Business | Markets
Thai rice barons discover the world eats out of their hands
Every Wednesday for as far back as anybody can remember, a small group of Thai-Chinese businessmen have met for lunch down a leafy lane in central Bangkok before sitting down to set world rice prices.
- Reuters
- Published: 00:45 April 25, 2008
Bangkok: Every Wednesday for as far back as anybody can remember, a small group of Thai-Chinese businessmen have met for lunch down a leafy lane in central Bangkok before sitting down to set world rice prices.
For decades it was a sedate affair, a bowl or two of, appropriately, rice followed by a leisurely chat between old friends about anything affecting global supply and demand: a bad flood, say, in Thailand, the world's biggest exporter, or a failed harvest in Iran.
Full of food and the latest news, these 35 rice barons would then recommend a price per tonne only a few dollars different from the previous week, before heading for home.
It may only have been an 'indicative' level, but few countries or exporters could risk deviating too far from the benchmark set by the big hitters of Thailand's Rice Exporters Association, the guardians of nearly a third of all the rice to be traded globally.
That all changed late last year when India imposed export curbs to protect domestic supplies after severe flood damage to crops.
Vietnam, which vies with India to be the world's number two exporter, followed suit a few months later, triggering concerns about Asia's ability to feed itself and pushing prices to record highs of nearly $1,000 a tonne, three times their 2007 average.
Asia nervous
Now, the price of Thai 100 per cent B grade white rice, the world's de facto benchmark, is moving 10 per cent in a week and making governments across Asia nervous about possible unrest stemming from the soaring cost of the region's staple food.
Suddenly, a lot of eyes are trained on the boardroom of the Rice Exporters Association in Bangkok.
After they agree on a price, the association passes it on by letter - or more recently email - to its 180 members late that evening. It still takes a day or two for the new price to make it onto the website.
In reality, most exporters have tended to sell at a slight premium - if they can get away with it - or a discount to make their long-time customers in trading houses in places like Hong Kong, China and Singapore feel they are getting a good deal.
"Normally it's a buyers' market - they can shop around between different sellers. Now its definitely a sellers' market," said association managing director Charin Hansuebsai.
The 2008 price surge is straining the old loyalties and traditions at an institution with a 90-year history.
Some members are quietly quoting rice at a premium of more than 10 per cent of the recommended price. Last week, rival exporters in Vietnam were quoting at more than $1,200 a tonne - a 25 per cent premium to the then Thai benchmark - in an incomplete tender to the Philippines.
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