Are changes near to the current stable global rice market?
It could be. Three factors: Thai stored rice coming onto the market, possible Vietnamese stockpiling and China's change in taste: no cadmium please! What?
The Wall Street Journal (May 21) has an article of recent unrest in Guangzhou:
'A government test indicated that nearly half the rice sold in the southern Chinese city of Guangzhou was contaminated with cadmium, triggering anger from consumers that China's staple food hasn't escaped the widespread pollution tainting its air, water and soil....According to the Guangzhou authorities, the contaminated samples were found to have 0.21 milligram to 0.4 milligram of cadmium in each kilogram of rice. The Chinese government allows a maximum 0.2 mg of cadmium in each kilogram of rice'.
As the rice originates from Chinese
province of Hunan, consumers are advised to seek alternative sources; as
with milk powder this may well wet China's appetite for foreign rice
(yeah Thailand!). Note the 100+ comments ...
The Bangkok Post (May 27) chimes in:
'Consumers in China are turning to well-known brands from northern provinces and Thai imports after high traces of cadmium were found in some long-grain rice in the country's South, a commodities analyst said.Demand for Thai rice, which can cost as much as nine times local grain, is rising, said Wang Shutong, an analyst at commodity information provider Sublime China Information Co (SCI). The price of rice from northeast Heilongjiang province, which produces the short-grain japonica variety, has risen as much as 2.6% this month, according to data tracked by SCI....Sales from mills in Hunan province, the first reported origin of the tainted rice, are stalling and 70% of processing plants have halted operations'. One of the comments: 'Thai rice is also tainted - patents or not, organic or not. It's not as dangerous as China's rice, but, it is loaded with arsenic and pesticide residues. Because the ground water has been tainted by farmers using pesticides. So even farmers growing rice 'organically' are growing it in water tainted with arsenic and pesticide residues, which end up in the rice we are eating'.
International Business Times also (May 28) looks at the cadmium story. It notes:
'China's imports of Thai rice or grains is expected to surge in the following weeks after the recent discovery of cadmium metal contamination in the grains marketed by Hunan, China's largest rice-producing province....Rice wholesalers in China have stopped selling rice from Hunan, buying from elsewhere in China, and even from Vietnam and Pakistan. In fact, rice grains prices from northeast Heilongjiang province has jumped to as much as 2.6 percent in May, according to data Bloomberg gathered from SCI'.
The other factors: to stockpile or not?
Despite a plethora of articles and comments, Thailands Nation (May 13) reports that officials want to
'convene to evaluate the [rice pledge revolving] fund's status'.
Is the bucket of gold (nearly) empty?
An opinion ventilated by Rakesh Sodhia on May 21 in the Nation:
'The government says Thailand will export 8.5 million tonnes in 2013, an increase of 20 per cent over 2012. The Thai Rice Exporters' Association says the figure is 6.5 million tonnes.
I have been in the rice-export business in Thailand for over 30 years and will place my money on the lower figure from the association. The government has no clue how to solve the problems facing the industry and reduce the huge stocks it is holding. If it discounts prices to be competitive against those of Vietnam, India, Pakistan and Myanmar, it will end up losing US$200-$250 per tonne. Meanwhile, the government's storage costs increase daily, since it is paying for space, inspections, fumigation and insurance, in addition to a deterioration in rice quality over time. The government is caught between a rock and a hard place and has nowhere to go'.
Opinion
from Bangkok Post (May 23): the day of reckoning is near. For the
rice-pledge scheme so it seems. Losses are yet to be accounted for, but
once that happens, the free-hand in rice subsidies will quickly disappear
so believes Thailand's no. 1 English print.
With virtually all of Thailands' rice tied up in government schemes, it's no surprise that the Nation (May 28) forecasts
a bleak future for Thai rice exporters, the real victims of the rice
pledge scheme. Not only are competitors eating into the Thai pie,
increasingly importing countruies are seeking to establish their own
rice self-sufficiency.
As
if the Thai government aren't troubled enough domestically, now the
foreigners are breathing down the Thai necks. AsiaOne (June 4) notes
that ratings agencies (remember, those agencies that failed to see the
recent banking crisis) are warning Thailand that their financial goals (and thuis their improved ratings)
may well not be reached if the rice pledging scheme continues.
'Thailand - rated "Baa1" with stable outlook - had hoped to win a credit upgrade, to an "A" rating once assigned before the financial crisis in 1997.But in a statement, Moody's said implied losses of Bt200 billion in the harvest year were much higher than the World Bank's estimate of Bt115 billion (S$4.7 billion) and the Finance Ministry's forecast loss of Bt70-Bt100 billion'.
The knee-jerk reaction. Bangkok Post
(June 4):
'Moody's Investors Service's credit-negative report on the rice pledging scheme is wrong, Prime Minister Yingluck Shinawatra said on Tuesday, and the government will issue a report explaining why'.
Yawn. The Thai
government are even losing the plot:
'During the debate, Boonsong [Commerce Minister] said that the Bt260 billion loss, reportedly cited in an unofficial Finance Ministry report, associated with the scheme was groundless. But he did not produce any proof to support his claim....When asked repeatedly, the PM said: "I told you, that those responsible for finding out the [actual] figures associated with the scheme will make them public later." Asked if the scheme losing such a huge amount would affect her as prime minister, she said "Enough!", and walked off'.
More empty pockets. The Nation (June 5):
'The Bank for Agriculture and Agricultural Cooperatives says it has an adequate budget to continue the rice-pledging scheme until the end of the latest project, but beyond that, the government will either have to borrow more or accelerate its stockpile releases to earn some rice-sales revenue as soon as possible'.
Is Vietnam following suit? Read this:
'Vietnam may stockpile 1 million tonnes of milled rice, about a fifth of the current Mekong Delta harvest, in a bid to support prices that have dropped to their lowest in nearly 26 months'.
The above from Pakistan's Business Recorder (June 2).
It also notes that it's mainly businesses that are stockpiling in the
short term, are gambling on prices holding or even going up ...
Risk averse
The Cambodia Daily (May 22) reports
on efforts by the UN and China to raise cassava exports and enhancing
quality at the same time. As with rice, cassava production and exports
of raw products are booming.
The Phnom Penh Post (May 23) reports on rising rice regional exports:
'Kim Savuth, president of the Federation of Cambodian Rice Exporters, told the Post yesterday that milled rice exports to European countries, Cambodia’s traditional market, is still increasing, but its percentage share is gradually decreasing. He said the trend of exports to Asian market is on the rise'.
A cryptic article
from the Phnom Penh Post (May 22):
'Officials are seeking expert firms to implement projects on so-called contract farming and the enhancement of the involvement of farmers’ organisations in paddy collecting and processing, officials said'.
Some
how I don't seem to understand the content of whatever they are hoping to
do. Are Agence Francaise de Developpement (AFD) and the government in
the market for establishing contracts? The only catch I saw was that it
was to be financed by AFD for €6 million! Fail to find any additional info on the AFD website ...
The answer to Cambodia's agriculture are loans and irrigation. So say experts as reported by the Phnom Penh Post (May 20):
'In a meeting on the private sector development in the rice sector, Lim Heng, vice president of the Cambodia Chamber of Commerce, suggested that the government should supply more irrigation systems for better rice output.
“If we do not have enough water systems and still depend on the rainfall, the risk can be very high,” Lim Heng told participants in the meeting. “Therefore financial institutions will be hesitant to give us loans as they think it is too risky.”
He added that if farmers had enough water, crop yields will be better, and the costs of production would be lower.
Irrigation systems in Cambodia are said to be on the rise, but experts in the sector said this is not reflected in day-to-day practices....Experts have long said that the shortage of loan activity in Cambodian agriculture hinders the sector’s development'.
Oryza.com (May 28) shares the thrill of Cambodian rice exporters at being part of the THAIFEX – the World Food of Asia food trade fair.
Giants and more risks
A sleeping giant has awakened. Radio Free Asia reports (May 9) that Burma hopes to export double last years figures of more than 1.5 million tonnes:
'Soe Tun [Myanmar Rice Industry Association central executive member] said Burma had recently set new records in rice exports, referring to a state media report which said the country had exceeded its target of 1.5 million tons in the last fiscal year by about 600,000 tons, marking “the highest amount of rice exported from Burma in the last 46 years.”
“Burma is now fifth in terms of rice exports around the world,” he said, and is poised to grow.
The Southeast Asian nation was the world’s biggest rice exporter for much of the first half of the 20th century until it was overtaken by Thailand after an army coup in 1962 set up nearly five decades of junta rule.
Since taking power in 2011, Thein Sein’s reformist government has quickly revamped Burma’s rice production and reputation as an exporter'.
Vietnamnet reports (May 20) on the problems it faces when exporting to China:
'However, high risks have been existing. The importers from China, the vast market which consumes 1/3 of Vietnam’s total rice exports, have been trying to force the prices down, or threaten to cancel contracts....The director of a rice export company complained he has tasted a bitterness when doing business with a Chinese enterprise.The Chinese partner ordered 10,000 tons or rice, with the payment to be made after deliveries. When the products docked at the destination ports, the partner, complaining about the quality, insisted on lowering the prices. The rice exporter, who fell into dilemma, had to sell the consignment of goods at a loss'.
