Thailand's Rice Bowl May Get Smaller as Farmers Curb Plantings
The Thai government stated its intention in March to encourage farmers to cut a third planting this year to improve quality and combat the hopper, which dies if deprived of rice plants for 25 days. The plan may eventually reduce annual exports by 2 million tons, or about 20 percent of Thailand's shipments.
Thai officials say they want the industry to focus on grades of rice that fetch higher prices. While Thai rice shipments have increased 33 percent in the past decade, Vietnamese exports are up 70 percent in the same period to 6 million tons, according to the U.S. Department of Agriculture.
Eoin Treacy's view Rough rice has lagged the gains in other food commodities which has helped to at least partially moderate inflationary pressures in Asia. Supply appears to be ample at present, with prices ranging in a volatile manner below $16 since late 2008.
Rice prices have been pulling back from $16 since February and encountered resistance two weeks ago near $14. A sustained move above $14.40 will be required to indicate a return to short-term demand dominance.
Rising oil, fertilizer and machinery prices are cutting into margins and the threat of fewer plantings is a potential medium-term concern. In a democracy, particularly one susceptible to popular protest such as Thailand, some measure aimed at raising farm incomes is to be expected. If Thailand curtails supply, it is questionable whether other countries can compensate. Such an eventuality could stoke speculative interest. Against a background of firm pricing for just about every other commodity, rough rice is unlikely to remain a laggard indefinitely.