Drought across Thailand’s farmlands has cut output, resulting in higher prices and the strong baht has also made Thai rice costlier
BANGKOK • Thailand is set to lose its status as the world’s No 2 rice exporter this year, as drought and a resilient currency make shipments more expensive than those from other growers including India and Vietnam.
The Thai Rice Exporters Association cut its export target for 2020 by 13%, to 6.5 million metric tonnes, from an earlier forecast of 7.5 million tonnes. The new estimate puts Thailand on course for its lowest shipment volume since 2000, according to the association’s data.
Drought across Thailand’s farmlands has cut output, resulting in higher prices. The strong baht has also made Thai rice costlier than in other exporting nations, the trade body said.
“It will be difficult over the next six months, but exports could be better if the currency can weaken more,” Charoen Laothamatas, president of the association, said at a briefing in Bangkok.
Thailand was the No 3 exporter in the first half, behind India and Vietnam. Africa, which took 55% of Thai shipments in 2019, sought cheaper grain from other suppliers, according to the trade body. Vietnam also benefitted from increased orders from the Philippines, which, like China and Malaysia, prefers soft rice.
Thailand still hasn’t been able to produce enough of this type for exports.
Benchmark Thai rice prices in April reached their highest since 2013 as the drought cut output and some importers stockpiled amid the Covid-19 pandemic. The average was US$673 (RM2,860) per tonne in the five months through May, according to the association, which was as much as 12% more than some rivals.
Although the Thai currency’s drop of about 4.9% this year isn’t much more than the 4.5% weakening of the Indian rupee, the baht’s exchange rate still reflects the fact that it was Asia’s best-performer to the dollar in 2019 — when Thai- land’s annual rice exports of 7.6 million tonnes were the least in six years.
An exchange rate of 32.5 baht to 33 baht per dollar would “make things better”, according to Charoen. The baht was 31.61 per dollar as of 1:20pm on Tuesday in Bangkok.
The rice industry is vital to Thailand because of the sheer number of people who depend on it for their livelihoods. The industry supports almost a third of the country’s population of 69 million, according to Chookiat Ophaswongse, honorary president of the association.
The ongoing drought adds pressure on an export-and tourism- led economy facing its deepest contraction in more than two decades. The central bank forecasts GDP to shrink by as much as 8.1%. — Bloomberg