Thailand's Rice Export Strategy: Jasmine Rice and the Reality of Price Competition

Have you ever felt that 'Thai rice is expensive'?

In fact, behind that 'high price' lies a strategy Thailand has built over many years. The jasmine rice brand, a government-led price-support system, and intensifying competition with Vietnam and India are all intricately intertwined.

This article gives a detailed look at the overall picture of Thailand's rice export export strategy and its standing in the Asian rice market.

Thailand's rice export volume and its position in the world market

Thailand was long the world's largest rice exporter. It has now ceded the top spot to India and Vietnam, but its 2023 export volume of about 8.7 million tonnes still places it among the world's best.

Its export destinations are wide-ranging. African countries are the largest market, followed by Asia and the Middle East. There is also a certain amount bound for Japan, but only around a few percent of the total.

Looking at this table, Thailand trails India by a wide margin. But a simple comparison of quantities misses something: the strategy of 'price and quality.'

The brand value jasmine rice creates

Thailand's greatest weapon is jasmine rice (khao hom mali in Thai). Its aroma and stickiness set it apart from other varieties.

Jasmine rice is grown mainly in the northeast (the Isan region). Dry soil and a distinctive climate nurture this fragrant variety. The variety is geographically bound tightly to the 'Thailand' brand, and it is distributed as 'premium rice' in Asian supermarkets and upscale grocery stores worldwide.

The differentiation is clear on price, too. Thai jasmine rice often moves at around US$700 to 900 per tonne, far from Vietnam's long-grain rice (about US$400 to 600) or India's broken rice (US$200 to 350).

Efforts to protect the brand

The Thai government also works hard to protect the jasmine rice brand. It has registered 'Thai Hom Mali Rice' as a trademark and is pushing efforts to prevent the international circulation of counterfeits.

As quality standards, it sets measures such as 'moisture content of 14% or less' and an 'aroma threshold' to keep export goods uniform. Such efforts have established the image of 'Thai rice equals high quality' in the world market.

The government's rice-pledging system and the history of farmer support

What stands out in Thailand's rice policy is the 'Rice Pledging Scheme' that successive governments have run. Under it, farmers pledge their harvested rice at a government-set price above the market price and can sell it later.

The scheme expanded to its largest scale during the Yingluck Shinawatra administration (2011 to 2014). The aim was to stabilize farmers' incomes, but it ended up leaving the government holding an enormous rice stockpile.

The market distortions the system created

Let's look at the specific problems.

• The government's rice stockpile is said to have reached about 18 million tonnes at its peak
• A purchase price above the market price strained public finances
• Quality deterioration and disposal problems arose with the stockpiled rice
• It led to a decline in export competitiveness

This 'rice-pledging scandal' became an issue that rocked Thai politics, escalating to the point where former Prime Minister Yingluck was criminally prosecuted. The system has now been fundamentally reviewed, and the direction has shifted toward supporting farmers in a way closer to the market.

This history shows how difficult agricultural policy is. Balancing farmer protection with export competitiveness is not easy for any country.

The reality of price competition with Vietnam and India

The biggest challenge Thailand faces is the rise of two powerful rivals, Vietnam and India.

A comparison with Vietnam

Vietnam has rapidly raised its competitiveness through variety improvement and greater production efficiency in recent years. In growing areas centered on the Mekong Delta in particular, some regions can harvest three crops a year, enabling low-cost mass production.

What is even more notable is that Vietnam has begun developing and exporting its own fragrant rice, 'ST25.' Having won 'World's Best Rice' in 2019, ST25 is becoming a strong rival to jasmine rice.

The giant that is India

India's influence is even greater. While holding its own brand in basmati rice, it also exports large volumes of inexpensive non-basmati rice. India's market dominance is clear from how world rice prices surged when it temporarily banned broken-rice exports in 2022 and 2023.

India's export prices vary widely by type, but non-basmati white rice runs about US$200 to 350 per tonne, less than half the price of Thailand's premium rice.

Thailand has adopted a strategy of not fighting this low-price competition head-on. Differentiating on 'quality and safety' rather than 'cheapness' is the basic policy of Thai rice exports.

Thailand's future export strategy and its impact on the Asian market

Thailand is currently pursuing three broad strategies.

1. Concentrating on the premium market

It is strengthening the premium positioning of jasmine rice for high-income consumers in Japan, the West, and the Middle East. Development of value-added products such as 'organic rice' and 'GAP-certified rice' is also advancing.

2. Developing new varieties

It is also trying to move beyond relying solely on jasmine rice. It aims to expand exports of varieties for health-conscious consumers, such as low-glycemic-index (low-GI) rice and colored rice (red rice and black rice).

3. Diversifying export destinations

Efforts are underway to reduce dependence on Africa and increase exports to China, Japan, and the EU. In China especially, demand for high-quality rice is rising among the wealthy, and it could become a new mainstay market for Thailand.

These strategies reflect Thailand's consistent stance of 'not competing on volume.'

Summary

Looking back at Thailand's rice export strategy, several important points come into view.

• The jasmine rice brand is an asset built up over several decades
• The rice-pledging system was intended to protect farmers but caused a fiscal burden and market distortions
• Vietnam's ST25 and India's low-price offensive are changing Thailand's export landscape
• Thailand continues to differentiate with a 'quality over quantity' strategy

For those involved in Vietnamese agriculture, Thailand's strategy offers much to learn from. Establishing a variety brand, designing government support, and how to pitch to overseas markets overlap with the challenges Vietnam faces.

At VN AGRI, we share the latest information on Vietnamese agriculture.

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