Thailand and Vietnam working together to stabilise rice prices
By Jon Fernquest |
In the face of rising rice prices, the Thai and Vietnamese governments have agreed to take steps to curb the trend.
The fourth Thailand-Vietnam Rice Trade Co-operation Meeting was held in Bangkok yesterday. An article in today's Bangkok Post business section covered the meeting.
This meeting is important because "Thailand and Vietnam account for more than 50% of the world rice trade, shipping 9.5 million and 4.5 million tonnes respectively last year in a world market of 28 million tonnes."
Recently the supply of rice worldwide has declined relative to demand:
"Exporters agreed that the global market situation had been 'unusual', with demand high but supply from both countries low because of global warming and the fact that farmers have shifted to grow other energy crops."
The supply of rice has also fallen in both Thailand and Vietnam this year:
"According to Mr Chookiat, Vietnam is also suffering from tight supply in the country. Rice exports from Vietnam, were expected to shrink to between 4 million and 4.5 million tonnes this year from an earlier estimate of five million tonnes.Thailand's rice production is estimated at 29.9 million tonnes of paddy this year, 23.38 million tonnes of which would come from the first crop, up 2.4% from last year, and another 6.5 million, a marginal decline, from the second crop.
Truong Thanh Phong, chairman of Vietnam Food Association, said paddy output in Vietnam was estimated at 36.5 million tonnes, unchanged from 2007.
Vietnam would keep grain shipments unchanged this year at 4.5 million tonnes because its cultivation area has been shrinking, he added."
Following standard economics, one might expect the price of rice to rise to make the international demand for rice equal to the limited supply.
Longstanding government intervention in rice markets makes the operation of rice markets much more complex.
Officials are now struggling to understand exactly what is happening and how to respond:
According to Mr Chookiat [president of the Thai Rice Exporters Association], although there was now a sellers' market, the exporters of the two countries wondered why they had been suffering losses over the last two months from advance orders due to rising domestic and world prices.A joint effort was therefore necessary to stabilise prices as well as set a range of rice prices, he said.
He said current high rice prices partially stemmed from speculation, which governments needed to address, otherwise domestic rice prices would rise to the extent that exporters could not afford to buy from local farms and mills.
Mr Chookiat predicted higher domestic prices would push down Thai exports to about 600,000 to 700,000 tonnes per month over the second quarter from one million tonnes a month earlier.
The Commerce Ministry is being urged to release its rice stockpiles into the market to help ease the price pressure.
Government intervention to stabilise prices is only a short-term fix.
Global warming and increased use of food crops for biofuel are long-term trends.
Will government intervention really be effective in the long-run?
(Source: Bangkok Post, business section, 28-02-08, page B3, Phusadee Arunmas, temp-link)
Vocabulary:
curb - control and limit (See glossary)
global warming - the trend of increasing temperature on the surface of the earth and ocean in recent years (See Wikipedia)
energy crops - agricultural crops that are being grown to be used for use as fuel as oil substitutes (See Wikipedia)
a tight supply - low supply (the good is difficult to get)
a marginal decline - a small decline (not important)
paddy - rice
intervention - become involved in a situation and try to change it
Thai Rice Exporters Association - the industry association of rice exporters in Thailand, organised just after World War I (See background at website)
a sellers' market - supplies are low and prices higher than usual, so sellers who are the suppliers benefit
advance orders - requesting to purchase in the future at a certain date
stabilise prices - stop prices from moving suddenly by large amounts, reduce volatility
X stems from Y - Y causes X
X partially stemmed from Y - Y was one cause among many of X
speculation - buying and selling for profit (See glossary)
address a problem - work on a finding a solution to a problem
stockpiles - large quantities stored for future use (See glossary)
ease the price pressure - increase supply to prevent prices from rising fast
