Thomas White Global Investing
Thailand
Thailand Stamp
October 17, 2008
A Postcard from Thailand
Thailand: The Rice Bowl of Asia

Thailand is the world's biggest exporter of rice Thailand’s specialty is Hom Mali or the jasmine rice variety, which is a staple part of the Thai meal. In 2007, Thailand’s Agricultural ministry decided to expand the rice farmland area by 79,073 acres in its northeastern provinces in order to help increase the production of the fragrant grain to meet overseas demand, especially from China. Thailand produces around three million tons of jasmine rice per year, which represents 15% of its total rice production.

The gentle winds blow across the paddy field. The stalks stand out in the rising sun bathed in gold, ready for harvest. In Thailand, rice is precious. It is money, food and culture all rolled into one.

Rice was introduced to Thailand through the Green Revolution of the 1960s and since then the country has been the world’s biggest exporter of rice. Its high-quality long grain white rice immediately captured the world market and today Thailand’s share is 31.4%. It exports about nine million tons of rice annually and possesses 24.2 million acres of rice fields. Known as the “world’s kitchen”, the Middle East, Indonesia, China, Singapore, Philippines and Africa are its main export markets.

Thai rice prices have trebled since January 2008, reaching their peak in April due to rising global food prices. Thai 100% B-grade white rice, the world’s main physical benchmark for global trade, was quoted at a range of $1,000 to $1,080 per ton in April, up from around $383 in January. The rise in world demand has definitely helped the Thai economy, more so because the country has no restrictions on exports unlike other South East Asian economies. Adding to its riches, exports were banned in Vietnam, India, Indonesia and Cambodia to prevent domestic shortages and dampen domestic prices.

Total production after milling is forecast to be 20.4 million tons in 2008, with 55% for domestic consumption and the remainder for export. Thailand’s chief competitor is Vietnam, which sells rice at a low price of $575 per ton creating intense pressure for Thailand’s exporters. Prospects for Thai rice exports may be bleak if the government continues to offer above-market prices to farmers, who in turn stockpile the grain, a practice prevalent since 2003. These stockpiles are then sold abroad and the current stock is estimated to be around 3.6 million tons.

There are 3.7 million rice-farming families in this nation whose mainstay is the long white grain. For these people and the billions across the globe it is rice that controls their survival, shapes their culture and moves the economy. Rice is life and Thailand provides…for the world.

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