Thailand's agricultural economy in 2011 is forecast to expand in a range of 1.4% to 2.4%, driven by strong farm expansion spurred by favorable prices, according to the Agricultural Economics Office.

The forecast is based on the assumption there will be no serious natural disasters on the scale that affected the country this year, less volatile oil prices and ongoing improvement in the world economy.

"The series of natural blows that hit the farm sector in one year was beyond our expectation," said Apichart Jongskul, the secretary-general of the office.

He said the agricultural sector in 2010 encountered several critical factors, starting with severe drought, two pest outbreaks - brown planthoppers and pink mealybugs - that respectively damaged local rice and cassava plantations, and widespread flooding.

The impact brought the agency to revise down its forecast for the agricultural economy to a contraction of 0.9%, from previous forecasts of 2-3% growth.

About 1.2 million tonnes of rice paddy alone were destroyed this year, lowering output from the main crop by 4.8% to 22.36 million tonnes of paddy. Production of cassava fell 30% from more than 30 million tonnes harvested two years ago. The damages will result in a 1.7% year-on-year contraction for the crop sector.

Mr Apichart said, however, that rising prices of many products would lead to farm expansion and contribute largely to next year's growth.

Next year, production of most crops is expected to rise by 1.6-2.6% over 2010 thanks to the government's farm income guarantees for major commodities including rice, cassava and maize.

In addition, rising fuel prices, with some forecasts putting crude oil at US$100 a barrel or more next year, are expected to push up prices of food and oil crops.

The Thai Rice Exporters Association forecasts high market demand will raise export prices significantly next year, especially for white rice.

Association president Korbsook Iamsuri said the export price of 5% white rice will move between $500 and $600 a tonne next year, from an average of $480-490 in the first nine months this year.

Hom Mali rice remains a premium export grain with prices above $1,000 a tonne, and prices of $500-600 a tonne for parboiled rice will also be higher than this year's average.

But Mr Apichart is confident that rice prices would not be as volatile as in 2008 when export prices rose to historic highs on fears of a worldwide food shortage.

He said exporters and buyers now had more experience to deal with swings in the market, and a rush to buy large amounts of rice might should not occur.

Statistics from the Thai Rice Exporters Association showed that Nigeria imported more than 600,000 tonnes of rice in the first eight months of 2008, up 338% over the same period the year before, and much more than the average of 300,000 tonnes it bought over the past few years.

According to Mr Apichart, as effects from climate change are likely to reach Thailand more often, the government plans more effective safeguards including a risk guarantee fund to aid affected planters from disasters and reduce the state burden.

This year's setbacks have cost the government several billion baht including 50 billion from floods alone.

Source: Bangkok Post