Impact of Floods in Thailand on Singapore's Rice Imports

Mdm Foo Mee Har asked the Minister for Trade and Industry in view of the severe floods in Thailand which had destroyed rice crops (a) what is the impact on our rice prices; (b) how dependent is Singapore on rice imports from Thailand; (c) what strategies are in place to keep rice affordable especially for the low income groups; and (d) how much rice stockpile does Singapore have.

The Minister of State for Trade and Industry (Mr Lee Yi Shyan) (for the Minister for Trade and Industry): Sir, as of September 2011, the export price of Thai fragrant rice preferred by Singaporeans had risen by about 9% compared to the start of the year. Singapore's rice imports comprise only a small proportion of global rice exports. In 2010, our total volume of rice imports was only about 1% of the total rice traded in the world. Although about half of our rice imports in 2010 came from Thailand, it was less than 2% of Thailand's total rice exports. Given our small import volumes, we are a price taker. However, it would also mean our demand can be easily met by alternative sources of supply given the size of the world market.

This said, when prices of rice increase in the international market, our purchases will become more expensive too. While we cannot avoid price fluctuations, we can do a number of things to mitigate sharp price spikes and possible supply disruptions.

Firstly, we continue to diversify our supply sources. More than ever before, we now import rice from many more sources, including Vietnam, India and the United States. Our small import volume also helps ensure that we can source enough rice to meet demand.

Secondly, we maintain a policy of stockpile. Today, all of our rice importers keep a healthy stockpile of two months or more.

Thirdly, to better educate consumers, MTI through the Retail Price Watch Group (RPWG) is working with major supermarket chains and retailers to highlight the variety of rice, meaning apart from fragrant rice, available that are high in taste and quality; as well as other non-rice staples that consumers can consider as part of their healthy diet choice. Even with the Thai fragrant rice, there is a 1.5 times price differential between the branded and non-branded rice. MTI will continue to monitor the situation in Thailand with our importers and retailers to ensure supply and price stability.

Mdm Foo Mee Har (West Coast): I thank the Minister of State for his comprehensive answer. I would like to ask a supplementary question on reports that financial speculators have been responsible for increases in global food prices. In the market, there has been discussion about spiralling – food prices being driven by financial players taking over the commodities market. Financial speculators now account for as much as 60% of the agricultural futures and options. Could the Minister of State also comment about how we are impacted and hedged against this?

Mr Lee Yi Shyan: Sir, I thank the Member Ms Foo Mee Har for her question. The kind of speculation that Ms Foo mentioned has not been seen at least in the contractual purchases between our importers and the exporters of the supplying countries. Typically, our importers will sign contracts of two to three months each time they place an order. In the last few months, when Thailand raised the rice prices, we are seeing our importers and importers in the market switching to lower cost supply. There is no panic in the market because this industry of supply has got many buffers in each of the supply chains. For instance, we have our own stockpile. Other countries do as well. Even the suppliers or the intermediaries themselves keep a healthy stock level in terms of supply. So, given the floods in Thailand, about 10% of the rice-growing areas in Thailand are affected. The other 90% is still supplying. In fact, we are all watching the harvest of fragrant rice in November.

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Apart from fragrant rice – which accounts for only 18% of Thailand's rice production – the other 82% is in the white rice category. White rice has three to four harvests per year. First of all, we believe that the floods have not seriously affected the rice fields in Thailand. Secondly, given the frequency of harvesting, they will be able to catch up to re-supply to the market.

The market right now is quite calm. On the local scene, we have 35 major importers, supplemented by about 70 smaller importers who purchase rice from the smaller markets like India and Pakistan. We have sufficient competition within the local scene to ensure price stability.