Myanmar plans to more than double rice shipments as the country that used to be the largest exporter embraces trade and opens its economy, challenging Thailand, Vietnam and Cambodia for sales amid a global glut.
Shipments may increase to 2.5 million metric tons in 2014-2015 from an estimated 1.8 million tons in the year that started April 1, according to Toe Aung Myint, director general of the department of trade promotion at the Ministry of Commerce. Exports are targeted to increase to 4.8 million tons in 2019-2020, Toe said in an interview in Hong Kong.
Myanmar's shift to democracy after five decades of military rule and its reengagement with the global economy are spurring interest in the agricultural potential of one of Southeast Asia's poorest states. President Thein Sein said the country can supply food to the region, provided it attracts investment. While infrastructure bottlenecks and competition for sales are seen complicating the drive to increase shipments, the country's exports are cheaper than output from rivals including Thailand.
"Myanmar has a capacity to produce more but its logistics do not allow them to export a large volume," said Mamadou Ciss, president of Alliance Commodities (Suisse) SA, which handles 400,000 tons a year. "Port facilities are very congested. It needs to work more on facilities and quality."
The price of Thai 5 percent broken white rice, an Asian benchmark, tumbled 24 percent to $442 a ton this year. World reserves will expand 1.2 percent to 109.3 million tons in 2013-2014 as stockpiles in the five largest exporters including Thailand, India and Vietnam expand to records, according to forecasts from the London-based International Grains Council. The Standard & Poor's GSCI index of eight agricultural commodities slumped 20 percent in 2013.
"Cheap rice from Myanmar makes the grain become attractive, compared with Thailand and Vietnam, which are about $80 a ton more expensive," said Kiattisak Kanlayasirivat, a Bangkok-based director at Ascend Commodities SA, which trades about 500,000 tons a year. "Sales will continue to increase."
Agricultural output has fallen behind potential and efforts to revive the industry can take advantage of rising food demand, McKinsey Global Institute said in a report in June, noting Myanmar used to be known as the "rice bowl of Asia."
Milled rice supply is expected to total 12.9 million tons this crop year, topping local demand of 11 million tons, and output may increase to 13.3 million tons next season, Toe said. Export figures and forecasts include trade with China, which accounts for about half of total shipments, he said.
"We see promising opportunities in the sector because the global rice market grows and China demand increases," Toe said, listing China, African countries, Russia and Europe as buyers. "We have resources and can produce more to meet demand."
The rice industry contributed about 13 percent of gross domestic product in 2011, and more than 70 percent of the population is connected with the trade, according to a presentation from Toe. Myanmar's strengths are low production costs, vast land and abundant water and labor, according to a 2012 study from the Manila-based Asian Development Bank.
Myanmar shares a border with China, and the U.S. Department of Agriculture forecasts rice imports by Asia's largest economy will rise to 3.4 million tons next year, making it the biggest buyer. China's purchases may total 5 million tons in 2014, according to Samarendu Mohanty, senior economist at the International Rice Research Institute.
Myanmar was the world's biggest rice exporter from 1961 to 1963, with shipments of 1.6 million to 1.7 million tons a year, until it was displaced by neighbor Thailand, according to data from the USDA that starts in 1961. Exports fell as low as 15,000 tons in 1997. Last year, it shipped 690,000 tons to rank ninth worldwide.
A state rice-buying program in Thailand that's cost $21 billion has spurred output while swelling government stockpiles to a record and hurting prices. The Thai hoard will increase 18 percent to 14.9 million tons in 2013-2014, according to the IGC. Thailand shipped 7 million tons last year and was that season's largest exporter after India and Vietnam, which traded 11 million tons and 7.2 million tons respectively, USDA data show. Thailand is targeting shipments of 8 million tons in 2014.
Cambodia is also boosting exports, heightening competition. In November 2012, Prime Minister Hun Sen targeted shipments of 1 million tons by 2015 and called for investment. The USDA forecasts the 1 million ton total may be reached next year.
Myanmar needs to develop infrastructure for processing, shipping and transport, Concepcion Calpe, a senior economist at the United Nations' Food & Agriculture Organization, wrote in an e-mail. The privatization of rice exports in 2003 helped to unleash the sector's potential, and the opening of land to overseas investors in 2010 was another milestone, Calpe said.
The country ranked 129th worldwide in a 2012 study of logistics by the Washington-basedWorld Bank that assessed benchmarks including quality of infrastructure. Thailand placed 38th, Vietnam 53rd and Cambodia 101st.
About $320 billion needs to be invested in infrastructure by 2030 if the economy is to expand 8 percent a year, according to the McKinsey study. Transport networks are insufficient to support growing activity, the Asian Development Bank said.
While loading a 20,000 deadweight-ton vessel with rice takes about four days in Thailand or Vietnam, the task can take eight days in Myanmar at present, said Kiattisak, the director at Ascend Commodities.
"Myanmar certainly has the potential to become one of the leading rice exporters, if not the leading one, in the medium run," said the FAO's Calpe. "It is one of the few countries in the region that faces no land, water or labor constraints and it is strategically located, having China and India as neighbors."