Winners and losers

Losing out
Far from a happy new year, Thailand's rice exporters are expecting tough times. The Bangkok Post reported on the the third of January how the nation will be facing increased competition from none other than Vietnam and Cambodia:

'He [Chookiat Ophaswongse, honorary president of the Thai Exporters Association (TREA)] said Hom Mali rice also faced competition from Cambodian fragrant rice, which is sold at over $800 a tonne [as opposed to $1100 for Hom Mali]. The Cambodian rice has a comparable quality to Thai rice in terms of aroma and appearance'.

Adding to their woes, Thailand has 'lost' a couple of million tonnes of rice. The Bangkok Post (6 January 2012) reports that the Thai government is short of 5 million tonnes which they had expected to be part of the 10 million tonnes mortgage scheme. As exporters and millers are also reporting low stocks, the question is where is all the rice? Supposedly intelligent answers can be forwarded to the Thai government.

And on the horizon, possible lower prices? An indication that high commodity prices may not sustain is given by Bloomberg (12-01-2011) which reports on dropping global prices for corn, wheat and soy. Will rice follow? Logic says yes, as farmers respond positively to price incentives, demand stagnates and governments worldwide announce increased stocks. With the exception of Thailand that is ...

Winners?
Cambodia on the other hand seems to churning out major strides in both production as well as export.
Rice output from Cambodia has increased despite wide-spread flooding. An upturn of 2% is on the cards according to the Phnom Penh Post (26-12-2011). The same publication (13 January 2012) reported rising milled rice exports from 40,000 tonnes in 2010 to 100,000 in 2011.
An example? TTY Corporation which has long been an investor in Cambodia's rural sector, seems to have cornered the China-Cambodia rice trade after receiving permission to export up to 200,000 tonnes during 2012. So states the Phnom Penh Post (30-12-2011). In the age of free trade when one nation is seeking to access virtually every natural resource available, why ponder about such tedious things as official approval?

And more is in the pipeline. In the Phnom Penh Post (2 January 2011) a report that Hainan Agpro Inc intends to invest

'$500 million in Cambodia's agriculture sector'.

Though these intentions seem to be limited to revving up the rice export potential of Cambodia, the company 'supported' by the local government of Hainan own expertise seems to be limited to tropical fruits.

Business as usual
Short of reporters, Thailand's Nation (27-12-2011) gives up space for Bayer CropScience to comment on the recent floods whereby they expect their fungicides to sell better. It also wants to help out: '

The company has offered a programme in the Central area whereby it recommends a certain chemical spraying method, which has been proved to increase yield by at least 10 per cent. The programme will encourage farmers to use the right quantity of chemical spray at the right time'.

But will they make a profit? Tying in with their cooperation, but not related to recent floods the company hopes to produce new hybrids with aasistance by the IRRI.

'The aim of the programme is to improve rice quality and yield'.

And is not to make a profit?

Payback? Commercial success for Philippines premier hybrid rice company, SL Agritech, could see it list on Manila's bourse. Businessworldonline notes the cash reaped will retire debts and assist foreign expansion. Hopefully they can count on the Philippine's continued subsidies, it certainly enhances their business model. Note how they count on Cambodia as a promising breeding ground ground for their venture ...

Just another note of caution. Lays, globally known for it's range of potato chips, is being sued by the brave Julie Gengo as lays seem to be claiming all their ingredients are 'natural' which in their belief includes GM soy and corn. Are rice hybrids natural?

Major focus internationally remains Thailand's bet on continued price rises for rice produce. And all skeptics may well be left stranded, especially as flooding will at least ensure higher prices in the short term.

• The Bangkok Post (15-10-2011) already commented on how the government is expecting 6-7 million tonnes less production.
  

• Other countries in Southeast Asia have similar tidings.

• Cambodia already has a response, releasing state controlled stocks of lower grade rice. This lead to lower prices though the wisdom of such releases is questionable, as Cambodia's stockpile will not last long, whereas the contribution to the nation of not releasing the stock piles may well have better returns in the light of increasing rice prices.

• With all the political hoopla on Thailand's mortgage scheme, an article in the New Mandala (16-10-2011) comes as a welcome balanced approach. It emphasizes the expectations concerning corruption (the need to learn from lessons in the past) and the realism that such a scheme will only work if prices rise, which at least for the foreseeable future seems to be the case.

• Marketwatch.com adds that Cambodia, Laos and Burma expect to profit from the same mortgage scheme, at least in the short term as the rice harvest will head to Thailand with higher prices ensured.

  'There is a large price differential between Thai and Cambodian rice, even though the quality is similar and many traders are now trying to bring in rice from across the border, said Christophe Cousin, managing director, Prasert and Sons, a Pathumthani-based international rice brokerage in Thailand. It is usual for around 1.0 million tons of Cambodian rice to be transported across the Thai border every year for more remunerative export prices, and now with the government offering even better rates, the trans-border movement will at least double in volume, said Chookiat Ophaswongse, former president of Thai Rice Exporters Association'.

  Interestingly, it also highlights that not only will neighbours piggyback on the scheme but that last years harvests may will end up mortgaged as well ...

Mortgage

With flood levels rising, it appears that expectations concerning Southeast Asia's harvests are dampening, probably resulting in a short term increase in prices.

On top of that comes the possibly ill-conceived Thai rice mortgage plan which hopes to increase international prices while safeguarding local prices and enriching farmers in the meantime.
The plan is the hottest issue concerning rice at this moment.

Phnom Penh Post chips in (on 29-09-2011) with an interview with CEDAC's president Yang Saing Koma. Unfortunately he does not give much regard to the Thai plan which I would believe will raise domestic prices for Cambodian rice and could well impede Cambodia's own plans to increase exports independent of Thai trade.

Among the many problems are those involved with increased corruption. Just today the Bangkok Post reported on a poll among economists:

'... that most economists polled recently believed there would definitely be corruption in the government's rice mortgage scheme.
...
The pollsters reported that 82 per cent of the respondents believed corruption would definitely taint the scheme, and 86 per cent felt that rice millers and silos would gain the most benefit, not farmers.
A total of 74 per cent of the economists thought that consumers would be the biggest losers, and 60 per cent said the farm income guarantee programme of the Democrats was better, according to the pollsters'.

Other skeptics include the Thai Farmers Association again reported in the Bangkok Post (30-09-2011):

'Wichean Puanglamchiak, vice-president of Thai Farmers Association, said the government's idea to mortgage all paddy sounds good on the surface. But it will backfire in a matter of months. "Most farmers do not have any farmland of their own and rent land for farming. "And chances are that when the next season comes, land owners will take their land back and hire farmers to work on their farms," he said'.

The Nation (22-09-2011) gives air for Narongchai Akrasanee, former minister and economist:

'... we are worried about the rice-pledging scheme, as we don't know how much it will cost ...'.

Others skeptics:

'its opponents, including former deputy prime minister MR Pridiyathorn Devakula and renowned economist Ammar Siamwalla from the Thailand Development Research Institute.
...
MR Pridiyathorn said taxpayers could be hit with a 250-billion-baht bill under the government's return to what he called a "loophole-ridden" rice mortgage subsidy programme. The programme could also result in Thailand losing its status as the world's top rice-exporting nation, he said'.

Again printed by Bangkok Post (27-09-2011).

The Nation on September 5 2011 heads a warning by Thai Development Research Institute (TDRI):

'While consumers and taxpayers will suffer from the government's controversial rice policy, Vietnam will substantially gain, the Thailand Development Research Institute (TDRI) has warned.
...
He [Ammar Siamwalla of TDRI] said farmers would ignore developing grain quality as the government had set up a high pledging price without regard to rice quality.The pledging project would draw a flood of rice from Cambodia and Burma. The market mechanism would be destroyed and only millers and a few exporters who joined the pledging scheme would survive, as the state would monopolise rice trading'.

One aspect of the plan is that it might well erode Thailand's pivotal position in the international rice trade. Previous years have seen others gain on Thailand. The Golbeandmail (26-09-2011) reports on India and Vietnam releasing larger amounts of stockpiles, while it reports that China is concerned even though it has higher than required stock piles. It also briefly states that China may well rely on science to provide the answer.

That said, the Asia Sentinel (23 September 2011) posts huge questions concerning China's potential to drastically improve productivity as prominently featured in Chinese press (see for example China Daily 19 September 2011: 'China sets new world record with hybrid rice yield'; as high as 14.5 ton/ha) . It's a very interesting article. It focuses on levels of nitrogen required which would need to rise to 250 kg/ha, which in turn could lead to increased soil acidity and depletion threatening China's own ability to produce.

Smaller issues:

• Further afield, despite previous reported problems with their American operations, Bayer CropScience continues on with their objective of market domination by getting an exclusive deal in Brazil.

• Interestingly, the ACIAR has calculated what financial returns were due to breeding efforts. Despite all the hoopla there's little to suggest that actually the increased financial rewards were due to higher current prices vs past prices, which in part is being blamed on the lack of breeding! It also stresses that the increased returns were earned by farmers, which is highly doubtful. Quick review of the study takes into account that the stated averages are higher than those observed in reality.
  

• In a what could be possibly a related hybrid rice issue, China has announced that they will not continue with the Confucius Peace Prize; China's most famous hybrid rice scientist