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19 Jan 2021

Econ Digest

Brighter outlook for Thai agriculture in 2021, but close attention must also be paid to 3 risk factors, namely global competition, the Baht and COVID-19

      Thai agriculture remained stable in 2020, supported by agricultural products prices that surged 4.5%YoY due to the drought that led to a huge drop in production in the first half of 2020. The exports of Thai agricultural products during the first 11 months of 2021 contracted only 3.9%YoY, putting less pressure on farmers’ income. As a result, farmers’ income was able to register a growth at 0.9%YoY in 2020.

      KResearch assessed that the Thai agriculture in 2021 is set to have brighter outlook, with farm income projected to increase in the range of 1.0-1.5%YoY. This growth is attributable to an expected rise in farm output by 2.0-2.5%YoY due to higher levels of rainfall influenced by the La Niña phenomenon that would continue to benefit farming up until May 2021. Meanwhile, prices of agricultural produce may decrease by 0.5-1.0%YoY, especially rice, cassava and oil palm, having to contend with risks from increasingly fierce competition in global market and the strengthening Baht, which is expected to reach THB29-29.25/USD at the end of the year. Close attention must also be paid to the severity of the new wave of domestic COVID-19 outbreak, and that of the world at large, both of which could put further pressure on prices of Thai farm products. Thus, the farmers' income guarantee program (phase 2) is an appropriate and timely measure from the government during a period where the overall prices of agricultural produce are following a downward trend, since it will help to alleviate the issue of low farm income to a certain extent.

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