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Thailand looks to boost rice exports with intergovernmental deals

Mar 15 2018

March 14, 2018 ( by Nikkei )


Supporting Thailand's farmers has become a government priority ahead of elections next year. (Getty Images)

BANGKOK -- The Thai government plans to boost rice exports by negotiating sales directly with other governments in a move intended to help struggling farmers ahead of a general election to be held by February next year.

In order to accelerate negotiations, officials will be sent to major importers of Thai rice, said Adul Chotinisakorn, director-general of the Commerce Ministry's Department of Foreign Trade.

"In some countries in Asia, rice importing issues are completely controlled by government procurement bodies," Adul said. "We aim to visit them and inform them that the Thai government is ready to assist Thai private exporters in selling more rice and the government can also sell rice via the government channel."

Several Southeast Asian importers will be targeted, including the Indonesian government's procurement and logistics agency Bulog, the Philippines' National Food Agency and Malaysia's commodities procurement agency Bernas.

According to ministry's statistics, Indonesia and Malaysia import around 800,000 tons of Thai rice per year, while the Philippines imports 1 million tons.

The government also hopes to engage traditional importers in the Middle East such as Iraq and Iran, each of which currently imports about 1 million tons of Thai rice annually.

Meanwhile, the Philippine government is due to hold a tender in March for the purchase of 250,000 tons of rice from the private sector, for which Thai companies are expected to bid.

The Thai government does not intend to compete with the companies, but "would help facilitate Thai exporters to join the bidding," Adul said.

In recent years, the Thai government has been keen to export rice on a government-to-government basis, particularly to countries where the payment and delivery processes can be complicated.

Selling rice via government channels helps shoulder risks that private exporters are often find too much to bear, such as navigating economic sanctions imposed by the international community. Doing business with Iranian companies, for example, has historically been difficult as banks have been unable to process payments.
The prices involved in government deals can also be slightly lower than market rates due to trade relationships between countries. This has made Thailand's government-to-government exports more competitive than offers made by private companies.

Generally, the aim of such deals is to increase export quantities to help absorb excessive supply and prevent prices from falling during the harvesting season. The practice is also designed to support Thailand's 13 million or so farmers, a demographic group that makes up about 20% of the population.
In the past, government rice sales played a significant role in supporting exports, accounting for about 20% of the annual total of 8-10 million tons.

Trade liberalization in the past few years has made it easier to conduct private deals, allowing the government to take a step back.

"We offer help, but we will not compete in selling rice with Thai exporters," said Adul. "It depends on whether the buyers want to buy from the government or from private exporters. Then, we can provide the right support."

Although demand has remained strong this year, Thai rice exporters say increased competition is making it difficult to operate. A stronger baht has not helped as competitors in Vietnam and India can now offer the crop at cheaper prices.

Limited production is also expected to cut exports this year, preventing the country from capitalizing on global demand. Farmers have been encouraged to grow other profitable crops such as cassava, corn and sugar cane.

The Thai Rice Exporters Association said it would monitor exports closely in the first quarter of this year and, if the baht continues to rise, could revise down the 2018 export target to be below the 9.5 million tons forecast earlier.