In 2022, the conflict between Russia and Ukraine caused the price of chemical fertilizer to more than double that of last year, reaching about 950-1000 U.S. dollars per ton, causing downward pressure on Thailand’s rice production, especially in the rainy season, the rice production decreased by about 1.2-1.8 million tons or about 10%compared with the previous year due to the impact of the high price of chemical fertilizer, but the rice production in the dry season was not affected by the high price of chemical fertilizer because it was in the harvest period, The total supply of rice output plus inventory in 2022 is about 24.3 million tons. After deducting the external demand, which is slightly increased to the rice export target of about 7million tons, and the domestic consumption of about 1300 tons of rice, the domestic redundant rice supply in Thailand is about 4.3 million tons, which is at a relatively tight level compared with about 6million tons last year, and the domestic rice supply tension may not be temporary.
Considering that the demand side situation that will improve this year may aggravate the decline in rice supply caused by the rise in fertilizer prices, and become a risk factor leading to a more tight supply of redundant rice in Thailand. It is expected that the foreign demand reflected by Thailand’s rice exports will be better than that of the previous year. Due to the solution of the pent up demand in the international market, the easing of the container problem and the depreciation of the Thai baht against the US dollar, this will help to promote Thailand’s rice exports. The rice export target can reach 7million tons, an increase of about 15.5%year-on-year, but it is still low due to the impact of fierce global competition, especially from Vietnam and India. It is expected that Vietnam and India will not take measures to restrict rice exports this year, because their rice production is at a high level supported by the appropriate climate. At the same time, Thai rice will still face many challenges in price competition because its price and production cost are higher than its competitors. After deducting rice exports and domestic consumption, the supply of redundant rice in Thailand may be more tense. Although this will be conducive to rice exports, on the other hand, in the case of high uncertainty caused by the continuous conflict between Russia and Ukraine, it may affect the supply of rice in Thailand. Therefore, in the situation of reduced rice production in 2022, although rice exports have slightly improved, this will only aggravate the risk that Thailand may encounter domestic rice supply tension.
Looking forward to the future, Kaitai Research Center predicts that the domestic rice supply in Thailand will still face the risk of tight supply with the highly uncertain global situation in 2023, including the long-term continuation of the conflict between Russia and Ukraine and the difficulty of predicting when it will end, which will lead to the high price of chemical fertilizer and affect the production of rainy season rice and dry season rice, and the problem of climate change tends to intensify, And the situation that rice prices are still low despite rising may not encourage farmers to expand production. These pressures have led to a decline in Thai rice production to 18-19.5 million tons and the inability to return to high production in the short term, as well as a decline in rice stocks.
There is no obvious change in global rice demand. Thailand’s rice export is still at a low level of about 7.5 million tons due to the fierce price competition faced by Thailand in the international market, but this is also the risk of reducing Thailand’s domestic redundant rice supply to a tight level of about 900-2.4 million tons. At the same time, high production costs will promote domestic rice prices to continue to rise over the previous year.
In addition, if Thailand’s rice exports are higher than expected due to the support of the following factors, including the supply side impact of competitors (floods, droughts, export restriction policies), better improvement of container problems than expected and more competitive prices of Thai rice, Thailand may be more vulnerable to the risk of tight domestic rice supply in the future.