Country Focus: Thailand

by Intern Intern1
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Thailand can boast of one of the world's most vibrant agricultural economies. Its vitality largely can be attributed to its free market orientation, industrious farmers and to a very energetic and progressive private sector.

Agriculture employs nearly 60% of the Thai work force. The average farm is quite small, about 1 ha. But, the land is productive and the farmers work hard, benefiting from interaction with private companies that have introduced new crops and hybrid seed, improved livestock, infrastructure and international marketing acumen. Together, the farmers and agribusiness have transformed Thailand into a major exporter of agricultural commodities. It is one of the world's few net exporters of maize; the world's largest exporter of rice, cassava and canned pineapple; the second-leading exporter of sugar, and the fifth-largest exporter of poultry meat. In addition, Thailand has become the world's third-largest producer of rubber.

Rice. The most important food crop is rice, accounting for at least 30% of the value of all crops produced in the country. It is the preeminent staple food. White rice, glutinous rice, fragrant rice and small quantities of basmati are produced, with white rice the most important.

Consumers spend about a quarter of their food budget on rice. Most rice is served as the centerpiece of a meal, along with meat and vegetables. Annual per capita consumption is about 120 kg, of which 10 kg are in the form of noodles or confectioneries.

Local traders purchase rice from the farmers and bring the grain into domestic markets or export channels. Most of the best rice is consumed in domestic markets. While the policy has been to increase exports of high-quality rice, lower qualities still account for nearly half the total. The higher-quality rice competes with that from other major exporters, such as the U.S.

Exports are handled by about 100 exporters, with 10 to 12 companies accounting for half the business.

When markets are functioning smoothly and farm prices are adequate, the government does not intervene. It has on occasion purchased paddy from farmers in order to support prices. The government stores such rice and disposes of the surplus eventually through government-to-government exports.

Another form of farm support program is a paddy mortgage scheme that sets target prices at 4,000 to 4,200 baht (1 baht = $0.255) per tonne for paddy 5%, and 3,300 to 3,450 baht per tonne for glutinous paddy. Under that program in 1991-92, participating farmers received 3% interest loans valued at up to 90% of the target price.

Maize. Thailand's chief feedstuff is maize, which is grown mostly in the north and at high elevations in the central plains. The main crop (90%) is seeded April-May and harvested July-August.

Before the explosive growth of the broiler industry, exports markets determined domestic prices. Today, competition among feed mills for existing supplies is the most important factor influencing maize prices.

The government and feed millers promote the use of hybrid seed through education and demonstration campaigns. Individual companies, such as the giant Charoen Pokphand Group, are active in these efforts through specially designed projects in which the company guarantees a bank loan provided to a farmer, allowing the farmer to purchase the hybrid seed and necessary fertilizer and chemicals. At harvest, the private company purchases the maize from the farmer at a set price. About 116,000 ha were enrolled in such programs in 1991-92, and the goal is to enroll 265,000 ha in 33 provinces in 1992-93.

The Thai feed milling industry is among the most advanced in the world. In 1990, the Thai Feed Mill Association directory listed 22 mills. Five new mills were brought on stream in 1991 and 1992. Feed mills are responsible for consuming 80% of the maize sold by the farmers into various domestic channels, the remainder is sold by the farmers directly to livestock producers.

Increasing demands from the feed millers are reducing the supplies available for export. Maize exports were valued at $160 million in 1991. Trade is handled by five to 10 active exporting companies. Major importers of Thai maize are Malaysia and Singapore.

Wheat. Consumption of wheat foods is growing rapidly in Thailand, spurred by the nation's buoyant tourist industry, the proliferation and growing popularity of Western-style fast food restaurants among both tourists and young Thais and a booming shrimp farming industry that has come to use wheat flour in specialty feed rations. About 85% of wheat flour supplies is used to produce foods for human consumption; shrimp feed manufacturers utilize the balance.

Of the wheat flour-based foods, noodles are the most important, accounting for 40% of utilization, then bread and cakes at 35%, biscuits at 20% and the remainder comprising family flour.

Thailand's largest baker and instant noodle manufacturer, Thai President Foods Co., is rapidly expanding its bread loaf production capacity. Fast food restaurants also are an important market for bakers.

In late 1980s, wheat consumption was growing at 21-26% annually, from 250,000 tonnes in 1987-88 to 380,000 tonnes in 1989-90. Consumption is expected to continue to expand at about 10-12% annually. Per capita consumption of wheat-based foods was estimated at 6.4 kg in 1991-92.

There are four flour milling companies operating five milling complexes in Thailand. The most recently constructed, Bangkok Flour Mill, a Thai-Malaysian joint venture, came on stream in 1991. A joint venture between Nissin Flour of Japan and a Thai company will dedicate a new mill this year. Charoen Pokphand plans to open a flour mill, which will be dedicated to providing material for the manufacture of shrimp feed.

Thailand's total daily milling capacity is estimated at about 2,450 tonnes per day.

Flour millers import wheat directly. An estimated 540,000 tonnes were imported in 1992. There is a tariff on imported wheat, 1 baht (US$0.26) per kg.

Competition is the primary factor in determining flour prices. Another constraining factor is that millers must receive approval from Ministry of Commerce before they can increase flour prices.

Thai wheat food and feed manufacturers can import wheat flour, if they are willing to pay the import duty of 3.85 baht (US$0.98) per kg. Japanese mills are the primary suppliers of imported flour. Imports have been about 55,000 tonnes (wheat equivalent) in recent years, mostly for noodle and biscuit manufacture.

Trade policy. Thailand is a member of the free trade Cairns Group. It also is an active member of the Association of Southeast Asian Nations (ASEAN) and a proponent of a Southeast Asia free trade zone.