Thai Rice Hoard at Record Seen Hurting Prices Amid Global Glut

Thai Rice Hoard at Record Seen Hurting Prices Amid Global Glut

Record reserves of rice in Thailand, accumulated from a state-buying program that’s spurred concern from the International Monetary Fund, are seen contributing to lower prices next year as worldwide harvests expand. The stockpiles probably total 16 million metric tons, which will pressure global prices, according to Eklavya Chandra, director at Bangkok-based Phoenix Commodities Ltd. (Thailand). The Thai holdings will surge 18 percent to 14.9 million tons in 2013-2014, the International Grains Council forecasts.The third-largest shipper started buying the grain from farmers at above-market rates in 2011 to boost rural incomes, fulfilling a campaign pledge by the Pheu Thai Party, which won a parliamentary majority that year. The IMF said last week the program was likely to generate wider losses and should be dropped in favor budgetary transfers to low-income households. Thai ministers said they will press on with the intervention.

“Everybody realizes that 16 million tons cannot be sold in a year or two years, so there is no bullish trend in the market,” the Phoenix director said in an interview in Hong Kong, where he’s attending a conference. “Supply continues to increase, while Thai stocks put more pressure on prices.”

The price of Thai 5 percent broken white rice, an Asian benchmark, tumbled 26 percent this year to $433 a ton, contributing to lower food costs as harvests of corn, wheat and soybeans increased. World food prices tracked by the Food & Agriculture Organization lost 5.3 percent in the past year.

‘Buyers’ Market’

“It’s still a buyers’ market because supply is actually more than demand,” said Anthony Lam, vice chairman at Hong Kong-based Golden Resources Development International Ltd. “In the short term, the Philippines is going to buy and Indonesia will buy soon, before the election, that will spike up prices.”

The Philippines may boost imports 20 percent to 1.2 million tons next year after Typhoon Haiyan struck the country, the FAO said on Nov. 19. Still, the storm’s impact on output is minimal as most harvests had been gathered, Orlan Calayag, administrator of National Food Authority, told the conference today.

“The global surplus is large enough to be able to cope with any large tender by the Philippines,” said Darren Cooper, senior economist at the International Grains Council. “I doubt that it would have a significant impact on the world market since the additional demand would likely be temporary.”

World stockpiles will expand 1.2 percent to 109.3 million tons in 2013-2014 as reserves in the five largest exporters including Thailand gain to records, IGC forecasts show. Global output will climb to an all-time high of 474 million tons, topping demand by 2 million tons, the data show.

Hurt Crops

Bad weather that hurt crops in the Philippines as well as in India will provide price support in the near term, said Samarendu Mohanty, senior economist at the International Rice Research Institute, based in Los Banos, the Philippines. Output in India may drop as much as 5 million tons to about 100 million to 105 million tons in 2013-2014, Mohanty said.

“With these Philippines and India cases, and China importing more, I don’t think the price will go down any more,” said Mohanty, forecasting a gain of as much as $30 a ton by the end of March. “The upside is limited by ample supply in the market and stockpiles in Thailand.”

Thailand has spent 678 billion baht ($21.3 billion) since October 2011 buying about 29 million tons of milled rice from farmers. The program spurred the buildup of record reserves and dethroned the country as the largest exporter.

Thailand will sell 1.2 million tons of rice to Beijing Great Northern Wilderness Rice Industry, a state-owned company, according to a statement from the Commerce Ministry yesterday. The price will be based on market rates and the shipment will be delivered by the end of December, it said.

To contact the reporter on this story: Supunnabul Suwannakij in Bangkok at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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