Rice consumption in Thailand: The slackening demand 1/

I. Introduction Rice consumption in Thailand: The slackening demand 1/ Somporn Isvilanonda 2/ Rice has long been a traditional crop and a dominant economic activity in rural Thailand. Not only does over half of agricultural labor force engage in rice production, but also half of cultivated area is allocated for rice production and produces around 26 million ton of paddy per annual in recent year. Despite two-fifth of rice suppy is exported, the rest is used for domestic consumption. Whereas rice remains Thailand s staple food, both economic prosperity and rapid urbanization in the recent past led some changes in people s consumption habits. In addition, rising income has inevitably stimulated consumers to diversity their diets away from rice in favor of meat and horticultural products. The practice of eating out associated with urbanization has also reduced per capita rice consumption. Continued development of these behaviors could further slacken the demand for rice in the domestic market and depresses farm price and farmers income. Since rice farmers share a majority of the Thai farmers, an increasing development in this situation would worsen the rural economy and widening the income gap between rural and city. This paper attempts to examine the trend of domestic rice consumption in Thailand. The usage of rice and rice by products for feed and food processing industries are also discussed. II. Economic development, population growth and household food expenditure Economic development in Thailand over the past few decades has successfully transformed her agricultural economy toward an increasing importance of nonagricultural sector. This can be observed by a declining share of agriculture from onefifth in the gross domestic product(gdp) in 1980 to less than one-tenth in 2005. As the agriculture has begun to gradually loss its comparative advantage, the manufacturing exports and tourism quickly replaced the agriculture as the source of her economic growth. Despite the interruption of financial crisis in 1997 which Thailand had to devalue her currency, the economic growth in recent years was about 5% which is a considerable rate. During the past three decades, the performance of Thailand s economy can be reflected by the population income. The average per capita income at constant price increased double from 21,670 baht per annual during 1981-85 to 48,436 baht per annual during1996-00 (Table 1). A rapid industrialization from 1981-1995 has consistently generated an economic boom until facing the economic crisis in 1997 which declined the growth rate in a later period to 2.5% ---------------------------------- 1/ A paper presents at the JSPS Asian Science Seminar on Development Strategy for Sustainable Food System during November 26 to December 5, 2006 at Nihon University College of Bioresource Sciences, Fujisawa City, Kanagawa, Japan. 2/ Associate professor, Department of Agricultural Economics, Faculty of Economics, Kasetsart University, Bangkok 10900, Thailand

Table 1 Thailand gross domestic product(gdp) per capita at 1998 price and annual growth, 1971-01 Period GDP per capita at 1998 price(baht) (1) Annual growth in GDP per capita(%) (2) 1971-75 Na - 1976-80 Na - 1981-85 21,670-1986-90 28,991 6.76 1991-95 43,031 9.69 1996-00 48,436 2.51 2001 48,697 0.53 Sources: (1) From Bank of Thailand. (2) Author s calculation Besides a success in transforming her economy, the average annual population growth in Thailand has continuously declined from 2.7 % during 1976-1970 to 1.3% during 1996-00. It further declined to 0.8 during 2001-03. The average mid-year population in Thailand during 2001-03 is about 62.7 million people (Table 2). As a consequence, the average household size declined from 5.5 to 3.9 and 3.5 in 1975, 1992, and 2002, respectively (Vanit-Anunchai, 2006). A declining family size, in couple with a continuous rise in per capita income induces adjustment in household socio-economic characteristics and its food consumption patterns. Table 2 Thailand mid-year population and annual growth, 1971-03 Period Mid- year population (1,000 people) (1) Annual growth in Population(%) (2) 1971-75 38,125-1976-80 43,304 2.72 1981-85 48,514 2.41 1986-90 53,939 2.24 1991-95 57,150 1.19 1996-00 60,911 1.32 2001-03 62,730 0.75 Source: (1) from Department of Provincial Administration, Ministry of Interior Changes in household economic condition and the country urbanization has affected on food consumption patterns. There has been an increasing trend in per capita consumption of the more nutritive foods such as meats, fruits, and vegetables and a declining trend in per capita rice consumption (Konjing and Veerakitpanich, 1985; SEP, 1992). Table 3 indicates that a share of food expenditure in the household s expenditure declined from average of 37.3% in 1990 to 34% in 2002. In terms of rice and cereal share in the household s food expenditure, it declined from 17.1% to 10.8 in the same period. Despite the share of rice and cereals in the village is greater than that in the city, 2

nonetheless trend in rice and cereal shares in the food consumption pattern in each community development area seems to decline between those years. Table 3 Average household expenditure, shares of food and rice and cereal expenditures by community development areas in 1990 and 2002 รายการ Households by community development area Village Sanitary Municipal ity Country average 1990 Average household expenditure (Baht/month) 4,003 5,195 8,299 5,897 Share of household food expenditure (%) 48.8 37.4 31.5 37.3 Share of rice and cereal (%) 20.7 20.1 13.6 17.1 2002 Average household expenditure (Baht/month) 8,550 10,552 16,121 14,436 Share of household food expenditure (%) 39.1 34.6 30.2 34.0 Share of rice and cereal (%) 13.6 11.7 7.6 10.8 Source: Isvilanonda and Kongrit (2006) III. Household rice consumption Traditionally, the Thai dietary habits rely mainly on rice. By analyzing the Thailand s household socio-economic survey data in 1990, Isvilanonda and Poapongsakorn (1995) showed that the per capita rice consumption per annual was estimated at 119 kg of milled rice (or 180.3 kg of paddy equivalent). Per capita consumption in urban area was only 43% of the level in rural area and consumption in semi-urban area was about 14% lower than in rural area. In rural area the consumption of the top 25% of the income group was 11% lower than that of the bottom 25%; for semiurban area, the difference was 14% and for urban area it was 20% (table 4). Table 4. Per capita annual consumption of rice (kg of milled rice) by region and income group in 1990 and 2002. Income group Average per caipta consumption(kg) Village Sanitary Municipality All average 1990 1/ Bottom25% 151 133 97 142 Middle50% 146 125 89 127 Top25% 134 115 78 106 Total 146 125 83 119 2002 2/ Bottom25% 128-121 125 Middle50% 111-93 100 Top25% 91-77 80 Total 114-93 101 Note: 1/ data in 1990 from Thailand Socio-economic Survey in 1990. Adopted from Isvilanonda and Poapongsakorn 2/ Author s calculation by using the Thailand Socio-economic survey data in 2002. In This survey, the semi-urban area was included in urban area. 3

In 2002 or twelve years later, the per capita rice consumption further declined to 101 kg of milled rice. The top 25% of income group was 56 % lower than that of the bottom 25% In rural area the consumption of the top 25% of the income group was 29% lower than that of the bottom 25%; for urban area, the difference was 36%(Isvianonda and Kongrit, 2006). That is, the average per capita consumption of rice declined 15% in twelve years. The gaps are even bigger for the high income level than that of the low income level. Also previous study on the response of domestic rice demand to the income change in Thailand, Ito et al.(1989) and Isvilanonda ( 2002) found a negative income elasticity which implies that rice is an inferior goods in the domestic consumption. This effect would soon create a declining trend in rice consumption demand IV. Rice production, rice export and farm price movement Rice is grown in many parts of the country. The share of rice area is about half of the total cultivated area. The rainfed ecosystem accounts for nearly 80% of the total rice area. Water scarecity prevented the development of irrigation system that would allow rice cultivation during dry season. Thus, dry season irrigated rice accountes for only 10% of the total rice area in Thailand and about 19% of total rice production (Isvilanonda, 2002). The major rice-growing belt is located in the norteast region and accountes for almost half of the country s rice cultivated area. A single rice crop grown with traditional high-quality rice varieties, particularly Jasmine rice or KDML 105 is the predominant cropping pattern in the region. Meanwhile, the average rice yield in this region is very low. Commercial rice production is mostly concentrated in the central plain and lower northern region where a substantial area is irrigated. Modern rice varieties are commonly grown in this environment with a high production yield. The production of rice increased nearly double over the past three decades. The average production rose from 13.86 million tons of paddy during 1971-75 to 26.14 tons during 2001-2003 (Table 5). The increase in rice production in the early period was a result of the expansion of cultivated land. Nonetheless, the rise in production in the recent past was due to improvement in rice cropping intensity in irrigated areas. During 1971-75, the export of Thai rice was averaged at 1.99 million tons or 14.49% of the total production. Increase in the volume of rice exports was a result of the production expansion. The rice export reached 9.14 million tons or about 40% of the total production in 1996-00. In recent year, the export even increase further to 11.11 million tons (Table 5). Despite Thailand is the largest exporter in international rice market, a green revolution in many parts of the world over the past few decades has continuously raised the trend of world rice supply. This situation, combing with a slackening trend of world rice demand, has further declined the international rice price. Since the domestic and the international markets of Thai rice are integrated, a lowering export price transmits to the weakening domestic price of milled rice (figure 1). To prevent a low domestic rice price, a rice pledging program was recently implemented to guarantee the farm price at higher than the market price. In Thailand, it has been continuingly criticized for the inefficiency of this program. The program also created a heavy loss to the government during the past few years. 4

Table 5 Average production, rice export, and domestic use, 1971-03 Period Total rice use (1) Export (2) Seed use (5) Domestic use availability after seed use (4) Per capita domestic disappearance (5) (million ton of paddy) (kg) 1971-75 13,862 1,995 559 11,308 290 (192) 1976-80 15,665 3,674 654 11,337 257 (170) 1981-85 18,708 5,749 692 12,623 245 (162) 1986-90 19,707 7,659 701 11,374 203 (134) 1991-95 19,415 7,767 742 10,908 293 (128) 1996-00 23,019 9,145 953 12,921 211 (139) 2001-03 26,141 11,112 1,104 13,925 216 (143) (%) 1971-75 100.00 14.39 4.03 81.58-1976-80 100.00 23.46 4.17 72.37-1981-85 100.00 30.74 3.70 65.56-1986-90 100.00 38.86 3.56 57.58-1991-95 100.00 40.00 3.82 56.18-1996-00 100.00 39.73 4.14 56.13-2001-03 100.00 42.51 4.17 59.85 - Note: Number in parenthesis is milled rice Source: (1) and (3) from Office of Agricultural Economics. (2) from Department of Custom. (4) and (5) from author s calculation. 5

18000 16000 14000 12000 Baht/tm 10000 8000 6000 4000 2000 0 1997 /1 1997 /4 1997 /7 1997 /10 1998 /1 1998/4 1998 /7 1998 /10 1999 /1 1999 /4 1999/7 1999 /10 2000/1 2000 /4 2000/7 2000 /10 2001 /1 Month domestic price of milled rice 5% export F.O.B. price 2001 /4 2001 /7 2001 /10 2002 /1 2002/4 2002 /7 2002 /10 2003 /1 2003 /4 2003/7 2003 /10 Figure 1 Export and domestic prices movements V. Domestic rice availability The domestic availability of rice in each calendar year is estimated after deducting the volume of exports from the total production, which inevitably includes annual changes in rice stock. On the other hand, domestic disappearance comprises industrial and domestic consumption but excludes seed use. The total amount of seed use is associated with area and seedling technique employed. The widespread adoption of pregerminated direct seeding and broadcast seeding in many areas in the past few decades has inevitably resulted the increase in demand for seed. During 1971-75, seed use avreaged about 0.56 million ton of paddy (4.03% of total production) and it increased to 1.1 million ton or 4.17% during 2001-03. The use of rice as a raw material in rice agro-industry products and feed industry is rather limited. However, it is difficult to quantify the volume of industrial use because of unavailable data. In Thailand, reliable time series data for rice stocks are not available. The per capita disappearance per annual in Table 5 is obtained by taking a three year moving average (to reduce the effect of annual change in rice stock on domestic availability). It is found that the domestic use availability is nearly stable over the past few decades. It slightly increased from 11.31 million tons (in term of paddy) in 1971-75 to 12.26 million ton in 1981-85. During 1986-90 and 1991-95, the domestic use availability slightly declined from 11.35 to 10.91 million tons, respectively. However, it marginally increased from 12.92 million tons during 1996-00 to 13.92 million tons or 59.85% during 2001-03. Despite a continuous increase in population, the trend of per capita domestic dissappearance (in term of paddy) declined continuously from 290.30 kg per capita (or 191.60 kg of milled rice) in 1971-75 to 193.30 kg per capita (or 127.60 kg of milled rice) in 1991-95. However, during 1995-00 to 2001-03, the per capita domestic disappearance 6

increased slightly from 210.80 kg(or 139.10 kg of milled rice) to 216.50 kg(or 142.80 kg of milled rice), respectively. VI. Industrial Rice Usage The data for industrial rice usage can be estimated by deducting the domestic availability with household consumption. In 2002, the estimated industrial use of rice was about 4.23 tons of paddy equivalent or 2.79 tons of milled rice. 6.1 The usage of rice by products in feed industry During the past few decades, the share of poultry and meat in household food expenditure has continuously risen in both rural and urban areas. This change in household food consumption patterns in coupled with the rapid growth of exported volume of poultry products, particularly chicken, has inevitably induced an expansion of the livestock sector as well as a demand for livestock feed (Poapongsakorn, 1985; Sutabuttra, 2000). The quantity of feed demand has risen from 8.66 million ton in 1999 to 10.006 million ton in 2004 with a growth rate of 3.1% per annual. Among raw materials used in animal feed industry, the usage of broken rice is less than four times that of corn. The share of broken rice is found only in swine and duck feed industries (Table 6). The high price of broken rice and rice by products relative to corn price limits the usage of rice by products in animal feed industry (Figure 2). Table 6 Estimated broken rice, rice bran, and yellow corn usage, 2004 Feed industry Broken rice Rice bran Yellow corn (metric ton) Chicken feed - 341,200 2,938,000 Swine feed 896,000 435,000 733,000 Duck feed 75,000 30,000 20,000 Dairy feed - 81,000 61,000 Aqua feed - 63,000 107,000 Total 971,000 950,200 3,859,000 Source: Thai Feed Mill Association 7

9.00 2002-2004 Price Corn Rice bran Broken rice 8.00 7.00 Baht/Kg. 6.00 5.00 4.00 3.00 2.00 2002 2003 2004 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 Month Source: Adopted from Punyawan (2005) Figure 2 Comparision of broken rice, rice bran, and corn prices 6.2 The rice processing industry The usage of rice and rice by products as a raw materials in food and non-food industries is relatively small in Thailand. It was approximated that 8.79% of milled rice production was used in these processing industries. Using the International Standard Industrial Classification (ISIC), the rice processing industries can be classified into rice cracker, rice flour, rice vermicelli, and rice starch. In 2002, there were 1,731 rice processing plants registered at the Department of Industrial Plants, Ministry of Industry. Judging from the registration number, the share of small plants is high or about 86% of the total number. Many large and medium scales are involved in producing rice processing products for export. Despite the average value of export has increased from 2,325.7 million baht during 1991-95 to 3,445.5 million baht during 1996-2001, the export quantity on the other hand has declined from 124.1million kgs to 110.4 million kgs during the same period (table 7 ). In terms of both exported value and quantity growth, the rice cracker and the rice sheet are still very high potential for Thailand to export these products. At present, the industrial performance for rice processing products in Thailand is continuing adjusting toward a change in market environment and technology. This reflects by the shrunken of export quantity but the risen of the export value. Thailand is still a large room to improve the supply chain of rice and rice processing products. In 8

recent years, the value share of her rice processing products export is accounted for less than 5% of the total rice export value which mostly in term of milled rice grain. Table 7 Export value and quantity of rice products average 1991-1995 and 1996-2001 Products 1991-199 1996-2001 Growth/Annum (%) Value (million baht) Rice cracker 895.0 1,632.6 16.48 Rice flour 1,324.1 1,678.6 5.35 Vamicelli 121.1 76.2-7.42 Rice sheet 10.2 58.8 95.29 Rice starch 5.2 9.5 16.54 Total 2,352.7 3,455.5 9.72 Quantity (million kgs) Rice cracker 16.38 21.13 5.80 Rice flour 102.72 86.68-3.12 Vamicelli 4.11 0.98-15.23 Rice sheet 0.30 1.15 56.65 Rice starch 0.49 0.42-2.86 Total 124.1 110.4-2.21 Source: Isvilanonda and Ubonsuk (2002). Export potential study of some selected rice products a paper presented to National Research Council of Thailand VII. Conclusion A successful economic development over the past few decades has influentially made an improvement in per capita income of the Thais and consequently stimulated a change in household rice consumption patterns. In all community development areas, a decline in per capita household rice consumption was found; whereas the income level increase. The per capita consumption even further declined from 1992 to 2002. This has inevitably diminished the total rice consumption in the households in recent years. In Thailand, the usage of rice and rice by products as a raw materials in feed and rice processing industries is relatively small. As a result, surplus of rice supply are exported as milled rice grain. The value share of rice processing products export is negligible. Since Thailand mostly exported rice in the form of grains, a continuously declining the world rice price simultaneously affected on the domestic price, creating a heavy intervention in the paddy market. It is necessary for Thailand to rethink its food policy towards rice agro-technology development. Investment in new forms of food and non-food products innovation development for rice is also necessary for enhancing the raw material demand for industry use. In addition, a rice subsidy in school lunch program in rural area should be considered. 9

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