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Thai government increases 2013 sugarcane forecast, drought hits rice




  • Thailand has raised its forecast for the 2013/14 sugarcane crop, potentially boosting sugar production, but revised down its expected rice output due to drought, an Agriculture Ministry official said on Thursday. Thailand, which is propping up local rice prices through a subsidy scheme to support farmers, also forecast a rise in rubber output after planting more trees. 

    Sugarcane production for 2013/14 was forecast at 105 million tonnes, up nearly 2 percent from 103 million tonnes in the previous crop, Surasak Pannop, deputy secretary-general of the Office of Agriculture Economy, told Reuters. The increase could push sugar production above the latest forecast by the Office of Cane and Sugar Board (OCSB) of 9.7 million tonnes, an analyst said. 

    “We will have more sugar in the market, so that will push prices down and increase availability,” said Joyce Liu, an investment analyst at Phillip Futures in Singapore. Benchmark New York raw sugar futures are already hovering near their weakest levels since July 2010 as a global surplus keeps prices under pressure. 

    Surasak said it was too early to forecast sugar output and the Ministry of Agriculture would update the production forecast of major commodities in the second half of the year. “We need to keep an eye on a possible dry spell in June/July and if it happens, it could cut sugar content in the cane and we would not have that much sugar,” he said. Thursday’s sugarcane forecast is higher than markets had expected and tops the government’s January predictions for output of 100 million tonnes. 

    “That’s an incredible outcome, considering most of the industry thought only five to six weeks ago that the final number would be 90-92 million tonnes,” said Tom McNeill, a director at commodity analyst Green Pool in Brisbane. “This was from a crop that suffered quite a lot of drought stress during the last monsoon period, so it is quite amazing that it has produced even more tonnes of cane than the prior year.” 

    RICE OUTPUT TO FALL Lower rice production is unlikely to trouble Bangkok too much. The government has run a costly intervention policy for two years, paying farmers more for rice than it is worth on international markets. Farmers get 15,000 Thai baht ($510) per tonne, about 50 percent above market prices. The forecast 3.6-percent cut in the 2013/14 crop will have no impact on Thai rice prices in the world’s third biggest exporter after India and Vietnam. 

    “We have asked farmers in some areas to stop growing an off-season rice crop as we don’t have ample water in major reservoirs,” Surasak said, putting rice output at 37.4 million tonnes from 38.8 million a year ago. The Thai government intervention has pegged the export price of common grade 5 percent broken grade Thai white rice at $574 per tonne, traders said. That is way above the same grade offered by Vietnam and India of $380 and $420 per tonne respectively. 

    The high prices caused Thai rice exports to fall sharply in 2012 to 6.9 million tonnes, down from 10.6 million tonnes in the previous year, toppling Thailand from its spot as the world’s top rice exporter. In April, a Thai official suggested the government might move the price it pays closer to the value of rice on global markets, triggering an angry response from farmers. 

    Surasak said rubber production for 2013 was forecast to rise to 3.86 million tonnes, up 5.2 percent from 3.67 million in the previous year. “Rubber output was forecast higher because of plantation expansion years ago and the rubber trees are now mature and start producing latex,” he said. 

    Copyright Reuters, 2013

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