Indonesian demand bumps up rice prices in Thailand

Indonesian demand bumps up rice prices in Thailand

BANGKOK (Reuters): Indonesian demand for Thai grain could drive up Thailand's domestic rice prices, trade sources have said .

Indonesia is set to import a record five million tons of rice this calendar year and Thailand will be one of its major suppliers, the sources told Reuters.

The chase for much-needed foreign currency, as economic turmoil grips Thailand, would prompt exporters to sell as much rice as possible abroad, they said.

As a result, Thai consumers could see a dwindling in local rice supplies and corresponding surge in retail prices, they said.

"If export demand is this strong, it is inevitable that local prices will rise sharply and I think Thais should be prepared to face that reality," said Vorapong Pichpongsa, president of the Thai Rice Exporters Association.

Thailand is expected to sell at least 1.5 million tons of rice to Indonesia this calendar year, he said.

"I can see Thailand exporting 1.5 million tons to Indonesia easily. I don't think we can provide more unless our next crop is good," he said.

"This is because the export demand for our regular customers already tops 4 million tons each year. We must be careful not to upset local stocks either," he added.

Local retail rice prices have already soared because of bullish export demand, dealing another blow to Thai consumers already pinched by the country's economic problems.

Commerce ministry data show retail rice prices have surged 47 percent year-on-year in February in Thailand due to tighter supplies brought about by strong export demand.

But trade sources said the worst is yet to come for Thai consumers.

If Jakarta's buying power is restored, Thailand was ready to sell Indonesia more than 1.5 million tons of rice, the sources said.

"If Indonesia is to really import five million tons, which is around a quarter of the world rice trade this year, Thailand is set to export more to that country," said a trader with one major rice trading firm.

"Last year, Indonesia imported around 750,000 tons of rice and Thailand supplied around 500,000 tons of that amount. Will Vietnam, China and India be able to provide 3.5 million tons?" he added.

"They might be, depending on the supply-demand situation of these countries. But if they cannot, Thailand is likely to fill the shortfall," he said.

Thailand has projected that its rice exports this year will be around 5.3-5.5 million tons compared with 5.27 million tons last year.

The unhusked rice output for 1997/98 crop (April-March) is expected to be 21-22 million tons.