Special Report: Industry group blames rice pledging program for drop in rice export


Thailand lost its crown as the world’s top rice exporter last year to India and Vietnam while an industry group blames the government’s rice-pledging program for the drop in exports. 

According to the Thai Rice Exporters Association, the kingdom exported 6.9 million tonnes in 2012, down 35.5% from the 10.7 million tonnes it shipped in 2011. Of the 6.9 million tonnes Thailand exported, around 1.7 million were registered as government-to-government deals. Meanwhile, the US Department of Agriculture’s figures report that Vietnam’s rice exports for last year reached 7.6 million tonnes while India’s exceeded 9.5 million tonnes.

The exporters’ association blamed the country’s drop in exports on the rice-pledging scheme, under which the government has agreed to buy unhusked white rice from farmers at a fixed price of 15,000 baht (US$484) per tonne, which is 50 percent more than the market price and high-quality jasmine at 20,000 baht per tonne.

The government has said it will continue the scheme, which is one of the ruling Pheu Thai Party’s election pledges, throughout 2013. The scheme has been hailed by local farmers as it boosted their incomes, but analysts warn that it compromises Thailand’s competitiveness abroad.

Since it started the scheme in October 2011, the government has stockpiled more than 10 million tonnes of rice as the price of Thai rice jumped to nearly $200 above its competitors on the international market. The World Bank last month estimated that Thailand would lose 115 billion baht on last year’s stockpiled rice if it was forced to sell at current prices.

The Yingluck administration has defended the program by arguing that buying rice at above market prices will not impact exports because Thailand has the highest quality rice and therefore can sell it abroad at higher prices.

At the moment, Thai exports are being further hindered by the strengthening baht currency, which the government blames partly on quantitative easing by the central banks of the U.S. and Japan. With the Thai currency appreciating to nearly 30 baht against the US dollar, the Federation of Thai Industries has expressed concerns that the strong baht could affect Thailand’s trade competitiveness.