Thai rice exporters are expected to gradually shift to trading in euro to mitigate the impact of the US dollar's continued weakening against the baht, which has hurt their revenue, industry experts said.
Nearly 90 per cent of the exporters' turnover is denominated in dollars. Rice is the country's biggest agricultural export, helping to boost the total value of Thailand's agricultural exports in October to US$2.4 billion (Bt79.8 billion).
Korbsook Iamsuri, CEO of Kamolkij, a major exporter of parboiled rice, said that although the rice price is expected to increase gradually next year on higher global demand, exporters are worried about the stability of the baht against the greenback.
"The US dollar is likely to remain weak against the baht and other currencies next year. It will be difficult for Thai rice exporters to offset losses from the baht's appreciation. Thai rice prices quoted in US dollars will also be high compared with other [countries'] rice prices," said Korbsook.
Thai rice exporters believe trading in euros would lead to greater price stability, Korbsook said, adding that she expected to see more exporters quoting prices in euros from now on.
However, the move to the euro would likely be gradual, and most importers will still with the dollar, she said.
The University of the Thai Chamber of Commerce has forecast that the baht will appreciate to 32.50 to the dollar next year.
Panya Jintateerachai, marketing manager at Suwannaphum Rice, an exporter of Thai jasmine rice, said the baht's strengthening would be a key negative factor affecting the rice trade next year.
"Exporters are afraid the weakening US dollar will affect the Thai rice trade. We are trying to trade rice using the euro, as it is more stable," he said.
Rice exporters have spent the past year struggling to mitigate the impact of the baht's appreciation, but as most overseas importers still prefer to do business in dollars, exporters are stuck for the time being, Panya said. But with the dollar expected to remain weak, new strategies will have to be found, he said.
Asked why exporters have not offset their losses by buying forward, Panya said the banks have set a limit rate for exporters. Therefore, exporters have been forced to seek other options, such as trading in the euro.
The baht last week ended at 33.26 to the dollar. On Friday, it weakened by 0.2 per cent against the greenback, trimming this week's gain to 0.1 per cent, according to data compiled by Bloomberg. The currency may appreciate to 33 by the end of March 2010, according to the median estimate of analysts surveyed by Bloomberg.
Finance Minister Korn Chatikavanij said the Bank of Thailand was attempting to stabilise the baht/dollar rate through intervention in the foreign-exchange market and buying US dollars.
BOT Governor Tarisa Watanagase said separately that the central bank was closely monitoring the baht to ensure it moves in line with regional currencies. She added that so far this year, the baht had gained 3-4 per cent over dollar, the same rate as regional currencies.
Source: The Nation
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