Thai suspension of rice sales to bring benefits to Vietnam
Thai suspension of rice sales to bring benefits to Vietnam
Vietnam hopes the rice price in the world market will increase as Thailand has asked its farmers to stop selling rice in anticipation of a price hike.
The Thai government has reported major losses from the rice subsidy program initiated by the previous government. The country has continued to help farmers store rice, hoping the price will increase in the world market.
Thai 5 percent broken rice is trading at $405-415 per ton, a slight decrease of $10-15 per ton from early November. The current price is $100 per ton lower than that of five years ago.
The Thai government recently issued $1.5 billion worth of bonds to raise money to pay debts related to the rice price subsidy programs. It had reportedly incurred a loss of 680 billion baht, or $21 billion from the rice subsidy program which has been implemented since 2004.
In an effort to raise the rice price, the government has called on Thai farmers to store 2 million tons of rice, promising to pay 1,000 baht per ton, or $77, to farmers to ensure the good quality of rice in stock.
The policymakers hope that the absence of Thai rice in the world market will increase the price in the world market by 8,500 baht per ton, or $263.
An official of the Vietnam Food Association (VFA) commented that the support from the Thai government to its farmers would benefits other rice exporters, including Vietnam, India and Pakistan, as well.
The official said there would be two scenarios to occur when Thailand stores rice. First, the move would not only help push up Thai rice prices, but also make other exporters’ rice more valuable.
Second, once Thailand keeps its rice in stocks, this would encourage other rice production countries like Vietnam, India and Pakistan to increase rice production as rice exports can sell at good prices.
This scenario has been happening over the last few years. When Thailand did not market its rice, Vietnam successfully raised its export price. If this occurs in 2015, Vietnam would continue benefiting from the Thai policy.
However, VFA still can see risks, saying that the situation would be worse if the Thai government stops subsidizing farmers and launches stored rice into the market.
The official also noted that Vietnam’s rice price will also be determined by many other factors in 2015, including demand from China and the Philippines.
According to Oryza.com, the Filipino government plans to import 600,000 tons of rice in 2015 to satisfy domestic demand. The country is negotiating with Bangladesh about next year’s contracts.
According to the Ministry of Agriculture and Rural Development (MARD), Vietnam exported over 6 million tons of rice in the first 11 months of the year, with turnover of $2.8 billion. The figures represented a 3 percent decrease in the export amount, but a 2 percent increase in value if compared with the same period in 2013.
