Going, going ...

As South-east Asia heats up, so does the discussion concerning Thailand's rice pledge scheme. More and more the near bankrupt scheme looms above the market and will ultimately decide the fate of the rice price in the next few years and thus the direction in which rice growing will move. Lower prices will force investors out and dissuade farmers from pursuing higher efficiency.

Meddling?

So where are we now?

International scrutiny is increasing. Case 1: 

Chicago Tribune (Mar. 27) takes time to look at Thailand's rice pledging scheme:

'Thailand is set to sell half-a-million tonnes of rice on world markets at a loss, as it scrambles to offload a record stockpile deteriorating in quality in warehouses filled with grain bought under a government scheme.

The two-year old policy to pay farmers more for rice than it is worth on international markets is straining the country's finances, has cost Thailand its spot as world's top exporter and provoked concern at the World Trade Organization.

While officials publicly deny the politically sensitive scheme is in crisis, the government is looking at measures to stem ballooning losses so far estimated at $6 billion

...

That leaves the government in a bind: it is committed to buying yet more rice, which it has no room to store and which it is unable to sell without suffering a huge loss'.

The New York Times follows (Mar. 28): 

'Thailand is set to sell 500,000 metric tons of rice on world markets at a loss as it scrambles to offload a record stockpile deteriorating in warehouses filled with grain bought under a government program'.

Both above articles resemble each other and come after Thailand was issued a warning by the WTO and it's cronies. Also the World Bank mentions the possible future negatives on rice prices in it's update on grain prices. Despite the stocks hovering above the market, the Bangkok Post (Mar. 28) notes that prices have nudged upwards slightly in the past months (Source: World Bank). The article that speculates on whether Thailand may off-load and what that would do to the price, which is not following prices of other grains.

More of the same
More bad news for sellers in general. Bangkok Post (Mar. 26) has an article on the positive growing conditions experienced in India: more supply into an already poor market. 

'Rice exports from India, the world's second-largest producer, are poised to set a record for the second year with the harvest expected to rebound on normal monsoon rain, potentially widening a global surplus.

Shipments will climb 5% to 10.5 million metric tonnes in the year beginning April, according to the median of estimates from six exporters, a government official and an industry executive compiled by Bloomberg.

Output may jump to an all-time high of 110 million tonnes in the season beginning July, according to Vijay Setia, a former president of the All India Rice Exporters Association.

Surging exports from India may add to global food supplies as farmers from Vietnam to China are preparing to plant a record rice crop. Stockpiles in Thailand have surged to an all-time high as the government buys supplies from farmers, while exports from Myanmar and Cambodia have expanded. The glut may further curb world food costs which tumbled for five straight months through February'. 

With the exception of rice.

Sydney Morning Herald (Mar. 27) also notes the Indian expectations:

'Rice exports from India, the world's second-largest grower, are poised to reach a record for a second year as the harvest may rebound on normal monsoon rain, potentially widening a global surplus.

Shipments will climb 5 per cent to 10.5 million tonnes in the year beginning April, according to estimates compiled by Bloomberg'.

Bangladesh will help Thailand off-load 1 million tonnes (Bangkok Post, Mar. 29). Looks like a lot, but it is spread over 4 years ...

Despite the misgivings the immediate future of the scheme has been spelt out.

The Sunday is the day for decisions, according to a newsreport by the Bangkok Post (Mar. 30):

'The proposal will be tabled at Sunday's mobile cabinet meeting in Chachoengsao.

Finance Minister Kittiratt Na-Ranong said the budget for the pledging scheme for the off-season crop is about 74.2 billion baht, raising the total expenditure for the pledging scheme in the 2012-2013 crop year to 224.2 billion baht.

The government has maintained the pledging price at 15,000 baht maximum per tonne.

According to Mr Kittiratt, the second crop would produce nine million tonnes but only seven million was expected to be consigned under the rice-pledging scheme.

Mr Kittiratt said the National Rice Committee has added a condition to ensure high quality rice.

He said the proposal is in line with the cabinet's earlier decision allowing the ministry to grant credit guarantees to the Bank for Agriculture and Agricultural Cooperatives (BAAC) to finance the price subsidy scheme.

He said the expenditure is covered by the government's 410 billion baht framework for rice pledging approved in 2011'.

And then the surprise on Sunday (not). The Thai government has formally approved the purchase of more stock.The Nation (1 Apr):

'The mobile Cabinet yesterday approved the rice pledging scheme for the 2012/2013 fiscal year, worth Bt105 billion in total, proposed by the Commerce Ministry.

Under the scheme, about seven million tonnes of rice will be bought from farmers, down from 9.2 million tonnes previously anticipated by the Ministry of Agriculture and Cooperatives, as yields have been hit by drought in some areas'.

One world, one price?

Confused by the different prices? So am I. If Thailand isn't the leading exporter anymore why use an index based on their export prices?

Oryza.com (Mar. 21) tries an alternative, the Oryza White Rice Index (WRI) : 'The index represents the weighted average of white long grain rice fob export quotes from markets across the globe

...

Oryza’s price quote assessments are based on real market quotes and the Oryza WRI reflects what Oryza believes to be a true and accurate aggregate reflection of rice market prices.   Rice prices are traditionally very hard to source and compare due to the complexity of the rice industry – the numerous types of rice, processing methods, varieties, grades, and origins'.

What do we learn? Prices are nudging forwards ...:

Domestic affairs (or not)

Malaysia openly solicits (Phnom Penh Post, Mar. 29) Cambodian agriculture: 

'Malaysia-BASED agricult-ural and commodities company Felda Global Ventures Holdings is considering investing in palm oil, sugar and rubber crops in Cambodia'.

The Phnom Penh Post (Mar. 26) reports on pinning future hopes on rubber:

'Cambodian officials say they will focus on nine different sectors in a bid to diversify and ensure continued national economic growth.

Among the nine priorities, rubber will play a crucial role in Cambodia’s trade integration strategy.

...

Though the Cambodian economy is still largely dependent on the garment sector, officials say they hope agricultural production can also boost the economy.

“Besides the garment sector, the next priority among the nine is rubber, followed by cassava, which also plays an important role in poverty reduction,” he [Minister of Commerce Cham Prasidh] explained'. 

Alas, the future of rubber is much dependent on the success of recent plantings. With economic doldrums in most of the world, it's dependent on the demand and in this case with the peace talks in South Thailand ...

Other ways of earning money. Cambodia has zero tariffs export to Europe, so Thailand assumes that they will be doing a favour for Cambodia by buying their produce and reselling it to Europe. Oryza.com (Mar. 23): 

'The Deputy DG also said that re-export of Cambodia rice may help Thailand boost its competitiveness in the EU and other markets, and also reduce smuggling of rice from Cambodia into the Thai rice mortgage program. Thailand may begin the project with around 100 to 1,000 tons of rice from Cambodia, he added'.

Official reaction as recorded by the Phnom Penh Post (Mar. 26): 

'Kong Putheara, director of the Ministry of Commerce statistics department, said he welcomes the plans of the new Thai strategy to potentially buy paddy from Cambodia, saying that most of the problems of the Cambodian agricultural sector stem from markets, rather than production'.

Though not directly related to the Thai plans to market Cambodian rice to  Europe a Thai co-operative delegation came to visit Phnom Penh (Phnom Penh Post, Mar. 27). Asked about exactly those plans we hear this:

'Hun Lak, general director of milled-rice trading company Mekong Oryza, told the Post he foresees that the open markets would translate to higher demand, which will eventually benefit farmers.

“In my opinion, more demand will make the price higher and gives farmers and incentive to increase their productivity for more profit,” he said'. 

Most produce already disappears across the border following higher prices and better post-harvest  ... 

Oh, and the company mentioned has nothing to do with the Thai co-op ...

Do note the company's website has alot of up to date info on rice trading related issues.

Gamble
Bayer's gamble with rice seed continues. Gmanetwork reports (Mar. 24) that 

'Bayer CropScience Inc. (Philippines) will invest P40 million this year to expand the production capacity of its hybrid rice seeds station in Calauan, Laguna'.

You do research and find out that a pineapple canning company isn't completely upfront with following the labour laws. You publish and then the company sues you. Well in Thailand that is. Bangkok Post (Apr. 2):

'He [vice president of canned-pineapple and juice-concentrate producer Natural Fruit] called on Hall [a former researcher at Mahidol University] to show up and fight the case to prove his innocence, adding that Natural Fruit is ready to negotiate.
"If you are really innocent, then face the judicial process and things will be over. If you want to negotiate, do contact us," he said.
Kachin, meanwhile, acknowledged that the latest statement could negatively affect the company, which is Thailand's 12th- or 13th-largest tinned-pineapple exporter.
He refused to speculate why Hall had made such serious allegations against the company'.