HeartThais Posted January 29, 2009 Report Share Posted January 29, 2009 http://www.ft.com/cms/s/0/820ab62c-e8a0-11dd-a4d0-0000779fd2ac.html Thailand eyes sales of rice By Tim Johnston in Bangkok Published: January 22 2009 16:26 | Last updated: January 22 2009 16:26 Thailand, the worldâ??s largest rice exporter, is considering selling up to 5m tonnes from its stockpile â?? equal to a fifth of the worldâ??s annually traded rice. The market is worried that such a large disposal could put further downward pressure on prices, which have halved since spiking last year to an all-time high of about $1,100 a tonne. Thai medium quality rice, the worldâ??s benchmark, however, has showed resilience, trading at $580 a tonne, more than double the price in 2007, supported by fresh demand from importers in Africa, brokers said. Thailandâ??s stockpile has built up as a result of its policy of buying surplus production at above market prices in an effort to protect the incomes of farmers. The country has been paying its farmers a premium of about 30 per cent for their crops in a bid to shield them from lower prices and high production costs, particularly of fertilisers. The Ministry of Commerce, which controls the rice reserve, has yet to decide whether to release the stocks onto the open market, which could hit world prices, or try to dispose of it in a government-to-government deal. Thailand and Iran have talked in the past about such a deal. The Vietnamese government recently concluded a deal to sell 500,000 tonnes to the Philippines, the worldâ??s largest importer, at a price of $420 a tonne including freight. The two countries are also talking about further shipments of about 1.0-1.5m tonnes. Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said that if Bangkok decided to sell rice from the stockpile, the government would have to absorb the losses, estimated at a minimum of $100 per tonne. â??The question is, are they willing to lose that sort of money?â?Â, said Mr Chookiat. However, he said that a sale might be the best option in the long term because the existence of the stocks was capping prices. â??If the government keeps the rice in Thailand, I donâ??t think the world price will increase.â? Link to comment Share on other sites More sharing options...
radioman Posted January 29, 2009 Report Share Posted January 29, 2009 I'm interested to understand if there might be any shift on the Baht should such a move become a reality. I presume they sell in $US but need to resolve it into Baht. As it stands they will get what, 35. Allowing the baht to weaken would give them a better return. Or is it more under the control of the buyers? Link to comment Share on other sites More sharing options...
HeartThais Posted January 29, 2009 Author Report Share Posted January 29, 2009 All other things being equal, the theory says baht should appreciate. But all other things aren't equal... The question I have is why is Thailand about to dump 20% of a year's supply of rice on the market? I didn't know they were buying rice directly from farmers but it looks like they are going to start phasing that out too. So, farmers are going to be hit with a double-whammy. I seriously don't see how you can expect to add 20% annual supply of anything and not expect prices to drop significantly. The government says it is trying to reduce storage costs but how much can it possibly cost to store rice especially when you factor the hit on farmers. Something's fishy. Link to comment Share on other sites More sharing options...
Central Scrutinizer Posted January 29, 2009 Report Share Posted January 29, 2009 I'd think the gov is trying to save money (possibly), and trying to make some money to pay for all their latest promised populist schemes to win the next election. I think it may be as simple as that. Little care or thought for the future, which might not be theirs if they do not win. I noticed today in the Post they are raising the tax on gas, deisel, and gasohol starting Monday I think it said. Link to comment Share on other sites More sharing options...
HeartThais Posted January 29, 2009 Author Report Share Posted January 29, 2009 Certainly they are trying to raise money but this seems like a pretty unpopular way to go about it. The following may (only) be short-sighted wishful thinking on my part. It looks like the Thai government is getting desperate for funds. Now, combine that with exports falling off the cliff for all of Asia. Weakness in even the blue-chip exporters. Shipping from and to Asia dropping to the point where they are willing to ship for virtually free. And the slight depreciation happening in renminbi and korean won and I'm starting to see hopeful signs of asian currency depreciation. The only thing that I can see supporting the currencies are foreign investment but if we use China as the leading indicator, signs are pointing to hot money outflows. Link to comment Share on other sites More sharing options...
chelseafan Posted January 29, 2009 Report Share Posted January 29, 2009 I may be wrong but as I see it, this is the result of Thailand closing the doors to exports 4 months ago to ensure that it had enough rice for the people. In doing this they helped to drive the price up short-term to artifically high prices as buyers that weren't on fixed contracts panicked. How many of you remember Costco putting a limit on the amount of rice their members could buy? Since then of course, the buyers have managed to secure their stocks from different sources allowing the market to settle back to normality. Unfortunately it now means Thailand has a massive surplus of stock. If the buyers have lost faith with the Thai export market then they may have trouble selling it at the price they want too Link to comment Share on other sites More sharing options...
HeartThais Posted January 29, 2009 Author Report Share Posted January 29, 2009 I don't have the link onhand but I read that this surplus is the result of a government subsidy going back to 2005. That's why I look at this reversal as a sign of desperation. Link to comment Share on other sites More sharing options...
chelseafan Posted January 29, 2009 Report Share Posted January 29, 2009 Thailand has always had a surplus, it makes good economic sense to have backup, the probem is that without the exports they grew their rice mountain by TOO much.... Link to comment Share on other sites More sharing options...
cavanami Posted January 30, 2009 Report Share Posted January 30, 2009 I would say that LOS *** needs *** money (as we all do, but LOS even more so). With the Baht remaining strong, it makes it difficult for exports. If the BoT would weaken the Baht, their exports would increase, bringing money money into the country and getting more Thais back to work. Maybe with a weakened Baht, the money brought in via exports would not be all that higher then it is now, but it should have a trickle down effect in that more jobs will open up in LOS...IMO Link to comment Share on other sites More sharing options...
Sporty Posted January 31, 2009 Report Share Posted January 31, 2009 This surplus, is result of Government Intervention, to make the TRT look good, for political gain... Now, the problem, grows, as farmers, that have never before, had 2 crops in a season, are planting now, despite the surplus. Thai Government to Implement Rice Pricing Scheme June 6th, 2008 · No Comments The Thailand government plans to implement a rice purchase scheme to help local Thai rice farmers according to Forbes. The move comes as Thai farmers threaten to protest over the fact that while Rice prices have gained significantly over the past few months the millers and exporters have not passed along those gains to producers. The scheme by the Thailand government and proposed by Prime Minister Samak Sundaravej suggests that the Thai government bank would purchase rice $428 per ton direct from Thai rice farmers. Politically, the move is timely as protest in Bangkok continued this week over the Thailand governments attempt to alter the Thai constitution in a favor of former ousted Prime Minister Thaksin Shinawatra. http://www.thailandblogspot.com/thailand-economy/thai-government-to-implement-rice-pricing-scheme/ Link to comment Share on other sites More sharing options...
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