Technical Assistance Consultant’s Report
Project Number: T A-REG 7495
January 2012
Support for the Association of
Southeast Asian Nations Plus Three
Integrated Food Security Framework
(Financed by the Japan Fund for Poverty Reduction)
The Rice Situation in Thailand
Prepared by Boonjit Titapiwatanakun
for the Asian Development Bank,
with the assistance of
Boosaree Titapiwatanakun
Boonjit Titapiwatanakun is a professor
at the Department of Agricultural and
Resource Economics at Kasetsart
University in Bangkok, Thailand.
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned,
or the institutions at which the consultant works, and ADB and the Government and these institutions
cannot be held liable for its contents. ADB does not guarantee the accuracy of data and presentations
included in this report and accepts no responsibility for any consequences of their use. By making any
designation of or reference to a particular territory or geographic area, or by using the term country in
this document, ADB does not intend to make any judgments as to the legal or other status of any
territory or area.
ABBREVIATIONS
AFET
BAAC
DIT
EU
FAO
FOB
GAP
ha
HACCP
kg
MOAC
MoC
MOPH
mt
OAE
TREA
Agricultural Future Exchange of Thailand
Bank of Agriculture and Agricultural Cooperatives
Department of Internal Trade
European Union
Food and Agriculture Organization of the United Nations
free on board
good agricultural practice
hectare
Hazard Analysis and Critical Control Points
kilogram
Ministry of Agriculture and Cooperatives
Ministry of Commerce
Ministry of Public Health
metric
Office of Agricultural Economics
Thai Rice Exporters Association
Note: In this report, "$" refers to US dollars.
ABSTRACT
Rice production has long played a vital role in Thailand’s socio-economic development,
making the country the world’s largest rice exporter in the last 3 decades. However, the role and
significance of rice have been slowly decreasing in the Thai economy. These are reflected in the
declining percentage of paddy land in total agricultural landholdings and the decreasing share of
rice in gross agricultural production and agricultural exports. Given this trend, this paper takes a
look at key issues: what are the situation and prospects of the Thai rice industry; how is rice
policy evolving, together with the transformation of the rice economy; and what are the
implications of these for food security, both domestically and globally? The changing role of rice
in Thailand and the increasing dynamism and complexity of both the domestic and international
markets call for a rethinking of the general direction of Thailand’s rice industry.
This paper was prepared for the Asian Development Bank by Boonjit Titapiwatanakun, Regional Rice Trade
Economist cum National Rice Economist for Thailand, under TA 7495-REG: Support for the Association of Southeast
Asian Nations Plus Three Integrated Food Security Framework. The paper is part of the TA’s diagnostic study on the
food security of five ASEAN member countries—Cambodia, Indonesia, the Philippines, Thailand, and Viet Nam—with
a special focus on rice. The paper is an abridged version of a full country report on Thailand, which is available upon
request. The paper is being published to disseminate the findings of work in progress to encourage the exchange of
ideas. The emphasis is on getting findings out quickly even if the presentation of the work is less than fully polished.
CONTENTS
1. INTRODUCTION ……………………………………………………………………………………
The changing role of rice ………………………………………………………………………….
Aims and scope of the country report …………………………………………………………...
1
1
2
2. RICE SITUAT ION …………………………………………………………………………………..
4
Rice production …………………………………………………………………………………….
Exports ………………………………………………………………………………………………
Production cost and profitability …………………………………………………………………..
Trends in prices and marketing margins …………………………………………………………
Food balance sheet ………………………………………………………………………………..
Supply and demand prospects ……………………………………………………………………
4
7
10
13
15
17
3. POLICY ENVIRONMENT …………………………………………………………………………. 18
Regulatory environment …………………………………………………………………………... 18
Major subsidy programs ………………………………………………………………………….. 19
4. PROBLEM ANALYSIS ……………………………………………………………………………. 20
Food security issues ……………………….……………………..………………………………. 20
Looking back at the 2008 crisis ………………………………………………………………….. 22
4. RECOMMENDATIONS …………………………………………………………………………… 23
REFERENCES ……………………………………………………………………………………….. 24
The Rice Situation in Thailand
1. INTRODUCTION
The changing role of rice
Rice remains the preeminent crop in Thai agriculture, although its relative importance has
been declining in recent decades.
Rice production has long played a vital role in Thailand’s socio-economic development,
making the country the world’s largest rice exporter in the last 3 decades. However, as the Thai
economy has become more developed, the role and significance of rice have been gradually
declining.
Three indicators reflect the gradually changing role of rice in the last 4 decades. First is the
declining percentage of paddy land in Thailand’s total agricultural landholdings (Table 1).
Although total agricultural land progressively increased in 2005–2008, paddy land slightly
decreased in 2005–2006. The current landholding structure indicates that it would be rather
unlikely for paddy land to significantly increase in the coming years.
Table 1: Shares of Thailand’s Total Area by Land Use (%), 2005–2008
2005
2006
2007
2008
Total Land
Residential
Paddy
Land
Upland
Crop
Fruit Trees,
Perennials
Other Uses
100.0
100.0
100.0
100.0
2.8
2.8
2.8
2.7
49.0
48.8
49.0
49.7
21.0
20.9
20.4
21.4
21.3
22.0
22.3
21.3
5.8
5.6
5.5
4.8
Source: Office of Agricultural Economics (OAE) 2010.
Second is the decreasing percentage of paddy share in the gross value of agricultural
production (Figure 1). The time series on rice production value and gross production value of
agriculture, which was obtained from the Food and Agriculture Organization of the United
Nations (FAO) for 1961–2008, revealed that from a high of 30.9% in 1963, the percentage share
of rice decreased to 19% in 2008. In this period, both production values showed a slow
decreasing trend following almost the same pattern.
Third is the declining share of rice in agricultural exports (Figure 2). Rice exports were
above 35% in the first half of the 1960s but dropped below 30% in 1971 to around 20% by 2008.
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Figure 1: Share of Paddy Rice in Gross Value of Thailand’s
Agricultural Production (%), 1961–2008
35.0
30.9
30.0
25.0
20.0
19.5
18.7
15.0
10.0
% Paddy share
5.0
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
0.0
Source: FAO Statistics Division 2011.
Figure 2: Share of Rice in Value of Agricultural Exports (%), 1961–2008
43
45
% Share of rice of total Agr. Prod. Exp.
29
19
30
26
17
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
50
45
40
35
30
25
20
15
10
5
0
Source: FAO Statistics Division 2011.
Aims and scope of the country report
All the foregoing indicators show that for the last decade, the role of rice has decreased to a
rather constant level. Given this trend, key issues of interest arise: what are the prospects for
the Thai rice sector; how is rice policy evolving, together with the transformation of the rice
economy in Thailand; and what are the implications of these prospects and policies for food
security, both domestically and globally?
The data for this study are drawn mostly from official statistics released by the Office of
Agricultural Economics (OAE) of the Ministry of Agriculture and Cooperatives (MOAC); the
Ministry of Commerce (MoC), in particular the Department of Internal Trade; the Customs
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The Rice Situation inThailand | 3
Department; and the Thai Rice Exporters Association (TREA). Box 1 presents a detailed
description and assessment of the official statistics of Thailand in relation to rice.
Box 1: An Assessment of the Official Rice Statistics of Thailand
Data and information on the supply side at the farm and provincial levels are under the
responsibility of the Office of Agricultural Economics (OAE) of the Ministry of Agriculture and
Cooperatives (MOAC). The OAE releases preliminary rice production figures 4 times per crop year,
using combinations of methods of estimation, e.g., reporting system, econometric model estimate, and
field observation using rapid rural appraisal. The OAE also collects and publishes farm price data on a
weekly basis. These price data are collected at the rice mill and transportation costs are deducted to
arrive at an estimated farm gate price. The cost of production data is collected through the OAE’s
regional offices each crop year. Some of these data are for official use only, such as in the
determination of government intervention price. Cost figures are the most controversial data because
these involve the average of all farm sizes, i.e., small, medium, and large. For small farmers, the cost
of production is normally higher than that of the large farm.
The demand side information is collected by the Ministry
institutions related to trade. The Department of Internal Trade (DIT)
such as the retail and wholesale price of different kinds of rice
available on the DIT website which releases this weekly in the Thai
is through selective interview and reporting system.
of Commerce (MoC) and private
collects daily rice price information
varieties. The price information is
language. The method of collection
The Custom Department collects monthly trade data from every lot of imported and exported rice
following the international Harmonized Commodity Description and Coding System. The data are also
available on the MoC website and trader associations such as the Thai Rice Exporters Association
(TREA). The Bangkok rice price, free on board, is derived from the trade data that are collected by the
TREA on a weekly basis from the website. Rice stock data are collected by the MoC and TREA for
their internal consumption. The monthly rice stock data are estimated by both the government and
private sectors. One problem of monthly stock data is the lack of monthly rice production and utilization
data, especially for production. The most recent available stock data have a one year lag.
All the foregoing data are generally reliable because they are scrutinized and released by welltrained officials and experts from government offices. Nevertheless, the degree of accuracy varies with
the nature of the data and the method of collection. The trade data are usually the most accurate
because they are sourced from official trade documents. However, some border trades of rice with
neighboring countries (Cambodia and Laos) are not reported officially. Price data are also very
sensitive to the actual volume and the time period of the transaction.
One important issue affecting the reliability of data is timeliness. The most recent data or
information are usually difficult to obtain and their reliability may also be questionable. The timeliness
of data is moreover affected by the higher cost of obtaining them. But a private exporter notes that rice
information is very much updated among the rice traders due to their continuous personal daily
contact. Still, it may be safe to say that despite the time lag, the rice information released by public and
private institutions is quite reliable.
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2. RICE SITUATION
Rice production
The rice industry in Thailand has reached a mature stage of development, with a high
degree of specialization in high-value native rice.
Thailand is located in the temperate zone where it is suitable to grow Indica or the so-called
long grain rice. Small areas in the northern provinces grow Japonica or short grain rice.
The Bureau of Rice Research and Development classifies rice varieties in several ways,
which includes dividing them by ecological cultivation, i.e., lowland rice, floating rice, deep water
rice, upland rice, and highland rice. The market and trade classification of rice reflects both the
cost of production and the quality of rice according to existing domestic and export market
demands. Basically, there are 3 types of rice: fragrant, non-fragrant, and glutinous (Table 2).
The rice varieties can be roughly approximated from the classification of paddy rice in the
market. For example, Jasmine or Horm Mali rice has two varieties: Kao Hom Doc Mali 105 or
KDML105, and Gor-Kor or RD 15.
Table 2: Rice Varieties in Thailand
Market Classification
Fragrant rice
1. Jasmine or Kao
Horm Mali
2. Jungwad
3. Pathumthani
Non-fragrant white rice
Glutinous rice
Approximate Varieties
Kao Hom Doc Mali 105
(KDML105 and Gor-Kor)
Same variety as Hom Mali 105
Khao' Jow Hawm
Suphan Buri Khao’ Jow Hawm
Khlong Luang 1
Pathumthani 1
Many varieties, photosensitive
and non-photosensitive
Niaw Ubon, Niaw San-pah-tawng
Areas or Province
Thung Kula plain (2 million
hectares), Surin, Buri Rum
Province other than in (1)
Non-photosensitive, irrigated
Non-photosensitive, irrigated,
Mostly planted in Central Plain
Non-photosensitive, irrigated
Most provinces
Northeastern and Northern
Source: Compiled from interviews by the author, January 2011.
Although Thailand has had the lowest yield among the world’s top 10 rice-producing
countries, even lower than the world average, Thailand has been the largest rice-exporting
country for almost 30 years now. This is because of the different varieties of rice produced
among the top 10 rice-producing countries, with some countries utilizing more new high-yielding
varieties while the others grow low-yielding local varieties. While Thailand has been producing
comparatively high-quality rice such as Jasmine or Hom Mali rice that is classified as a fragrant
variety with a lower yield, it has also been producing large quantities of high-yielding varieties of
non-fragrant rice. Although the Thai national average yield is low, the total production is much
higher than the domestic utilization, creating at least 6–9 million tons of rice surpluses for export
each year.
In the last decade, total production increased 18%, from 25.8 million tons in 2000 to 31.5
million tons in 2009 (Table 3). The harvested area grew by 7%, expanding from 9.9 million
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hectares (ha) in 2000 to 10.7 million ha in 2009. The yield per hectare gained 10%, from 2.6
tons to 2.9 tons. In this period, the average total harvested area of rice reached 10.224 million
ha, producing 29.5 million tons of paddy rice (or 19.5 million tons of rice) with a yield at 2.9 ton
per ha. The average farm gate price notched $192/t, generating a total farm value of $5,667.5
million. Due to the government pledging program, the harvested area jumped to 0.5 million ha
from 2006–2007 while the farm price surged from $180/t to $327/t, marking an increase of
$147/t.
Table 3: Area, Production, Yield, and Prices of Paddy Rice, 2000–2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Av. 2000–2009
Harvested area
‘000 ha
9,891
10,125
9,654
10,164
9,993
10,225
10,165
10,669
10,669
10,684
10,224
Production
‘000 t
25,844
28,034
27,992
29,474
28,538
30,292
29,642
32,099
31,651
31,508
29,507
Yield
t/ha
2.6
2.8
2.9
2.9
2.9
3.0
2.9
3.0
3.0
2.9
2.9
Price
$/t
108
109
118
134
165
172
180
327
291
317
192
Source: OAE 2010.
In general, rice is grown in two main cropping seasons in Thailand, which are comprised of
the major crop of rice and the second crop of rice. The major crop is grown from May to
October, except in the 6 southern provinces where the cropping season is from mid-June until
February of the next year. The second crop is the irrigated rice that grows in the dry season
from November to April, and from March to mid-June in the provinces in the south.
Most of the rice is produced during the major cropping, which covers around 57 million rai
or 9 million ha (6.2 rai = 1 ha) and yields more than 22.2 million metric tons of paddy rice. Major
rice cropping is estimated at 77% of the total crop year, including paddy production, with the
average yield at 2,569 kilograms (kg)/ha. Major rice crops are grown in every province. In terms
of rice production by region, the largest area is in the northeastern region, comprising about
57% of the total, followed by the northern region at 22%; central region, 17%; and the southern
region, 4% (Tables 4 and 5). Most of the second rice crop is produced in the Central Plain that
is equipped with an irrigation system designed for rice production. The total area planted to rice
covers about 1.6 million hectares, 55% of which are located in the Central Plain, 34% in the
northeastern region, 9% in the northern region, and 2% in the southern region.
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Table 4: Total Rice Harvested Area by Season
(in ha and regional shares in percent)
Region
Major Rice Crop
Northern
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
21.4
22.4
21.3
21.9
22.4
22.1
22.0
22.2
22.1
21.9
Northeastern
56.5
56.3
56.9
56.5
56.6
56.8
57.4
57.0
57.2
57.6
Central Plain
17.5
17.5
17.7
17.9
17.2
17.4
16.8
17.3
17.4
17.3
4.5
3.9
4.1
3.7
3.8
3.7
3.7
3.5
3.3
3.2
Total area
8,755
Second Rice Crop
Northern
37.3
8,789
8,136
8,675
8,596
8,645
8,560
8,623
8,702
8,760
34.3
34.0
29.4
32.4
32.9
33.5
34.4
35.0
35.3
Southern
Northeastern
51.7
53.2
57.7
58.8
56.4
56.9
57.9
54.6
52.6
49.9
Central Plain
3.1
2.6
1.3
1.7
2.6
2.1
2.0
2.1
2.6
3.1
Southern
Total Area
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
1,215
1,391
1,404
1,390
1,489
1,397
1,580
1,605
2,046
1,982
2007
2008
2009
Source: OAE 2010.
Table 5: Paddy Production by Season
(in million tons and regional shares in percent)
Region
2000
Major Rice Crop
Northern
4.96
2001
2002
5.76
4.87
6.57
6.46
6.72
6.46
6.61
6.60
6.50
Northeastern
8.54
9.47
9.09
10.19
10.01
10.44
10.29
10.38
10.30
10.38
Central Plain
4.67
4.92
4.91
5.54
5.39
5.60
5.29
5.52
5.59
5.63
Southern
Total
2003
2004
2005
2006
0.85
0.75
0.76
0.83
0.79
0.78
0.80
0.81
0.75
0.75
19.02
20.89
19.63
23.14
22.65
23.54
22.84
23.31
23.24
23.25
Second Rice Crop
Northern
0.30
0.45
0.29
0.45
0.40
0.36
0.32
0.48
0.69
0.84
Northeastern
1.85
2.20
1.73
2.25
2.04
1.96
2.27
2.31
3.06
2.90
Central Plain
2.89
3.30
3.55
3.66
3.78
3.49
4.07
3.91
4.88
4.48
Southern
0.11
0.10
0.06
0.07
0.11
0.08
0.09
0.10
0.17
0.20
Total
5.16
6.06
5.62
6.43
6.33
5.89
6.75
6.80
8.79
8.42
Source: OAE 2010.
The development of rice farming in Thailand has shifted from subsistence farming to
commercial farming. During the last 2 decades, rice farmers have been relying more and more
on purchased inputs such as seeds, fertilizers, and labor and farming services (land preparation
and harvesting). Commercial-oriented farming with more cash inputs has created more cash
flow requirements. As a result, farmers have had to borrow more from the Bank for Agriculture
and Agricultural Cooperatives (BAAC). In addition, appropriate farming practices and knowledge
have also been needed by farmers. Both government and private companies play an important
role in transferring farming technologies and promoting suitable farm input application. The
government especially plays a vital role at the farm level—in undertaking research and
development, especially for variety improvement, quality seed improvement and propagation,
and promoting organic fertilizer and good agricultural practices (GAP) farming systems.
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Exports
The export market of Thai rice is highly diversified, whether in terms of destination or type
of product. The bulk of Thai rice exports is in high value and processed rice.
In 2010, data obtained from MoC showed that the countries with the biggest rice imports from
Thailand were Nigeria, followed by the United States, Cote d'lvoire, and Saudi Arabia (Table 6).
In 2009, rice export data from the OAE showed that of the total rice exports of 8.6 million tons,
Hom Mali rice had the highest share at 31%, followed by parboiled rice, 31%; white rice, 27%;
and glutinous rice, 6% (Table 7
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Table). The export shares of Pathumthani fragrant rice and husked rice were 2.5% and
2.3%, respectively.
Table 6: Shares in Value of Rice Exports of Thailand by Major Trading Partner, 2008–2010
Country
2008
Share (%)
2009
2010
10.21
11.43
11.88
2. United States
3. Cote d'lvoire
5.29
4.09
7.53
6.02
8.24
6.21
4. South Africa
5.44
8.18
5.72
5. People’s Republic of China (PRC)
6. Hong Kong, PRC
2.63
3.58
4.13
4.54
4.09
4.03
7. Japan
1.44
2.65
2.9
8. Singapore
9. Indonesia
2.97
0.86
2.92
1.49
2.72
2.68
10. Malaysia
5.96
2.31
2.32
11. Cameroon
12. Australia
1.06
1.59
1.65
2.04
1.95
1.92
13. Ghana
2.06
2.1
1.8
14. France
15. Syria
1.06
0.44
1.34
0.12
1.2
1.17
16. United Arab Emirates
1.53
1.24
1.12
17. Bangladesh
18. Congo
0.09
0.22
0
0.5
1.07
0.82
19. Iran
1.31
0.31
0.67
0.54
47.63
0.59
38.92
0.59
36.88
100.00
100.00
100.00
1. Nigeria
20. Gabon
21. Others
Total
Source: Ministry of Commerce 2010.
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Table 7: Rice Exports by Major Varieties, 2008 and 2009
2008
Quantity (t)
Value
($’000)
10,216,128 6,100,239
Total rice exports
Shares by rice variety (%)
White rice
2009
Quantity
Value
(t)
($’000)
8,619,871 5,022,714
41.18
35.3
26.86
20.25
24.63
29.66
30.52
39.82
Pathumthani fragrant rice
Glutinous rice
2.52
2.92
2.76
2.46
2.49
6.12
3.08
4.4
Husked rice
2.03
1.92
2.3
2.15
26.65
0.028
27.83
0.02
31.55
0.143
30.2
0.078
0.05
0.05
0
0.01
Hom Mali
Parboiled rice
Broken parboiled rice
Others
Source: OAE 2010.
Thai white rice is classified into at least 8 grades of quality. Essentially, there are two types:
white rice with different percentages of broken quality and white rice broken with different
grades. Of the total export of 2.3 million metric tons of white rice in 2009, the highest share was
white rice 5%, comprising 26% of the total, followed by white broken rice A super, 21%; white
rice 25%, 21%; and white rice 100%, 17%. It should be noted that the price difference among
the grades and quality of white rice is quite significant (Figure 3).
US$ per ton fob Bangkok
Figure 3: Price Differences Among Hom Mali (HM), White Rice 100% (WR), Broken White Rice
100% (KWR), Parboiled Rice 100% (PBR), and Glutinous Rice 100% (GLR)
700
600
500
400
300
200
100
0
-100
-200
HM&WR100%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
179 284 177
91
276 235 120 164 223 214 344 580
HM&BWR100% 248 361 227 137 324 271 193 256 283 405 600 376
HM&PBR100% 164 268 161 91 280 232 125 168 219 186 312 541
HM&GLR100% 130 223 78 10 159 143 96 19 -115 330 408 171
Source: Thai Rice Exporters Association 2011.
As far as the food security of member countries of the Association of Southeast Asian
Nations (ASEAN) is concerned, the quantity of total Thai rice exports should be carefully
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considered. For example, during 2007–2009, total Thai rice exports to the ASEAN comprised
around 7%–10%, or less than one million tons (both fragrant and non-fragrant white rice).
However, most of the rice trade within the ASEAN is made up of white rice 5% to 25%, of which
Thailand’s total exports to the world market are about 2–3 million tons per year. That means, if
all of the white rice 5% to 25% of Thailand were exported to ASEAN member countries,
Thailand’s annual rice export contribution to rice security in the ASEAN would be around 2–3
million tons of white rice, excluding the high quality fragrant rice and parboiled rice.
Production cost and profitability
Production cost has been rising over the past decade due to rising fertilizer and fuel prices.
The OAE classifies the production cost of rice in 2 categories: variable cost and fixed cost
(e.g., land rent, depreciation). From 2000 to 2009, both the costs of major and second rice crops
shared the same upward pattern (Figure 4). However, the average total cost per ton of the
second rice crop was about 24% higher than that of the major rice crop. The total fixed cost and
the variable cost of the second rice crop were 35% and 22% higher than that of the major rice
crop, respectively. The high costs were due to the increased application of fertilizers and other
chemicals inputs. The second rice crop consisting of high-yielding varieties that are more prone
to pest and disease also require more fertilizer.
Figure 4: Total Cost of Production Per Ton (TC) of
Thai Major Rice Crop (MR) and Second Rice Crop (SR), 2000–2009 (in $/mt)
300
US$ per mt
250
200
150
100
50
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
TC MR 122.41 98.794 107.58 110.56 120.22 139.3 155.88 173.4 265.94 246.38
TC SR
84.503 73.252 79.634 86.324 89.707 109.16 127.01 146.99 200.99 193.66
Source: Centre for Agricultural Information 2010.
Marketing of paddy rice is done through a variety of channels and mostly under modern and
highly competitive conditions.
ADB Technical Assistance Cons ultant’s Report
The Rice Situation inThailand | 11
The linkage between the farm level and processing level (rice milling and rice product
manufacturing) or the upstream activities of the rice industry can be classified as the indirect
marketing channel (Figure 5). Farmers can sell their paddy rice either to the local merchants or
directly to the rice millers. Farmers can also enroll in the rice pledging program that has been
implemented by the government through BAAC since 1987. In 2008, an estimated 45% of the
total paddy rice was sold to local merchants/middlemen, 33% to rice millers, and 22% to the
government under the pledging program. The processed rice and rice products are sold to
distributors (wholesaler/middleman) who supply these to retailers (traditional and modern trade)
and exporters. It should be pointed out that the percentage of paddy rice purchased by each
marketing participant changes every year, especially paddy rice purchased by designated
government agencies.
Figure 5: Rice Marketing Channels
Farmer
Local Merchants
Rice mill/silo
Food manufacturers
Package rice/
trademarks
Food products
Farmer group
(collecting/milling)
Package rice/
trademarks
Government
(ricemill/warehouse)
Auction /AFET
Distributor
(wholesaler/
middle man)
Retailer
(Modern trade)
Retailer
(Traditional trade)
Export
Domestic
Consumers
Source: Thai Development Research Institute Foundation 2009.
Rice millers and traders are the key players in the midstream activities at the paddy
processing level of the rice industry. The role of rice millers is in processing, packaging, storage,
buying and selling, and distribution. Thailand’s rice conversion rate is 0.66, which is slightly
ADB Technical Assistance Cons ultant’s Report
higher than that of
55% of Thailand’s
exported. However,
market and through
The Rice Situation inThailand | 12
Vietnam, 0.65; Myanmar, 0.64; and Cambodia, 0.63. In 2007–2008, about
total rice produce were sold in the domestic market and the rest were
information is lacking on the percentage of rice sold through the traditional
modern trade.
Competition among rice millers has been very high due to the overcapacity of the rice
milling industry. The Department of Rice reports that as of 31 December 2007, there were 1,729
registered medium and large rice mills with a total daily milling capacity of 177,399 metric tons.
Based on the existing total annual paddy production, it would require only 160–170 days for the
existing rice mills to mill rice. This would imply that the average milling cost in Thailand is high
since the existing rice mills have to compensate for costs as they cannot operate at full capacity.
However, this is also the case for other sectors in the primary agro-industry such as cassava
and sugarcane factories, most of which do not operate at full capacity (the total days of
processing is less than 312 days per year).
The linkage between rice millers and traders in the market terminal (Bangkok) is either
through direct business-to-business sales or through indirect transactions with the so-called rice
middleman. Although the role of rice middlemen has been decreasing due to direct business
transactions, for rice traders, the rice middlemen are still indispensable in facilitating trade
between rice millers and wholesalers, especially for overseeing quality inspection and
scheduling delivery and payment (normally, wholesalers pay within 1–3 months). The
middleman’s service charge is around 0.75% of the total value of the transaction.
The domestic trade of rice operates through rice wholesalers who buy rice directly from rice
millers or through rice middlemen. The wholesalers pack the rice into small plastic bags in
different sizes, from 0.5 kg/bag to 10 kg/bag, or they instruct the rice mill to pack the rice under
the wholesaler’s brand name for distribution to small traditional retailers or the modern trade
retailers. Some traditional rice retailers still buy directly from wholesalers or rice millers, using
gunny sacks weighted at 101.5 kg/bag that they repackage in 15-kg paper bags. This type of
rice retailing has been in existence in Thailand for more than half a century.
The percentage share of packaged rice in the total domestic rice consumer market is not
available. However, a rough estimate of total domestic rice consumption at 7.5 million tons, with
the average retail price of white rice 5% at 26,300 baht/ton, gives a total market value of
domestic rice at 197.88 billion baht in 2010. This would imply that the packaged rice is about
10% of the total rice supply for the domestic consumer market in 2010.
Strictly speaking, however, wholesale rice is different from rice exports although rice
wholesalers and exporters may be integrated. Exporters sell their rice directly or indirectly
through three channels: (1) international rice brokers or private rice importers; (2) the
government of the importing country; and (3) the Thai government for further export to the
government of the importing country. According to a leading exporter, most of the international
rice trade takes place through international rice brokers. The 198 firms that are registered
members of the Thai Rice Exporters Association are also potential Thai rice exporters. The
export share of the top 10 rice exporters was 67% in 2006; the share of the top 5 firms was
more than 52%.
Despite rising costs, the profitability of rice farming has improved due to rising rice prices.
The rice farmer’s profit margin is computed by using the annual average price of
SupanBuree Variety as the approximate paddy price for white rice obtained from the OAE
ADB Technical Assistance Cons ultant’s Report
The Rice Situation inThailand | 13
(Table 8)Table. In 2000–2009, the estimated margin for main crop rice showed an upward
trend, starting off with a negative $20.84/ton in 2000 and jumping to $63.81/ton in 2008, the
year of the global food price crisis. In the same period, the farmer’s profit margin for the second
crop rice also showed a rising trend. The average profit margin for the second crop has been
comparatively higher than for the main crop, except in 2007. The cost of production obtained
from the OAE includes the opportunity cost of family labor and other non-cash costs such as
depreciation. Therefore, the negative margin of rice farmers might not imply the actual loss.
Nevertheless, the time of selling paddy rice and the actual moisture content are also crucial
factors that affect the profit margin.
Table 8: Average Profit Margin of White Rice, 2000–2009
Main Crop Rice ($/ton)
Second Crop Rice ($/ton)
Price (1)
Cost (2)
Margin
Price (3)
Cost (4)
Margin
2000
2001
101.56
96.78
122.41
98.79
(20.84)
(2.01)
82.72
80.11
84.50
73.25
(1.78)
6.86
2002
2003
106.35
112.69
107.58
110.56
(1.22)
2.13
89.30
96.78
79.63
86.32
9.66
10.46
2004
2005
135.73
164.93
120.22
139.30
15.51
25.64
117.69
152.10
89.71
109.16
27.99
42.94
2006
2007
177.41
186.69
155.88
173.40
21.52
13.29
155.70
159.41
127.01
146.99
28.68
12.42
2008
2009
329.75
284.07
265.94
246.38
63.81
37.69
284.30
237.95
200.99
193.66
83.31
44.29
Notes:
1.
Price = Main crop rice: SupanBuree Variety paddy, 14%–5% moisture content ($/ton)
2.
Cost = Main crop rice total cost of production per ton ($/ton)
3.
Price = Second crop rice: SupanBuree Variety paddy, 24%–25% moisture content ($/ton)
4.
Cost = Second crop rice; total cost of production per ton ($/ton)
5.
Margin = Farmer’s profit margin: the average price received minus the total cost of production ($/ton)
Source: Office of Agricultural Economics 2010.
One key factor that has contributed to the upward trend in the profit margin of rice farmers
is government intervention in the market price of paddy rice through the pledging program
(before 2009) and the income guarantee or price insurance program (after 2009). The rapid
increase in the rice profit margin after 2003 was due to the popular policy of the Thai Rack Thai
government that set the pledging price higher than the market price of paddy rice. The pledging
price has since increased every year.
Trends in prices and marketing margins
Farmgate, wholesale, and retail rice prices have depicted the same pattern of movement
(Table 9). Although the price gap of farm and wholesale prices narrowed in 1998–2001, the
price gap of wholesale and retail prices slightly widened. The trend slowly continued in 2001–
2007. In 2007–2008, prices sharply increased, showing the comparatively big gap in prices.
During the 2008 rice crisis, the price spread between farm and wholesale rates, and between
wholesale and retail rates, increased from $78/mt to $141/mt and from $68/mt to $169/mt,
respectively. After the crisis, the price spread between farm and wholesale rates decreased to
ADB Technical Assistance Cons ultant’s Report
The Rice Situation inThailand | 14
$79 and $54 in 2009 and 2010, respectively, but that of wholesale and retail rates increased to
$245 and $357, respectively. The pattern is quite unusual when compared with the average
price spread during 2001–2005, which was $57 for farm and wholesale rates and $68 for
wholesale and retail rates. Currency exchange rates could not have been one factor that caused
the big difference because the Thai baht appreciated about 4% during this period.
Table 9: Paddy, Wholesale, and Retail Prices for White Rice 5% and Corresponding Margins,
in Milled Rice Equivalent, in $/ton, 1997–20010
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Av. 2001–2005
Av. 2006–2010
Paddy
Price
Wholesale
Price
Retail
Price
Wholesaler
Margin
Retailer
Margin
171
147
165
179
205
250
266
287
485
426
394
198
372
251
209
219
240
258
301
332
365
626
504
448
255
455
333
288
285
309
353
358
380
433
795
749
805
323
633
47
42
32
34
26
21
25
27
29
18
14
31
23
33
38
31
29
37
19
14
19
27
49
80
28
38
Note: Ratio of conversion from paddy to milled rice is 0.66.
Source: OAE for farm price; Ministry of Commerce for wholesale and retail price.
The above price movement reflects the government’s policy changes in marketing and price
intervention. The rather constant price movement in 1998–2001 coincided with the rice pledging
program that temporarily postponed farmers’ paddy rice sales during the harvesting season.
During this period, the pledging price was set more or less in line with existing demand and
supply. The pledging measure was intended to delay the supply of rice rather than institute a
price support program. However, starting 2001, the pledging price was set at almost the same
level as the guarantee price. In addition, the pledging price was set with the implicit political
agenda to curry favor with farmers.
The computed wholesale margin of white rice 5% showed a downward trend, which
decreased from 45% in 1997 to 14% in 2001. In contrast, the retail margin showed an upward
trend, albeit fluctuating, during the same period. The retail margin increased from 13% in 1997
to 37% in 2000, and then decreased to 14% in 2006. The trend rapidly picked up subsequently,
increasing every year to as high as 80% by 2010. The decreasing wholesale margin was due to
increasing competition and the integration of firms at the marketing level. Changes in rice
packaging and modern retail trade increased marketing cost at the retail level.
But the paddy and rice conversion ratio, which converts the paddy price into its rice
equivalent, may overestimate the value of paddy rice in relation to wholesale white rice 5%. The
paddy conversion ratio of 0.66 published by OAE includes all types of rice such as whole rice
and broken rice. The marketing margin, however, should take into account the marketing cost
and the difference in rice quality and brand name. Comparison among marketing margins, in
some cases, may be misleading. Moreover, the marketing margins have been further
complicated by the forward trading between rice millers and the wholesalers or exporters. Under
ADB Technical Assistance Cons ultant’s Report
The Rice Situation inThailand | 15
forward contract trading, the price spread at the same period would not reflect the actual
marketing margin.
Domestic prices have been heavily influenced by world market trends. The price movement
of white rice 100%, 15%, 10%, and 5% free on board (FOB) has showed the same pattern of
fluctuation—taking an upward trend in 2001–2007 then making a big jump in 2008 (Table 10).
However, a rather sharp decline started in 2009–2010. The price difference between white rice
100% and white rice 15% was more noticeable during periods of price decreases (1999–2001
and 2009–2010) than during price increases.
Table 10: Export Prices by Rice Grade, Bangkok FOB, 2000–2010, in $/t
Hom Mali grade 2
White rice 100%
White rice 5%
White rice 10%
White rice 15%
Parboiled 100%
Glutinous 100%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
561
368
316
480
478
410
475
556
920
908
1105
227
212
188
175
201
193
204
198
243
239
294
288
314
307
336
327
698
683
584
554
483
465
207
171
190
194
236
286
305
324
680
551
439
193
243
163
204
184
201
192
200
232
246
274
289
291
310
317
340
647
727
511
617
419
523
288
286
283
320
335
318
459
673
582
520
892
Source: Thai Rice Exporters Association 2011.
The same pattern in the price movement of white rice implies the close substitution among
the different grades of white rice, especially for white rice 100% and white rice 5%. The
Bangkok FOB price of Hom Mali or fragrant rice exhibited a downward trend in 1990–2001 like
that of white rice but steadily climbed starting 2002, which continued until 2010 and made a big
jump in 2008. This reflects the different status of Hom Mali in the white rice market, especially
after the 2008 rice crisis. The price difference between Hom Mali and white rice 100% and
between Hom Mali and parboiled rice 100% was almost the same. The price difference between
Hom Mali and broken rice was the highest at $316/mt, while the price difference with glutinous
rice was the lowest at $147/mt. The close price difference and the parallel pattern of price
fluctuation indicate their similar utilization and substitution. In contrast, the wide price difference
implies the different kinds of markets and utilization of rice.
Food balance sheet
There are at least two existing balance sheets for Thai rice: the first is estimated by FAO
and the second by the OAE (Table 11). The OAE estimate of rice per capita consumption
includes the consumption of both rice and rice flour, which is based on the National Statistical
Office household expenditure data. Therefore, there may be discrepancy in converting
expenditure data into quantity of rice consumption.
Both the series of rice per capita consumption have consequently shown opposite trends.
While the FAO series has depicted a steady downward trend fluctuating between 117 kg and
110 kg, the OAE series has reflected an upward trend—from 105 kg in 2000 to 113 kg in 2004,
and 110 kg in 2006 to 112 kg in 2007. The upward trend was observed from the preliminary
figures for 2008 and 2009, which are 111 kg and 113 kg, respectively.
ADB Technical Assistance Cons ultant’s Report
The Rice Situation in Thailand | 16
Table 11: Food Balance Sheet for Rice, 2000–2010, and Projections for 2011–2015, in ‘000 t
Paddy
Production
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
24,737
25,375
27,826
32,312
30,733
29,772
28,098
32,822
36,637
37,826
34,113
35,190
36,261
37,329
38,394
39,459
Supply
Milled Rice
Beginning
Production
Stock
16,326
16,747
18,365
21,326
20,284
19,650
18,545
21,662
24,180
24,965
22,515
23,225
23,932
24,637
25,340
26,043
1,553
397
717
1,917
3,981
3,577
2,436
215
3,133
5,509
5,671
2,970
3,453
3,925
4,388
4,842
Demand
Discrepancy
TOTAL
Export
Food
Seed
Feed
Processing
Other
Uses
17,879
17,144
19,082
23,243
24,264
23,227
20,981
21,877
27,313
30,474
28,185
26,196
27,385
28,562
29,728
30,885
7,318
7,328
7,527
8,087
7,612
8,093
9,196
8,996
8,926
9,479
9,797
9,928
10,062
10,201
10,343
10,490
6,506
6,562
6,632
6,696
6,625
6,706
6,817
6,926
6,922
6,921
7,064
7,102
7,143
7,188
7,236
7,287
760
760
775
805
798
795
789
822
831
836
827
828
829
830
831
832
1,117
1,145
1,256
1,458
1,387
1,344
1,268
1,481
1,654
1,707
1,540
1,588
1,637
1,685
1,733
1,781
198
203
223
258
246
238
225
263
293
303
273
281
290
299
307
316
31
32
35
41
39
38
35
41
46
48
43
44
46
47
48
50
Source: Calculated from estimated equations and ratios.
Ending
Stock
TOTAL
397
717
1,917
3,981
3,577
2,436
215
3,133
5,509
5,671
2,970
3,453
3,925
4,388
4,842
5,288
16,326
16,747
18,365
21,326
20,284
19,650
18,545
21,662
24,180
24,965
22,515
23,225
23,932
24,637
25,340
26,043
1,553
397
717
1,917
3,981
3,577
2,436
215
3,133
5,509
5,671
2,970
3,453
3,925
4,388
4,842
ADB Technical Assistance Cons ultant’s Report (Draft )
The Rice Situation in Thailand | 17
Both the series of rice for human consumption from FAO and OAE were used in
estimating the domestic demand function for human consumption of rice. Only the OAE
series provided demand data according to the theory of demand (the estimated coefficient of
price variable was negative). The series from OAE was then utilized as the database for
further adjusting a new series for the balance sheet for Thai rice. The other usage series
was deducted using the feed and processing usage series from FAO. The estimated data
were then used to compute the ratios required for projection. A rice balance sheet has been
drawn up with projections until 2015, using all the estimated equations and ratios.
Supply and demand prospects
Rice consumption is expected to continue rising, though at a languid pace. However,
production is projected to grow at a slower clip than in the previous decade, primarily due to
rising yield. The rising surplus will lead to the sustained growth of exports and accumulation
of stocks.
In the projection period of 2010–2015, the beginning stock of rice, which is the ending
stock of the previous year, is estimated to fluctuate between 5.7 million tons in 2010 and 2.9
million tons in 2011 (Table 11). The total available rice, which was estimated at 28.18 million
tons in 2010, is projected to decrease to 26.19 million tons in 2011, but may subsequently
increase every year and reach 30.88 million tons by 2015. This shows that for the next 5
years at least, the rice total supply will increase, provided that the current government policy
and other variables remain unchanged (e.g., rainfall, fertilizer price, and no serious rice pest
and disease).
Rice for direct human consumption is projected to increase slowly, from 7.06 million
tons in 2010 to 7.29 million tons in 2015. This would be mainly due to Thailand’s slow
population growth rate (0.7%) and the overall per capita income increase resulting from
economic growth.
In Table 11, the estimated rice balance sheet for 2011 to 2015 shows an upward trend
for almost every item. This is due to the constant ratio of some variables and the constant
average of variables in the projection. Nevertheless, given an annual average in rice
production of 22 million tons to 24 million tons and a maximum domestic human rice
consumption of 9 million tons and 3 million tons for all other usages for the next 5 years,
Thailand is expected to be a rice surplus country. Therefore, rice security or food security
may not be a problem for Thailand. Rather, the problem areas for the Thai rice industry
would involve rice surplus and rice exportation.
The supply side of rice in Thailand is still dependent on major rice production. In recent
years, the increase in rice production has been due to cropping intensity, especially for the
second rice crop. In some irrigated areas (mostly in the central region), 5 crops are planted
every 2 years. At present, the prospects of increasing rice production in Thailand are quite
bright. One main reason is the government support policy in favor of rice producers.
However, the rise in irregular rainfall pattern is causing flooding and drought in some
rice-producing areas. Some areas in the central region have resorted to substituting other
crops for the second or third crop of rice to avoid crop failure due to the lack of irrigated
water. The possibility of crop diversification is very much dependent on the price of the
substituted crops and the government policy on the price of paddy rice.
The unfavorable movement in the price of chemical fertilizer due to world oil price
fluctuation is another negative factor impacting rice production, especially for the high-yield
varieties of white rice. Thus, rice yields may not further increase unless new cultivars of high-
ADB Technical Assistance Cons ultant’s Report (Draft )
The Rice Situation in Thailand | 18
yielding varieties are produced as a result of research and development, which would
however require increased funding and supporting policies.
Given this range of plus and minus factors, it is thus very unlikely that rice production in
Thailand will be increasing rapidly. It is anticipated that a rather flat upward trend in rice
production will be the likely scenario.
3. POLICY ENVIRONMENT
Regulatory environment
Aside from food safety regulations, the rice market in Thailand is liberalized and the
government is basically supportive of the rice sector.
Apart from private rice exporters, the government is also involved in rice export through
government-to-government trading that is handled by the Department of Foreign Trade
under the MoC. Some of the government-to-government rice trades are initiated by the
government, which subcontracts to private rice exporters through special auction
procedures. Government involvement in rice trade primarily aims to secure and promote the
Thai rice export market rather than to monopolize rice exportation. Nowadays, Thailand does
not have any limitation on the quantity of rice exports.
Policies on regulating rice standards are the same as for other economically important
crops. GAP sets the standards for agricultural products that are controlled at the farm level.
This has contributed to the standardization of products to make them safe for both producers
and consumers.
The implementation of the policy on agricultural and food standard certification started in
2003. There are 2 types of certification: the certification of products and the certification of
the production system. The first type seeks to ensure that certified products follow
qualification and safety standards. It also assesses the production process to ensure that
standards are maintained, including for such protocols as GAP, the Code of Conduct, and
Organic Agriculture. The second type establishes standards for the production system of
agricultural products and foods to make them comply with such protocols as Good
Manufacturing Practice and the Hazard Analysis and Critical Control Points (HACCP)
system.
A set of regulations has also been designed to control rice trading, including exportation.
In the past, the government limited the quantity of rice exports because excessive exports
could cause unwanted problems for domestic consumers. Thus, many rice export
regulations exist such as the Export License (Rice Trade Act), Quota System, Export Tax,
Rice Premium, and Rice Reserve Enactment. These regulate not only the quantity of Thai
rice exports but also the domestic rice price, which has consequently been lower than the
world price.
The rice industry is also governed by other enactments that likewise regulate other
crops, commodities, and services. These are the Food Act (1979), which imposes food
quality control for the safety of consumers; the Agricultural Standards Act (2008), which
stipulates controls and tests for all agricultural commodities for import and export; the
Industrial Factories Act (1992), which regulates factories and also controls the levels of
industrial pollution released through factory activities; and the Consumer Protection Act
(1979), which enforces added mechanisms to bolster consumer rights.
ADB Technical Assistance Cons ultant’s Report (Draft )
The Rice Situation in Thailand | 19
Regulations affecting rice production are also the same as for other crop and plant
production. These include (1) the Fertilizer Act (1975 and 2007), which safeguards farmers
against substandard fertilizers; (2) the Plants Act (1975, 1992, and 2007), which aims to
protect farmers from low-quality seeds; (3) the Plant Quarantine Act (1964, 1999, and 2008),
which protects and controls the spread of pests that may come from imports and exports; (4)
the Dangerous Materials Act (1992, 2001, and 2008), which includes controlling hazardous
chemicals used in agriculture; and (5) the Plants Protection Act (1999), which enforces
intellectual property rights for the conservation of local plants.
Research on rice variety improvement plays a vital role in developing the Thai rice
industry. However, according to the Department of Rice, which was officially established in
2007, the government budget for rice research in 1988–2007 had a negative compound
growth rate of 3.04% (base year 2002). Thus, this calls for greater public and private
investment in R&D for the rice industry.
Major subsidy programs
Recently, rice production has enjoyed unprecedented public sector support or subsidy
through the paddy pledging program. However, the program has raised prices both
domestically and in the world market, and also has introduced other issues such as the fiscal
deficit, government excess stockholding, and the concentration of benefits among millers.
Currently, two important policies are being implemented to further develop the rice
industry: the farm income guarantee program and the rice standard control system. The farm
income guarantee or price insurance program was initiated in late 2009 to replace the
pledging program for paddy rice that was adopted in 1985 to enhance the liquidity of rice
farmers. Normally, the pledging price was lower than the market price but this was raised to
help farmers quickly sell their produce to pay for expenses or debts. The Bank of Agriculture
and Agricultural Cooperatives, the Public Warehouse Organization, and the Marketing
Organization for Farmers implemented the pledging program.
However, the pledging scheme impacted the domestic paddy price, leading to market
distortions. The scheme benefited mainly the farmers and rice millers who participated in the
program and the rice traders that were closely associated who could get a low price from the
government auction. But independent rice millers lost ground as farmers chose to join the
pledging system where the pledged price was higher than the market price. Thai rice
exporters were also affected by the higher rice price in the pledging season and lost their
competitive edge in the word rice market.
Given these problems, and still under populist pressure, the government shifted briefly
to a price insurance program, which continued to inflict a large fiscal burden. However, this
had the opposite effect on consumers, both in the domestic and world market, by reducing
rice prices.
There are two key steps for implementing the price insurance or farm income guarantee
program for agricultural products: the registration of farmers and the formulation of the
market reference price. The first step involves enrolling farmers into the program without
charge. The farmers have to register with the MOAC’s Department of Agricultural Extension
to obtain a certificate of registration, and then contact the BAAC for the contract price. Under
the second step, concerned government agencies set up the reference market price for
selected agricultural products.
Under the price insurance program, the government provided farmers a guaranteed
price for selected agricultural products (i.e., rice, maize, and cassava) for crop year 2009–
2010. The prices were set at 1.70 baht/kg ($56.67/ton) for fresh cassava root, 7.10 baht/kg
ADB Technical Assistance Cons ultant’s Report (Draft )
The Rice Situation in Thailand | 20
($236.67/ton) for maize, 15,300 baht/ton ($510/ton) for Jasmine rice, and 10,000 baht/ton
($333.33/ton) for normal paddy rice.
For the same crop year, rice was further classified into 5 varieties under the program.
Jasmine rice (Kou Hom Mali 105), which is normally grown in rainfed areas and has a
comparatively low yield with only one crop per year, commanded the highest price at 15,300
baht/ton ($510/ton).
One advantage of the pledging program is it encouraged farmers to change the types of
planted crops and improve the quality of production.
However, the key advantage of the price insurance program lay in its greater
effectiveness in supporting the targeted group in the agricultural sector. Its total coverage of
3.2 million rice farmers that benefited from the program surpasses the number of
beneficiaries of the previous paddy pledging program, which is less than a million farmers.
Other factors in favor of the price insurance program include (1) less complicated regulations
that enable the government not to get involved with the preservation or conversion of the
products; (2) marketing mechanisms are not distorted unlike in the case of the pledging
project; (3) farmers receive the full benefits; and (4) the price support mechanism does not
contravene the rules of the World Trade Organization since it does not subsidize exports but
only supports and maintains the prices of agricultural products within the country.
The price insurance program eventually prevailed because of populist considerations
during an election year. Another reason that triggered the policy change was the increasing
burden of government rice stocks due to the ever increasing pledging prices of paddy rice in
2001–2006.
It would be inappropriate, however, to compare the two policies in terms of total
implementation expenditure and budget on a crop year basis. In the case of the paddy
pledging program, the total budget and expenditure do not end at each crop year due to the
stocks carried over.
As far as ASEAN rice security is concerned, it is quite clear that Thailand’s price
insurance or farm income guarantee program can generate favorable impacts as it provides
more available rice exports at a lower price. The magnitude of exports and the decrease in
price would depend very much on the target price and the intervention price of rice that are
determined by the government program. However, the lower world price of rice will have
negative impacts on rice farmers in Vietnam and emerging rice-exporting countries such as
Cambodia and Laos.
4. PROBLEM ANALYSIS
Food security issues
The priority issues for food security in Thailand are general food safety, proper
household utilization and nutrition, and the eradication of remaining pockets of poverty.
Thailand has great potential for food production, and it strives to promote food
production and food safety at the same time so that these can contribute to overall food
security and the people’s health. The per capita dietary energy supply, number, and the
proportion of the undernourished population increased from 2,390 kcal/person/day in 1997–
99 to 2,510 kcal/person/day in 2004–2006, or 4.78% (Table 12Table). During the same
period, the number of undernourished decreased from 12.3 million people to 10.7 million
people, or 13%. As a result, the proportion of undernourished in the total population declined
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from 21% to 17%. However, it is interesting to note that although Thailand has become a
major food exporting country, the proportion of undernourished in the total population was
higher than that of the Asia and Pacific region (16%) and the world (14%).
Table 12: Per Capita Dietary Energy Supply, Number,
and Proportion of Undernourished Population in Thailand
Dietary energy supply
1997–1999
2003–2005
2004–2006
2,390
2,490
2,510
12.3
10.9
10.7
21
17
17
Undernourished
Millions
Share in the population (%)
Source: FAO Regional Office for Asia and the Pacific 2009.
The percentage share of household food expenditure in total income is still high. Survey
data of the Ministry of Public Health on food and nutrition in 2003 showed that more than
26% of total households used 41%–60% of their total income for food while more than 35%
of total households spent around 60% of their total income on food. The most vulnerable
group lives in the rural areas, spending more than 80% of their total income for food. This
would imply that food price increases have greater negative impact on the rural sector.
Table 13 shows that the northeast region, which is Thailand’s largest rice-producing
region, has the highest percentage of the poor, followed by the north, south and central
regions. The central region is Thailand’s second largest rice-producing area, especially for
the second crop and third crop (irrigated rice). The figures indicate that poverty issues in the
rice-producing areas need to be addressed.
Table 13: Poverty Statistics for Thailand, 2000–2009
Total poor
Share in population
Percent urban
Percent rural
Percent by region
Bangkok
Central
North
Northeast
South
2000
12,555
21.0
12.7
87.3
2002
9,135
14.9
13.8
86.2
2004
7,019
11.2
13.3
86.7
0.9
9.9
20.6
58.0
10.6
1.6
11.9
25.1
52.8
8.6
0.7
9.5
26.2
56.3
7.2
2006 2007
6,057 5,422
9.6
8.5
11.2
11.7
88.8
88.3
0.5
8.7
23.3
59.8
7.8
1.2
9.2
28.0
52.2
9.5
2008
5,772
9.1
10.0
90.0
2009
5,279
8.3
11.5
88.5
0.7
8.4
27.8
56.3
6.7
0.9
7.7
25.6
57.9
8.0
Source: National Economic and Social Development Board 2010.
For one of the world’s major food exporting countries, the key to resolving food
insecurity is addressing rural poverty and food safety and quality standards. Rural poverty is
a high priority agenda of the government.
The MOAC and the Ministry of Public Health (MOPH) are entrusted with formulating and
implementing policies and programs on food security. The MOAC attends to increasing the
efficiency of food production, while the MOPH addresses food safety to ensure hygienic food
production.
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The MOAC, in particular, seeks to ensure that the planting of energy crops will not have
adverse effects on food production. It sets policies that will add value to agricultural
products, protect farmlands, and institute zoning regulations for planting areas to certain
crops. To cope with climate change and natural disasters that have resulted in several
farmlands being unproductive, Thailand needs to increase agricultural output and reduce
production costs. In this regard, scaling up research and development will ensure continued
productivity. The country is also set to improve soil and crop varieties, further develop water
sources, and advance food processing to add value to agricultural products. The production
system is also being developed toward raising the quality of products in line with local and
international demands. Contract farming and crop insurance are being studied to help
stabilize prices of farm products.
The MOPH has been working with the Thai Restaurant Association to raise the quality
of Thai restaurants and food shops to international standards. Target objectives were set in
2009 to develop 150 local restaurants and food shops to meet international standards.
The Thai government has also given increased priority on developing organic
agriculture for more than a decade now. A strategy plan for organic agriculture development
was established in 2006–2009 through the cooperative effort of departments and agencies
within MOAC. After two years of implementation, the National Economic and Social
Development Board replaced this plan with the Strategy Plan for National Organic
Agriculture Development 2008–2011. The Thai private sector is much aware of the organic
movement and has long been playing a continuous role in developing this even before the
Thai government formulated the strategy plan.
Looking back at the 2008 crisis
The Thai government intervened in the domestic market to cushion the impact of price
volatility but managed to avoid destabilizing policies adopted by other major rice exporting
countries.
The domestic rice market was extremely volatile during the early period of the global
food price crisis in 2008. The price of 100% white rice at the wholesale market and Bangkok
FOB increased by 100% and 90%, respectively, while its domestic retail price rose by 105%.
However, during this period of high rice prices, the government intervened with rice
programs utilizing government rice stocks that were quite effective in depressing the retail
price.
As the world’s leading rice exporting country, Thailand helped ease the global crisis by
firmly maintaining the free trade environment and spurning stringent protectionist measures
such as banning rice exports.
In a normal year of the rice crop calendar, the major rice cropping transpires from
August to April. This would imply that the rice price increases in February–April 2008
occurred at the tail-end of the crop year when only some farmers were able to sell their
paddy rice at a good price. In the domestic market, retail and wholesale prices go up and
down in the same direction during volatile market conditions, while during normal market
conditions, the retail price is rather constant although the wholesale price fluctuates. Most
rice farmers buy their rice at the retail level, and only a few keep some of their paddy rice for
their own consumption. Therefore, during the time of the crisis, the impacts of high rice
prices had huge negative effects on farmer-consumers, especially the rural poor.
The situation was also greatly difficult for the rest of the supply chain in 2008. There
were cases of rice millers that could not deliver on their forward contract and were forced to
declare bankruptcy. As a result, some commercial banks had to take over rice mills after the
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The Rice Situation in Thailand | 23
2008 crisis. Rice exporters also suffered substantial losses although no incidents of
bankruptcy were reported in their sector.
Following the 2008 crisis, a number of challenges now face Thailand: (1) how to avert
another rice price crisis; (2) how to mitigate the negative impact of a price crisis should this
arise; and 3) what kind of regional coordination and cooperation would be needed to avert a
crisis.
One bright spot in Thailand after the 2008 rice crisis was the introduction of the futures
contract. In April 2010, white rice 5% FOB (WRF5) was traded in the Agricultural Future
Exchange of Thailand (AFET). The WRF5 has a bigger size contract of 50-metric ton trading
unit and an FOB delivery term, which is appropriate in relation to the nature of rice
exportation in the current market situation. It may be too early to tell whether the rice futures
market in Thailand is going to be as successful as other rice futures market in the Asian
region. At present, the AFET FOB rice futures market has yet to take off due to government
price interventions. Nevertheless, the current government is still promoting AFET to be the
leading futures exchange market in the region.
4. RECOMMENDATIONS
The decreasing role of rice in the Thai economy and the increasing dynamism and
complexity of both the domestic and international markets call for a rethinking of the general
direction of the rice industry.
On the issue of domestic production, the productivity of the Thai rice industry should be
enhanced through research and development of appropriate high-yielding varieties.
Sufficient budget should be allocated to fund ongoing research programs in cooperation with
regional and international agencies. Increasing rice cropping intensity, which takes
advantage of government intervention programs, should be closely scrutinized in terms of
efficient resource utilization and sustaining the competitiveness of Thai rice production.
On the marketing side, concerned stakeholders in the rice industry, especially the
private sector, should work in concert to map out the ways and means to promote the rice
futures trade in Thailand and provide hedging opportunities for producers and traders as well
as timely market information.
Finally, the role of Thai rice in the world market should be further strengthened. Thailand
should take an active role in regional and international forums and cooperative efforts such
as information dissemination and research and development, and improve the coordination
of government agencies and policies on rice and food security.
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