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Winners and losers emerge in Thailand's rice scheme
Publication Date : 10-10-2012
The Thai government's rice-price pledging policy has paved the way for Siam Indiga to become the country's biggest exporter, with total export volume reaching 480,000 tonnes during the first nine months of this year.
In a success story that critics said might raise political questions, the company has moved up from the country's No 3 spot to become No 1, while its competitors have reportedly all seen export volumes drop by an average of 40-50 per cent. The company exported nearly 200,000 tonnes last year.
Siam Indiga's name has been linked with the bankruptcy-threatened rice-exporting trading arm President Agri Trading, which was the country's biggest rice exporter from 2003 to 2005, during the tenure of ousted prime minister Thaksin Shinawatra. In that period, critics claimed that political ties were affecting the rice trade. Some traders allegedly benefited from the Commerce Ministry's bidding process for rice in government stockpiles more than the others.
According to a report by the Thai Rice Exporters Association, the Kingdom's rice export volume dropped by a significant 44.56 per cent to 5.04 million tonnes during the first nine months of this year. Export value plunged by 34 per cent to 93 billion baht, or by 35.7 per cent in dollar terms to US$3 billion, during the first eight months.
Chaiyaporn Rice became the country's second-biggest exporter with an export volume of 420,000 tonnes during the first nine months, replacing Asia Golden Rice. The country's former top exporter, Capital Rice, dropped to third.
Previously, the country's top five exporters were, in order, Capital Rice, Asia Golden Rice, Siam Indiga, Chaiyaporn Rice and CP Intertrade. The list now stands at Siam Indiga (480,000 tonnes), Chaiyaporn Rice (420,000 tonnes), Capital Rice (350,000 tonnes), Asia Golden Rice (330,000 tonnes) and CP Intertrade.
An exporter source said the country's top five rice exporters - with the exception of Siam Indiga - have faced export drops in terms of both volume and value by an average of 40-50 |per cent. For instance, the country's former top exporter Capital Rice, whose monthly export volumes reached an average of 120,000-130,000 tonnes last year, has seen the figure drop to 70,000-80,000 tonnes. Asia Golden Rice, the country's former second-biggest exporter, has seen a similarly significant drop.
A rice-exporter source said questions were being asked as to whether the government of Prime Minister Yingluck Shinawatra was treating traders equally and fairly.
Regarding other criticisms of the rice-price pledging scheme, the source said that if the government had signed government-to-government contracts totalling 7.23 million tonnes of rice as claimed, this export volume should be reflected in reports by the importing countries - which doesn't seem to be the case.
"It is impossible that the government, as claimed, has gradually shipped 1 million to 2 million tonnes in the past few months, without there being any record of such an export volume," said the source.
According to reports from Thailand's Foreign Trade Department and Customs Department, during the first seven months of this year, rice exports to Indonesia have dropped significantly by 52.61 per cent to 297,640 tonnes; to the Philippines by 99.85 per cent to 246,000 tonnes; to Bangladesh by almost 100 per cent to 58,000 tonnes; to China by 65.8 per cent to 65,003 tonnes; and to Ivory Coast by 46.24 per cent to 173,014 tonnes.
Remarkably, those markets have been named by the government as its key buyers under government-to-government contracts.
Sumeth Laomoraphorn, chief executive officer for rice and food business of CP Trading Group, the country's fifth-ranked exporter, said the firm's export volume had dropped by 20 per cent to 320,000 tonnes in the first seven months, falling 7 per cent in value terms to 7.2 billion baht. CP is also focused on the domestic market, targeting trade of 400,000 tonnes of rice this year, both white and jasmine.
Sumeth remained optimistic, however, pointing to higher export prices amid the drop in volume. In addition, the company's export drop could be partially explained by the fact that buyers are opting to purchase more parboiled rice from India, which is offering more attractive prices.
The company projects its total export volume at 620,000 tonnes, down 15 per cent, this year. Its main export market is African countries that focus on parboiled rice. Thailand's total export volume of parboiled rice is 3 million tonnes, with CP's share standing at 280,000 tonnes.
The CEO accepted that the export drop derived from uncompetitive prices. However, the government cannot step back from the pledging policy now, he said, or it will face a storm of protest from farmers.
"It will take about a year to see real results from the government's price-pledging policy. We have to wait and see. At the moment, the government should seriously consider whether to proceed with the scheme or find a suitable way to revise its price-subsidy policy," Sumeth said.
To solve its own export drop, the company will focus more on exporting high-quality product such as parboiled rice to African countries, where consumers' |purchasing power is increasing, he said.