Floods May Damage Quarter of Thai Rice Crop, Exports Hit

Thailand may lose a quarter of its main rice crop in the nation’s worst flooding in decades, the government estimates, which could boost prices of the staple and further squeeze shipments from the world’s top exporter.

The flood damage to rice comes at a time when Thailand, which accounts for about 30 percent of global trade, has in place an intervention scheme that is likely to push prices even higher, encouraging buyers to seek alternative origins.

A rally in the market for Asia’s main staple could stoke tensions across a region where several nations are struggling with a double-digit increase in food inflation, although ample global reserves and new supplies in the pipeline are expected to keep buyers calm for now.

“The 6 million tonnes damage (to rice paddy) is just an initial estimate. We need to conduct a survey again after flood water recedes,” Apichart Jongsakul, head of the Office of Agriculture Economy, told Reuters, adding that the figure, which is a 50 percent jump from early estimates, referred to the main crop.

As a result Thailand may not be able to meet its rice export commitments to Indonesia, the Indonesian trade minister said on Friday, forcing Southeast Asia’s largest economy to explore other sources.

“I just received information that they (Thailand) don’t appear to be able to fulfill their commitment to sell and ship rice to Indonesia,” Trade Minister Gita Wirjawan said. “Thus we are trying to find a solution…there are several alternatives.”

The worsening flood situation could cut Thai production to 19 million tonnes of paddy, Apichart said, nearly a quarter down from the previous forecast of 25 million. Thailand has a second smaller crop producing around 7 million tonnes a year.

Thailand has seen about 1.6 million hectares (3.8 million acres) of farmland inundated, forcing the government to cut its estimate for this year’s main crop by 24 percent.

The floods, which have covered around a third of the country, have killed up to 377 people since July.

The price of benchmark 100 percent B grade Thai white rice is expected to jump as much as 34 percent to $850 a tonne when floodwater recedes, due to the government price-supporting plan and lower supplies, traders and exporters said.

This could have some impact on overall rice prices in the region although India is offering cargoes at much lower prices.

India’s food price index rose 11.43 percent in the year to Oct. 15, while China’s food prices climbed 13.4 percent in September from a year earlier. Bangladesh food inflation jumped to 13.75 percent in September from 12.70 percent in August.

“The government will definitely accelerate its rice buying scheme to support farmers who have been already hit hard by the severe floods,” said Korbsook Iamsuri, president of the Thai Rice Exporters Association.

In addition to the flood damage to Thai rice crop, the market is concerned about typhoons hitting production in the Philippines, the world’s biggest importer until last year, and seasonal floods in Vietnam’s Mekong Delta.

Still, the Philippines’ rice purchases next year may hover near an earlier estimate of 500,000 tonnes despite damages from recent typhoons and will unlikely match imports of in 2011, the Agriculture secretary said on Thursday.

Waters, which have risen to the highest level since 2000, submerged more than 20,000 hectares (49,420 acres) of rice in the Mekong Delta food basket and destroyed some 7,000 hectares, or 1 percent, of the area planted for a minor crop, government data showed.

But high prices may lead to a 30 percent cut in shipments from Thailand next year and No. 2 seller Vietnam may be unable to increase its export volumes as buyers turn to cheaper rice from India, traders and industry officials said at an industry seminar in Ho Chi Minh City last week.

India, which had banned exports for almost four years, authorised shipments of up to 2 million tonnes of non-basmati rice from September and traders said its grain was offered at $460-$470 a tonne, well below Thai and Vietnamese prices.

Indonesia has been exploring the possibility of importing long-grain rice from India and Pakistan, though no decision has been made yet, said Deddy Saleh, Director General of Foreign Trade at the Trade Ministry.

“Indian and Pakistani long grain rice are now too expensive, affected by high Thai and Vietnam rice prices,” he said, adding that they are also looking at rice from Myanmar and Cambodia, though there are difficulties in finding reliable rice traders or exporters from the two countries.

An official at state procurement agency Bulog, which has a permit to import 1.6 million tonnes this year, said Indonesia currently has a 900,000-tonne government-to-government deal with Vietnam, and a 150,000-tonne commercial pact with Thailand.

This did not include the 300,000 tonnes government-to-government contract with Thailand that was cancelled.

Thailand’s Apichart said the government was worried about a farm rehabilitation plan and a seed shortage in the next, smaller crop, as most of the paddy seed stored in farmers’ granaries had been washed away by floods.

“This could mean a drop in the next second smaller crop as well, as we lack paddy seed,” Apichart said, adding that no immediate estimates of the second crop loss were available.

The Agriculture Ministry expects minimal damage to the sugarcane crop, while rubber output was likely to be intact, as plantations in the south escaped the floods, he said.

Annual rubber output is set to stay at 3.2 million tonnes, while sugarcane was seen at 99 million tonnes, he said, slightly below the Thai Sugar Miller Corp’s 100 million-tonne forecast.

(Additional reporting by Michael Taylor and Yayat Supriatna in JAKARTA, Writing by Naveen Thukral, Editing by Ramthan Hussain)