Thai long grain rice exports falter amid competitive Indian prices

London — Thailand is unlikely to remember the international rice market in 2020 favorably, especially for exporters specializing in standard long grain white and parboiled rice.

According to the US Department of Agriculture, Thai 2020 milled rice exports -– excluding Fragrant rice –- totaled 4.2 million mt as of Dec. 27, down 28% year on year. To make matters worse, 2019's year-end total of 5.8 million mt was down 39% from 2018.

Examining 2020 export figures, the situation is even bleaker for standard long grain exporters. White and parboiled rice accounted for 73% of total 2019 exports, according to the Thai Rice Exporters Association (TREA).

From January-November, white and parboiled rice only accounted for 65% of the year's reduced export total.

Instead, an increasingly large percentage of Thai exports comprise specialty varieties which are often destined for high-end markets. As evidence of this, the quality-conscious US market was Thailand's main export market for several months in 2020, replacing more traditional markets in sub-Saharan Africa.

The vast majority of Thai rice that was exported to the US was Fragrant rice, according to participants.

According to TREA, Hom Mali Fragrant rice accounted for 20% of total exports in January-November 2020, up from 15% in 2019. Another niche product, Glutinous rice, also accounted for 2.3% of exports in the same period, up by 1.1 percentage points year on year.

Price effect

Price has been the main cause in these shifts and while buyers have limited options if they wish to buy more niche and often branded Fragrant or Glutinous rice varieties, they can go to multiple other markets for white and parboiled rice.

Since the start of 2019, Thailand has consistently been either the most expensive or second most expensive major origin of white rice in Asia. Additionally, price spreads between major origins have widened considerably since the second half of 2019, meaning Thailand has often not been a competitive origin for white rice by a large margin.

While the price spread of 5% broken white rice between the four main Asian origins -– Thailand, India, Vietnam and Pakistan -– would typically be assessed by S&P Global Platts at no more than $50/mt, the spread often rose well above $100/mt in 2020.

Participants have cited multiple factors for Thailand's high prices and low export figures in recent years. These range from the government reducing farmer subsidies to the lack of old crop stocks, which often topped up current crop exports by around 1 million-2 million mt each year.

Many participants said it was unlikely that Thai prices will soften substantially in coming weeks and months. Instead, it is likely Thai long grain prices will remain uncompetitive and annual exports will be limited to 6 million-7 million mt.

One major exporter said that if prices remained at current levels, "I would say less", while a Europe-based trader said Thai exporters must "live on another planet" given how uncompetitive their offers have been.

India benefits

The main beneficiary of Thailand's recent lackluster long grain sales has been India. Like Thailand in the past, exporters have been able to draw on substantial old crop stocks for export, but unlike Thailand they have benefited from consistently increasing harvests in recent years.

As a result, prices have remained competitive in 2020, when prices in most other Asian countries spiked amid COVID-19 related panic buying and reduced production.

Notwithstanding recent non-Basmati price increases, Indian exporters still anticipate that they will continue to dominate standard long grain rice sales in 2021.

The All India Rice Exporters Association expects non-Basmati milled rice exports in the 2020-21 marketing year (October-September) to total 10 million mt, according to the Financial Express. The record is 8 million mt in 2017-18.

Recent high volume demand from Bangladesh will undoubtedly help Indian sales at the start of 2021, although exporters must still overcome major logistical difficulties.

According to one Europe-based trader, there were 21 ships in Kakinada Port to be loaded with rice as of Jan. 5. Of those, only seven were being actively loaded, with one yet to be loaded, despite having arrived in the port on Dec. 4.

One Singapore-based trader said container shipments from India were not feasible, with a second Europe-based trader also saying India's container logistical situation was "horrible".

While some buyers are happy to pay a premium and go to other Asian origins to conclude business for prompt shipment, many buyers still seem willing to take the risk and come back to India due to the country's price competitiveness.

So long as India retains that status as 2021 progresses, its position as the world's leading rice exporter is their title to lose.