Thailand’s Rice Exports Hit 12-Year Low

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Thailand’s Rice Exports Hit 12-Year Low

Last year Thailand lost its spot as the world’s top rice exporter. Can it bounce back?

Thailand lost its coveted spot as the world’s top rice exporter last year as the country’s exports declined 37 percent in 2012 from the year before, according to data released by the Ministry of Commerce on Wednesday.

Last year Bangkok sold 6.73 million metric tons of rice at a value of $4.63 billion compared to 10.7 million tons worth $6.43 billion in 2011. The 2012 volume was the lowest level of rice the country has shipped abroad since 2000 when it sold just 6.55 million tons.

Thailand’s drop-off opened the door for both India and Vietnam to surpass it as the world’s first and second largest rice exporters respectively. According to Bloomberg News India sold 10.3 million tons last year while Vietnam is estimated to have sold 8 million tons.

Bangkok’s declining rice exports is largely a product of Prime Minister Yingluck Shinawatra’s populist rice-buying scheme. As The Diplomat reported in November, the current administration created a program in late 2011 that pledged to purchase farmers’ white rice at 15,000 baht ($488) per ton and more for higher quality variants.

The Yingluck administration defended the program against initial skepticism by arguing that buying rice at above market prices would not impact exports because Thailand had the highest quality rice and therefore could sell it abroad at higher prices.

It quickly became evident that the administration badly misjudged oversea markets as the government struggled to sell the rice and stockpiles began accumulating rapidly, reaching at least 12 million tons by the end of last year. The stockpile had become so large that the government was struggling to find a place to store it and began trying to rent out aircraft hangars for additional space.

Last month the World Bank said that Thailand spent 376 billion baht (U.S.$12.5 billion) or 3.4 percent of GDP on the rice scheme during the 2011/2012 harvest season (October 2011 to September 2012). It further estimated that the Thai government will spend 450 billion ($15 billion) or around 3.8 percent of GDP for the 2012/2013 harvest season.

Despite the acute economic costs of the program, eliminating it will be difficult politically. PM Yingluck and her Pheu Thai party derive their electoral support from rural farmers and poor classes in northern and northeastern Thailand who are the primary benefactors of the rice-buying and other populist schemes.

These populist programs have also contributed to Thailand’s rising public debt, which stood at 4.94 trillion baht or 43.9 percent of GDP at the end of the last FY year and is expected to rise to 47.5 percent of GDP during the current FY ending next September. Various government sources have said that Bangkok will not let the number rise to 50 or 60 percent of GDP, and hopes to keep servicing the debt to under 15 percent of annual budgetary expenditures. In the current FY servicing the debt is expected to consume 7.4 percent of the government’s budget.

Meanwhile, Thai exports are being further hindered by a strengthening currency that the government blames partly on quantitative easing by central banks in the U.S. and Japan.

Zachary Keck is assistant editor of The Diplomat. Follow him on Twitter: @ZacharyKeck.