Pativate Santavanond, first executive vice president and managing director of KTB’s Business Centre, said yesterday that the bank was aware of the market situation and had sent teams out to survey the health of its rice mill customers.
“We suggest to them to release stocks by selling to exporters and traders.
“However, most of them have enough cash to deal with the new rice crop and some customers have technical problems.
“The help from the bank will be made case by case,” he said.
Rice mill operators in KTB’s portfolio have a daily production of 500 tonnes.
The outlook for rice prices was not good, so KTB had to follow the situation closely, Pativate said.
The Cabinet on Tuesday agreed to raise the subsidy for Hom Mali paddy to Bt13,000 per tonne from Bt11,525.
The price of Hom Mali white rice has been low since the beginning of this year and is not likely to recover, while the inventories of rice mills cannot be sold due to weak demand in the global market, particularly in China, said a banker who declined to be named.
As a result, small and medium-sized rice mills don’t have enough cash to buy paddy from farmers, the source said.
Few commercial banks have exposure to the business with KTB being the major player in lending to rice mills. However, the bank cannot extend more loans to operators that have exhausted their credit lines.
Commercial banks view rice milling is a high-risk industry, so small companies are facing a difficult time surviving.
If cashflow turns negative and prices do not return to normal, half of the small rice mills in the country would have to cease operating, which would hurt rice farmers, the banker said.
“The problem right now is the rice mill operators don’t have purchasing power to buy paddy from farmers.
“And the price of paddy compared with the prices of white rice is not supporting the rice mill operators to buy new paddy while existing stocks can’t be released,” the source said.
“What we are concerned about is cassava farmers because the price of cassava is only Bt1.5-Bt1.6 per kilogram, down from Bt2 in the past, due to slower demand from the China market.
“The cassava harvest is beginning. Cassava farmers are facing the same difficult situation as rice farmers,” the source said.