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Re-Imagining Rice Agriculture
Olam International Ltd
Thailand Rice Convention 2019 28th May 2019, Bangkok
High global inventories:
All exporting countries have higher stocks
1
USDA FAO IGC USDA FAO IGC USDA FAO IGC
India 22,600 21,800 22,700 25,000 25,700 21,900 25,500 27,550
Thailand 3,009 5,600 3,200 3,174 5,400 3,100 3,624 5,600
Vietnam 1,034 3,100 3,800 1,145 3,000 3,700 1,045 2,950
USA 933 930 900 1,702 1,700 1,500 1,867 1,580
Pakistan 1,424 1,324 1,224
South America 1,818 690 1,100 1,530 670 900 1,363 480 600
China 109,000 105,100 92,900 115,000 106,500 98,500 117,000 106,500
Other Asean 1,361 1,481 1,481
Total Non China/Other ASEAN30,818 32,120 31,700 33,875 36,470 31,100 34,623 38,160
YoY Diff 3,057 4,350 -600 748 1,690
Fundamental Comparisons Table: USDA, FAO, IGC, OlamFor Major Exporting Regions Ending Stocks (in 1,000mt)
2017/2018 2018/2019 2019/2020
• Over the last few years, Thailand has been able to achieve very large export figures due old crop
availability
• Lower Inventories in Thailand Post liquidation of the government stock
• Thailand ending stock has dropped from over 12Mn MT in 2013/14 to around 3Mn now
• As that crop availability dwindles, exports are adjusting lower and more in-line with the country’s
production
High global inventories:
Stocks-to-use
2
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
0
0.05
0.1
0.15
0.2
0.25
Global Stocks to Use: Exporters, Importers, and China
Exporters (Left Axis) Importers (Left Axis) China (Right Axis)
• Inventories in exporting countries (mainly India) will remain high
• Importing countries will continue to see a drawdown in inventory as major importers
pursue self-reliance policies
• Higher Inventories in China are expected to flatten in 2020
3
0
5
10
15
20
25
30
35
40
45
50
1/1
2/2
007
1/8
/20
08
1/4
/20
09
1/1
2/2
009
1/8
/20
10
1/4
/20
11
1/1
2/2
011
1/8
/2012
1/4
/20
13
1/1
2/2
013
1/8
/20
14
1/4
/20
15
1/1
2/2
015
1/8
/20
16
1/4
/20
17
1/1
2/2
017
1/8
/2018
Mil
lio
ns
of M
etr
ic T
on
ne
s
Major Rice Exporters: 12-Month Moving Aggregate; Jan 2007 - Mar 2019
Thailand
OtherASEAN
Vietnam
China
India
Brazil
Pakistan
US
China 840
Brazil (inc Argentina/Paraguay/Uruguay) 490
Vietnam 376
Pakistan 11
OtherASEAN -343
India -367
US -445
Thailand -1,017
Volume Gain Loss (12M on 12M)000 mt
China discounts
continue to drive
demand to China
Philippines improves
Viet
Global Export demand is robust despite
the loss of Bangladesh and Indonesia
Thai Rice Prices Remains At A Premium
4
0
200
400
600
800
1000
1200
1400
Jan
-15
Apr
-15
Jul-
15
Oct
-15
Jan
-16
Apr
-16
Jul-
16
Oct
-16
Jan
-17
Apr
-17
Jul-
17
Oct
-17
Jan
-18
Apr
-18
Jul-
18
Oct
-18
Jan
-19
Apr
-19
USD
Month
Thai HomMali, Viet Jasmine(Monthly Prices)Jan 2015 - Apr 2019
ThaiHomMali VietJasmine
• Increasing supply of lower cost fragrant rice from Vietnam drives Thai export
demand lower
• Thai Hommali has been able to remain steady at higher prices on the back of
domestic demand, Core Exporting countries Demand and lower stocks
Fragrant Prices
300
320
340
360
380
400
420
440
460
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
May
-16
Jul-1
6
Sep-
16
Nov
-16
Jan-
17
Mar
-17
May
-17
Jul-1
7
Sep-
17
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
USD
Month
WR 5% for Thai, Viet, Pak, India (Monthly Prices)
Jan 2015 - May 2019
Thai5 Viet5 Pak5 India5
5
WR Prices have reverted back to 2015 lows as:
• Exceptional import demand from Bangladesh and Indonesia has dried up
• The major Exporting countries (especially India) continue to see high inventories
• China has begun exporting cheap old crop; taking less imports (especially cross-border)
Thailand has less inventory and also sees risk of further shortage due to drought.
Thai and Indian white rice prices have also been able to offer stability even as other markets fell to
near-term lows
Bangladesh
Demand
Indonesia
Demand
Thai Rice Prices Remains At A Premium
WR Prices
6
Nigerian Cluster PB Demand:
• Indian volumes come up as the Thai prices are relatively expensive
• Recent dominance by Thailand would continue without a larger spread
Other West African PB Demand: Indian volumes dominate this region
South Africa PB Demand: Thai would continue to dominate this market
-80
-60
-40
-20
0
20
40
60
80
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-
15
Mar
-15
May
-15
Jul-1
5
Sep-
15
Nov
-15
Jan-
16
Mar
-16
May
-16
Jul-1
6
Sep-
16
Nov
-16
Jan-
17
Mar
-17
May
-17
Jul-1
7
Sep-
17
Nov
-17
Jan-
18
Mar
-18
May
-18
Jul-1
8
Sep-
18
Nov
-18
Jan-
19
Mar
-19
May
-19
Pric
e D
iffer
entia
ls (U
SD)
Mar
ket S
hare
(%)
Date
Nigerian Cluster's Imports (MT) from India and
Thailand (left axis) vs Price Differentials (Thai - India) for PB (right axis)
NC - India NC - Thailand Price Differential (Thai - India)
Thai Rice Prices Remains At A Premium
PB Prices
7
For Thailand rice:
• Lack of overhang of the government inventory – No Cheap rice to export;
Market would substitute Thai Old Crop stock with Chinese Old Crop
• Lower Ending stock compared to the other exporting countries – Firmer Prices
• Weather related risk and derived shortages – Thai Rice at a Premium
• Thai Rice continues to enjoy a High Quality Reputation
Thai Rice Global Market Outlook
“Re-Imagining Thai Rice”
Maintain Thai Rice Premiums by meeting the Changing Consumer needs and
develop the “core export demand”
Sustainability: Maintaining Thai Rice
Premiums by meeting consumer needs
8
“Involved with the local community”Berlin
“Sustainable, healthy”Berlin
“Not too expensiveCompared toRegular alternatives”Stockholm
“Transparent supply chain”LA
“Minimal environmentalimpact. Eco friendly
packaging” LA
“Info on pkg on how it is produced” LA
“Good for the environment” LA
Note: quotes from consumersResearch Mar/Apr 2019
“I want them to be ‘green’” Denver
“I am a firm believer in Sustainability and goodfarmer relationships”Denver
Consumers are increasingly
ethically-minded
Food products with ethical claims is a
US$250bn category with 4% growth
per year
Sustainable rice is gaining momentum
Traditional premium-led model is very
limited for Rice
9
• Premium Model: Higher income rice consumers,
who can afford to pay a premium for sustainable rice
• These consumers purchase Premium Products
such as Thai Hommali Rice, mostly in high-end
packaging
• These niche markets can maintain a similar
model to coffee/cocoa, but only accounts for a
about 10% of the global rice market
• Sustainability can deliver the High end
Products that can command the premium
• Sustenance Model: Majority rice consumers eat
cheap, non-fragrant rice, and its byproducts (e.g.
brokens) as a cheap staple carbohydrate
• Premium model will struggle with lack of margin
• Sustainability Projects can help reduce the cost of
farming, improve milling yields – overall reduce the
Cost
RICE500 MM mt
Total Palm Oil
consumed per year,
68.645 MM mt
Total Cocoa +
Coffee consumed
per year, Combined
16.66MM mt
Thailand should be at the forefront of
Sustainable Rice efforts
10
Thai Rice Department, GIZ & Olam led partnership from 2016 which aims at moving
16,000 farmers in Thailand to Sustainable standards
• Olam has been the Pioneer in Sustainable Rice Initiative
• Only Private company in the world to offer Sustainable rice in this scale
• Premium Quality rice
• Volume – Scalability
• All assurances as per the SRP standard
Positive Impacts we have been able to achieve
1. Farmers have seen a 9% reduction in cost
2. Quality improvements have also improved incomes by a further 10%
3. Word of mouth has led us from 70 farmers in 2016, to 2,300 Farmers in 2018 and expected to
be 6,000+ farmers in 2019
4. Water savings as high as 40%
Thailand should be at the forefront of
Sustainable Rice efforts
11
Thai Rice Department, 10 Thai Ministries, GIZ, Olam, and others in NAMA in 2019 which
aims at moving 100,000 farmers in Thailand to Sustainable standards by 2023 Detail Programme of Thai Rice NAMA Reception
Monday 27th May 2019
18:00 – 20:00
British Ambassador’s Residence, British Embassy Bangkok
18:00 Register
18:15 MC welcome participants and introduction
18:20 Welcoming remarks by Ms. Margaret Tongue, Chargé d’Affaires British
Embassy Bangkok
18:25 Speech by H.E. Mr. Grisada Boonrach, Minister of Agriculture and
Cooperatives
18:30 Speech by Mr. Tim Mahler, GIZ Country Director Thailand
18:35 VDO success story presentation
18:37 Sharing Success Story from farmer: Khun Mae Duang Chan, Lead Farmer from
Ubon Ratchathani
18:45 Call to Action Ceremony
18:55 Group Photo
19:00 Cocktail Reception and Networking
To achieve transformational change through a paradigm shift from conventional to low-emission farming in Thailand
Goal
▪ Farmers have adopted the SRP
Standard/GAP++ and thereby reduce GHG
emissions and realize additional co-benefits.
▪ Mitigation services are provided in the market
▪ Innovative incentive schemes are established
on the national level to support the
transformation of the whole rice sector to low-
emission production.
▪ 5 years from Aug 2018 –July 2023
▪ 14.9 million Euro
Duration
Budget
Objectives
12
“Re-Imagining” Thai Rice Industry for a
Sustainable Future