parboiled rice to the European Union, US, Australia and New Zealand may fall short of Thai supplies that have increased sharply.
On the plus side, however, larger parboiled rice exports are expected to prevent domestic paddy prices from falling sharply, thanks to huge demand from rice mills. This will help mitigate our government's liabilities in their crop price guarantee program where they are required to pay farmers the difference between guaranteed prices and reference prices. Much thus depends on parboiled rice exports.