Thailand's rice market is expected to face a price war next year as a result of oversupply that will lower prices in both domestic and export markets, while the stronger baht could hurt the competitiveness of rice shipments, exporters warn.
Charoen Laothammatas, president of the Thai Rice Exporters Association, said paddy supply from the 2016-17 crop to be harvested from November to January, is estimated to rise by 10-20% from the normal level of 22 million tonnes.
The increased supply is expected after farmers, especially those in the Central Plains, Northeast and North, enlarged their planting areas to enjoy continual rainfall after the severe drought.
Mr Charoen said global rice prices will also be affected by the La Nina weather phenomenon, which is spreading across Asia and creating more monsoons to prop up rice production in countries such as India, Pakistan and Vietnam.
These countries are major export competitors of Thai producers and their output normally come out at the same time as Thailand's crops, he said.
He expected the rice supply would flood the market from the last quarter this year to cause a price war in the global market.
Mr Charoen's forecast echoed the report of the US Department of Agriculture (USDA), which earlier estimated world rice supply next year at 481.23 million tonnes, up 2.3% from 2016, while consumption will increase slightly by 0.4% to 480.63 million tonnes.
He said the baht's appreciation in recent weeks would be another factor in decreasing the competitiveness of Thai rice in the global market.
The baht hit a one-year high on Monday at 34.72 against the US dollar and has risen by 3.3% against the greenback this year.
The strong baht will make Thai rice relatively costly, Mr Charoen said.
"Every appreciation of one baht against the dollar adds $10 to the price of a tonne of Thai rice," he said at a press conference yesterday.
Mr Charoen said large stockpiles of Thai rice accumulated under the rice pledging scheme would also influence buyers to offer lower prices.
At present, there are about 9 million tonnes of milled rice in state stocks, down from 18 million tonnes two years ago.
In the first six months, Thailand shipped 4.99 million tonnes of rice and it is set to export about 9.5 million tonnes this year.
The USDA forecasts Thailand will export about 9 million tonnes of rice in 2017, followed by Vietnam at 7 million, India at 5.5 million and Pakistan at 4.25 million.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the price of Thai white rice in free-on-board terms is $425 a tonne or about $50 more than Vietnamese rice. This shows that Thai rice is less competitive than that of its rivals and that may turn buyers to other markets, he said.