Process Management

News last update:6 Aug 2012

Thailand agribusiness report Q4 2011

The Thai agriculture sector consistently contributes an average 11% to the country's GDP and employs about one-third of the total working population.

Thus, it is understandable why competing political parties are inclined to propose agriculture-related policies during an election, as was the case in the recent July elections.
That said, Companies &Markets (C&M) believes that more long-term policies would benefit the key export industries of rice, sugar and livestock to better develop their competitive advantage.
Key trends
  • Sugar consumption growth to 2015: 49.3% to 3.1mn tonnes.
    This is will be driven by growing demand from the soft drinks and confectionery sector.
  • Rice production growth to 2014/15: 10.6% to 22.4mn tonnes.
    This expansion will come almost entirely from improved yields as the area of land under rice cultivation will remain stable.
  • Poultry production growth to 2015: 35.6% to 1.7mn tonnes.
    This will largely be due to increased private investment in the sector. 
Industry developments
The Pheu Thai Party (PTP) has pledged a buyback price of white and Hom Mali rice from farmers at THB15,000 (US$496) and THB20,000 (US$653.80) respectively.
This is about 76% and 46% higher than the current market price of THB8,500/tonne and THB13,700/tonne respectively.
At present, the guaranteed price of white rice is at THB11,000 (US$359.50) and Hom Mali rice at THB15,300 (US$500).
C&M believes that this policy may receive support from the farmers at the start but is likely to be detrimental over the longer term.
Net corn importer
C&M forecast that Thailand will remain a firm importer of corn over the forecast period as demand outstrips supply.
Given the strong fluctuations in corn prices in recent times, this places the country in a vulnerable position, especially as corn is essential in manufacturing animal feed.
This is significant as Thailand is a major livestock exporter in the region, and the rising cost of grain will directly impact costs of livestock farmers.
Indeed, imports of corn have increased by 157% between 2007 and 2010 from 160,232 tonnes to 412,161 tonnes according to USDA data.
Sugar problems
A shortage of barges, the sinking of a ship and a lack of labour have all been blamed on current bottlenecks in Thailand's sugar supply chain.
In the view of C&M, better coordination is required to prevent this problem in the future, as they predict Thailand's sugar production to continue increasing, offering the possibility of further export growth in the mid-term.
Investment must be found for the expansion of the country's ports and upgrades to the landside supply chain.
As the world's second-largest producer of sugar and with demand from China increasing, the current export boom might have been expected to have had a significant impact on the dry-bulk shipping sector.
However, rates continue to tick down, further highlighting our view surrounding overcapacity in this market.
To obtain the full market report, go to Companies and Markets.

Dick Ziggers

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