“Although Thailand typically produces 3 to 5 percent of the world’s rice, it accounts for nearly a quarter of global trade. The average annual yields of Thai paddy rice run to 30-32 million tons, or 20-21 million tons of milled rice. This is consumed by domestic and export markets in roughly equal quantities Thai rice is recognized globally for its high quality and as such it is in demand in a large number of countries”
Thailand is located in the southeastern region of the continent of Asia. It has made remarkable progress in social and economic development. It became an upper-middle income country in 2011 and intends to reach higher-income status by 2032. As such, Thailand has been widely cited as an example of development success, with impressive poverty reduction, particularly in the 1980s. However, average growth slowed to 3.5 percent over the period 2005–2015. Poverty and inequality continue to pose significant challenges, with vulnerabilities resulting from faltering economic growth, falling agricultural prices and ongoing droughts.
Agriculture, which employs 35 percent of the workforce, is a key sector of the Thai economy. Even though the contribution of agriculture to GDP has declined over time, Thailand is still one of the world’s top exporters of commodity crops. For most of the past three decades, Thailand was the world’s largest rice exporter, although it lost that distinction a few years ago to India.
Although Thailand typically produces 3 to 5 percent of the world’s rice, it accounts for nearly a quarter of global trade. Thailand has one of the world’s largest fish and seafood industries and exports about 90 percent of its production. Thailand is also one of the top two global sugar exporters. It is ASEAN’s primary producer and exporter of dairy products. It is also one of the top three palm oil producers across the globe. Other major exports include pineapples, coconuts, tapioca, tuna, and shrimp. Much of Thailand’s agricultural land is located in Central and Northeast Thailand. Central Thailand is often referred to as Thailand’s “rice bowl” or “bread basket”.
Thailand’s naturally fertile land, combined with its increasingly well-developed infrastructure, serves as a strong foundation for propelling both small-scale farmers and larger agriculture companies into the forefront of global agri-business, with the country ranking among the world leaders in the exportation of rice, seafood, rubber and sugar. Thai government wants to reduce production costs, promote high quality agricultural products and increase competitiveness in the agriculture sector.
RICE IS VITAL FOR THAILAND
Rice is one of the most important commodities in the agriculture sector. Rice is also one of Thailand’s staple foods, with each person eating, on average, almost 115 kilograms per year. Given its role as a vital economic crop, rice naturally has a central place in the provincial economy. In terms of land under cultivation, rice is Thailand’s most planted crop, taking 45% of all Thai farmland, and a total of 17.5 million Thais, or almost 1 in 5 of the population, are involved in rice production
The overarching importance of rice has naturally led governments of all types to pay special attention to rice farmers and their needs, and a wide range of policies to help rice farmers have been tried out over the years. These have included 1) price-based policies, such as the rice price guarantee scheme, the rice pledging scheme; and 2) other similar policies, together with other forms of help, including financial assistance with production costs for rice farmers and schemes to help with the costs of harvesting and improving rice quality.
Thai rice is recognized globally for its high quality and as such it is in demand in a large number of countries; Thailand’s most important export markets are China, the United States, the ASEAN region, Africa and the Middle East. The main export categories are white rice, jasmine rice and parboiled rice.
Over four million Thai households are involved in rice cultivation. Rice farmers have two main channels through which to sell their rice: they may sell directly to a local mill or they may sell on to or via middlemen such as agricultural cooperatives, paddy rice center market or paddy rice collectors, who will then distribute paddy rice to rice mills at a later date. 2) The intermediate segment comprises rice mills, which use unprocessed rice as an input to produce finished, milled rice. Typically, 1 kilo of paddy rice produces 0.6-0.7 kilos of milled rice.
OVER 100 MILLION TONS RICE MILLING CAPACITY
Thai domestic milling capacity is significantly higher than demand; at more than 100 million tons per year, it is in fact more than three times domestic rice output. Large rice mills, defined as those with a processing capacity of over 20 tons paddy rice/day, that have invested in new technology to improve milling techniques and the quality of the rice which they produce and that have their own silos for the storage of rice often benefit for being within the same commercial network as exporters.
Alternatively, they may be contracted by major exporters to mill or to process rice bound for export markets and so these operators will have a better market position and will likely be less affected by the national oversupply of milling capacity than will small rice mills (i.e. those with a capacity of less than 20 tons paddy rice/day).
The major rice mills include the following players : Asia Golden Rice, Capital Cereals, CP Intertrade, Sangfah Agri Product, Capital Rice, Ponglarp, Riceland International, Thai Fah (2511), CP Food Store, Thai Capital Crops, Tong Hua Bua Yai, Ake Rice Mill, Thai Granlux International Rice, Chia Meng Marketing and Vudhichai Produce.
In a typical year, average annual yields of Thai paddy rice run to 30-32 million tons, or 20-21 million tons of milled rice. This is consumed by domestic and export markets in roughly equal quantities. In its January report, USDA forecasts 20.7 million tons rice production for 2018/19 season. This is a one percent increase from last season as main crop rice production more than offset reduced off-season rice production due to ample water supplies and attractive prices particularly for fragrant rice. USDA’s expectation for 2018/19 off-season rice acreage is 2 million hectares. This is a one percent reduction from last year due to limited water supplies in the northeastern and the lower northern regions. Many rice farmers in these regions have shifted to corn cultivation driven by attractive corn prices and government financial support.
According to the Thai Customs Department, rice exports in 2018 totaled 11.1 million tons, down 5 percent from 2017 due to reduced fragrant and parboiled rice exports . In 2019, Thai rice exports are expected to decline to around 10 million tons. This is a 10 percent reduction from 2018 due mainly to reduced white rice exports, as supplies will be more limited due to the lack of government stocks for sale. Thai rice exports will likely also face strong competition from Vietnamese and Indian rice.
WHEAT IMPORTS EXPECTED TO INCREASE
Here are the outlook for the Thai corn production and wheat imports from Thailand Grain and Feed Update report of USDA:
Forecast for MY2018/19 corn production remains unchanged at 5.3 million tons. This is a 6 percent increase from MY2017/18 due to expanded acreage driven by attractive farm-gate prices and government financial support for farmers who decide to replace off-season rice cultivation with corn.
Forecast for MY2018/19 wheat imports is revised down to 3.1 million tons. This is a 2 percent reduction from MY2017/18 due to reduced feed wheat imports. Feed wheat imports are expected to decline to 1.9 million tons, down 6 percent from MY2017/18 due to high import prices caused by tight feed wheat supplies of major producers. Additionally, aqua feed demand is expected to grow more slowly than in the previous years.
Milling wheat imports are expected to increase to 1 million tons, up 18 percent from MY2017/18 due to greater total milling capacity from two newly operational flour mills. Combined these two new mills have a capacity of 0.3 million tons per year. Imports of wheat flour are expected to decline significantly to 0.2 million tons due to greater competition from locally produced flour.
We also suggest you to read our previous article titled "Though fragmented, India’s grain milling industry is vibrant and growing".