Global Rice Outlook: Thailand Focus

BMI View: We continue to believe Thailand's rice production will recover in 2013/14 after 2012/13's disappointing crop, but have revised down our estimate due to lower plantings in the off-season crop. In 2014/15, we see output declining due to the abandonment of the government's rice pledging scheme and to inclement weather ahead of the main crop's planting season. The government is stepping up efforts to dispose of ballooning inventories and a resulting recovery in Thai exports, coupled with favourable output outlook in other suppliers, bolsters our view for global rice prices to average lower in 2014 and 2015.

We have revised down our estimate for Thailand's rice production in the 2013/14 season. The drier than normal weather recorded in Thailand since the end of 2013 will decrease yields of the secondary 2013/14 crop, the plantings for which have already been hit by the scaling back of the rice subsidies. We now see output recovering by a milder 1.1% year-on-year, to 20.4mn tonners (compared with previous estimate of 20.6mn tonnes). Looking at the 2014/15 season starting in October 2014 with the harvest of the main crop, we see output declining by 1.6% y-o-y to 20.1mn tonnes. The weather remains dry ahead of the planting season, which may hamper sowing conditions. Moreover, uncertainties surrounding the government's domestic support programs and delays in some farmers' payments for the current season will weight on planting intentions. Area harvested is likely to stagnate, at best, around 2013/14's levels of 10.9mn ha.

Growing Global Supply With The Pickup In Thai Exports

Averaging Lower In 2014
Second-Month CBOT Rough Rice, USD/cwt (Weekly Chart)

Global Rice Outlook: Thailand Focus

BMI View: We continue to believe Thailand's rice production will recover in 2013/14 after 2012/13's disappointing crop, but have revised down our estimate due to lower plantings in the off-season crop. In 2014/15, we see output declining due to the abandonment of the government's rice pledging scheme and to inclement weather ahead of the main crop's planting season. The government is stepping up efforts to dispose of ballooning inventories and a resulting recovery in Thai exports, coupled with favourable output outlook in other suppliers, bolsters our view for global rice prices to average lower in 2014 and 2015.

We have revised down our estimate for Thailand's rice production in the 2013/14 season. The drier than normal weather recorded in Thailand since the end of 2013 will decrease yields of the secondary 2013/14 crop, the plantings for which have already been hit by the scaling back of the rice subsidies. We now see output recovering by a milder 1.1% year-on-year, to 20.4mn tonners (compared with previous estimate of 20.6mn tonnes). Looking at the 2014/15 season starting in October 2014 with the harvest of the main crop, we see output declining by 1.6% y-o-y to 20.1mn tonnes. The weather remains dry ahead of the planting season, which may hamper sowing conditions. Moreover, uncertainties surrounding the government's domestic support programs and delays in some farmers' payments for the current season will weight on planting intentions. Area harvested is likely to stagnate, at best, around 2013/14's levels of 10.9mn ha.

Averaging Lower In 2014
Second-Month CBOT Rough Rice, USD/cwt (Weekly Chart)

Growing Global Supply With The Pickup In Thai Exports

We maintain our long-held view that Thailand will accelerate its rice exports in 2014. In line with our long-held view, the government abandoned in February 2014 its costly Paddy Pledging Programme (see 'Rice Scheme Days Numbered', June 10 2013), which maintained Thai rice prices at uncompetitive levels during more than two years. The government is also stepping up efforts to dispose of ballooning inventories, in order to pay some farmers and ease growing discontent in the industry. Thailand's exports have picked up in recent months, as the government is now ready to sell its stocks at a much discounted price. January-February exports were at 1.4mn tonnes, up 39.5% y-o-y. The country is slowly regaining market share from Vietnam and India, after these two competitors boosted exports when Thai rice prices were elevated. Thai rice prices are now neck and neck with Indian and Vietnamese prices, around USD370-380/tonne, Exports are likely to recover strongly in 2013/14 after two years of declining shipments. The USDA estimates them at 8.5mn tonnes, up 21.4% y-o-y.

Thai Prices Tumbling
CBOT Rough Rice & Select Countries' Rice Export Prices, USD/tonne

CBOT Prices To Eventually Ease

We expect front-month CBOT rough rice prices to remain supported over the short term but believe prices will ease over 2014. The recent weakness in Thai prices may lead to a price war with Indian and Vietnamese competitors, keeping Asian prices their low levels. Meanwhile, we see the rice supply outlook improving in the US in 2014/15, which will ease prices in the US and eventually weight on the CBOT contract. Indeed, although the US is only a secondary exporter, CBOT prices, traded in the US, are largely influenced by the local supply picture.

We continue to believe CBOT rice prices will head towards multi-year support coming in at USc15.00/cwt in H214. Global supply will rise in 2014/15, with increasing export capacity coming from Thailand and rising global surpluses and stocks-to-use ratio. Ultimately, we continue to expect CBOT prices to average lower over 2014 and 2015 - at USD13.50/cwt and USD12.80/cwt respectively - due to ample global supply.

THAILAND RICE ESTIMATES
FY09 FY10 FY11 FY12 FY13 FY14 FY15
BMI Thailand Rice Production* 19.9 20.3 20.3 20.5 20.2 20.4 20.1
USDA Thailand Estimates* 19.9 20.3 20.3 20.5 20.2 20.5 20.1
Thailand Ending Stocks (USDA)* 4.8 6.1 5.6 9.3 12.8 14.7 13.4
Rice Harvested Area (mnha) 10.8 10.9 10.7 11.0 10.8 10.9 10.9
Rough Rice Yield (tonnes/ha) 2.78 2.81 2.88 2.82 2.82 2.85 2.80
% Of Global Production 4.4 4.6 4.5 4.4 4.3 4.3 4.2
% Of Global Exports 29.6 29.1 30.3 17.5 17.2 20.8 na
BMI Global Rice Production* 448.7 441.4 449.2 465.8 469.5 472.3 479.7
USDA Global Rice Estimates* 448.7 440.6 449.3 465.8 469.0 470.6 na
*(mn tonnes).Sources: BMI, USDA, Thai Rice Exporters' Association, FAPRI; 2011/12 = 01/2012 to 12/2012
THAILAND RICE TIMELINE
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Main H P P P P P P H H
Second P P H H H P
Note: P = Planting, H = Harvest. Source: BMI, USDA
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