Thailand Crisis

Here is an update of my chart, with datas for april.

(Source EPPO, Table 2.1-4).

The drop in april (from 944 000 barrels per day to 830 000) was certainly caused by Songkran holiday. As for the value, EPPO says that the average price of imported crude oil in april was 105,35 USD per barrel (versus 99,11 in march).

As you know, we have to watch carefully the energy bill, because of the surge of oil prices… and the effects on the trade balance… therefore on the THB (currency). Everything is linked… Particularily when we speak about oil.

Anyway. I would like to add that the datas provided by EPPO and the Customs Department (compiled by the Bank Of Thailand) are different.

For instance in march, EPPO gives a total value of 2,9 billions USD for import of crude oil… While the Customs state 2,4 billions (roughly 13 % less) ! 9 months over 12, EPPO’s figures were higher than Customs.

And the exchange rates THB-USD are different too… ! And worse, even if you take in account the different exchange rates… you stil get different total in THB and USD… It prooves that the core of the problem is… volume.

I guess both have the same definition of a barrel of crude oil… I hope so… But for some reasons, the EPPO and Customs, both official departments, don’t have the same set of datas… Frustrating.

Here is a small chart about the value in USD of imports of crude oil (crude oil only), for both.

And it shows that one of the problem of the oil issue… is datas. I mean BP, EIA, IEA… prestigious and powerfull sources of infos… compile datas for production, consumption, imports, exports… for all the countries… provided by all the countries… after thoses datas are studied, charted, analyzed by everybody, peak oil believers and non-believers, government, professionals etc. …

My point : some data sets are not reliable. And worse : may vary from time to time.

Bottom line : when you read that “Global oil consumption grew by 1 mb/d in 2007” (source BP Statistical Review of World Energy 2008), you have to understand that there is a serious… fog around the math magic !

Okay, okay, what is important is the trend. Even if your data set is flawed, you can still make valid observations with variations.

But, if we start speaking about absolute numbers (like consumption was 1 million barrel per day higher in 2007 compare to 2006)… I mean… we need to be careful… nobody did actually and really count those barrels…

Sounds stupid to say but I can’t find any clearer way to say it.

The oil issue is just too burning, too essential, with too many geopolitics and economics links… it’s impossible to believe that all the datas are genuine and/or right.

There is always a fog around the datas whether it’s deliberate or not.

Thailand enjoyed a trade surplus of approximately US$1.29 billion in May but suffered an overall trade deficit of around $1.69 billion during the first five months of 2008, a senior commerce ministry official said Friday.

Permanent Secretary for Commerce Siripol Yodmuangcharoen said the country’s exports in May climbed to a new record high of about $15.46 billion, up 21.4 per cent when compared to the same period last year.

Imports in May totaled $14.17 billion, an increase of 15.7 per cent from the corresponding period of 2007, said Mr. Siripol.

During the first five months of 2008, Thailand’s exports totaled about $70.94 billion, up 22.05 per cent from the same period of last year.

Imports during the period amounted about US$72.64 billion, a jump of 34.2 per cent from a year ago. (TNA)

Impressive. By the way, my call for a bigger trade deficit in may due to the oil bill was wrong. Or too early.

However, imports dropped 9 per cent from April, because of a significant fall in fuel imports, particularly finished oil, which decreased 71.55 per cent.

“Higher oil prices may have changed consumers’ behaviour, bringing a trade surplus in May,” said permanent secretary Siripol Yodmuang-charoen.

The Foreign Trade Department said demand for oil last month fell sharply by 29.12 per cent to 624,623 barrels per day, from 881,239 barrels in April. (Nation)

We should remain extremely cautious… It could be a statistical glitch. I mean it’s difficult to understand… I can’t believe that oil consumption dropped by 30 % in one month (look at the chart of net imports).

There is only one solution : exports of oil must have been slashed (yes, Thailand is an oil producer and exporter, look chart here).

[and this would be a perfect illustration of the first real effect of peak oil : oil producers reduce first their exports, to serve their own demand. To know more : read this fascinating article on the OilDrum]

[Well actually there could be another explanation (suggested by a reader) : stockpiles. They tapped oil/diesel stockpiles.]

Anyway, the BOT will publish the details (countries, sectors etc.) on june 30. Then we will be able to know how the exports jumped from 13,7 billions in april to 15,46 in may !

Datas for exports in april have been published (source BOT).

Here is an update of the chart about exports of rice (value in millions USD and volume in metric tons).

Compared with the previous month, we have -12 % in volume, but a +6 % in value (normal, the prices continued to increase in april).

Now if we compare year-on-year (april 2007), we have +62 % in volume and a whooping +137 % in value.

What about the “rice crisis” ? Well… we don’t speak about it anymore.

The new crops have curbed the emotion worldwide, and some countries have removed their ban on exports… So the prices went down.

However, rice remains an issue in Thailand. The government has decided a very generous -and controversial (read here)- program to subsidy the prices paid to farmers. I will follow up with another article.

People are lost : one year ago the name of the game was “Save the Private Exports and curb the appreciation of THB versus USD”.

And today : the BOT intervenes on the market… to support the THB !

What’s going on ?

Well… one factor is… a black swan : oil prices.

Just to put things in perspectives : in may 2007, barrel = 63 USD… One year later = 130 USD. This is a black swan.

Look at my other charts about energy intensity, oil imports, retail prices of gasoline, volume of sales of gasoline.

Now here is a new chart about the trade balance (exports-imports, source BOT). You see that we are plunging. The reason is obvious : the energy bill (crude oil but not only, coal and natural gas too).

By the way, the current account was also in deficit in april.

Now the same chart, with oil prices (monthly average, WTI, USD per barrel, source EIA). Continue reading ‘Chart : trade balance… trade deficit with oil prices’

Datas for exports in march have been published (source BOT). Here is an update of the charts.

First, the view per month.

After a weak february, march has been good at 477 billions THB. But that’s only + 4 % compare to march 2007… Does the machine start to suffer from a lack of steam ?

Then, the view per quarter.

Interesting… Q4 2007 seems to have been the peak. Q1 2008 decreases at 1 372 billions THB, eventhough the comparison year-on-year remains good (+10 % compare to Q1 2007).

Overall, the datas coming from the US, Europe, Japan show  some weaknesses in global trade… I think Thailand will feel the impact

Datas for exports in march have been published (source BOT).

Here is an update of the chart of rice exports.

March set a new record with 1 209 093 metric tons (and 533 millions USD in value) ! That’s a 108 % increase compare to march 2007.

To the people who believe that with rice, Thailand has just entered in a golden area of amazing prosperity (yes I heard that…) … I would like to remind you 2 facts :

-total exports in march reached… 14,76 billions USD…
-the high prices… affect the thai people themselves, in their day to day live, and especially the poor people

Another astonishing statement from the Prime Minister during his weekly TV-radio show.

Prime Minister Samak Sundaravej appealed to Thais nationwide to bear up under higher costs for rice - even to eat less if necessary, because higher prices help the farmers.

But he said all Thais should consider that higher prices mean that farmers are able to sell their rice stocks at more than double the usual price to exporters, and increase their income.

“‘If you sacrifice and pay more for rice - a bit more, not much more - it will benefit farmers,” he said. If necessary, eating a little less rice would let the farmers sell it at even higher prices for export. (Bangkok Post)

Let’s study what it means.

-”a bit more, not much more“… Samak is living on another planet. The prices increased by 10 to 30 % !

-”eat less so we can export more”. Samak aknowledges that the prices at export are higher compare to the domestic market, That there is an imbalance between production and consumption worldwide. And that it’s of course okay to… squeeze and milk foreign customers !

He forgets that the countries that need badly the thai rice right now… are developing countries (like Philippines, Pakistan, Iran etc.).

Rice is not a luxury… It’s basic food for hundreds of millions of -poor- people…

Datas about exports in february have been published by BOT.

Here is an update of the chart.

Value in billions THB (left scale) and % of growth year-on-year (right scale).

February was not very brillant, at 427,55 billions THB (or 12,99 billions USD).
We need to go back to july 2007 to find a lower total amount (406 billions).

The % of growth is 6,52 % compare to february 2007.

March is going to be important to follow, to see if there is really a negative trend…

The first datas should be available around april 21… Then details will be published on april 30.

Here is a view of the main countries/areas for thai exports.

The magic four customers for Thailand are : Asean, UE, USA and Japan.

On 2007, thai exports reached a total of 5 255 billions THB.

Asean accounted for 1 120 billions (21 % of the total).

Value of thai exports, in billions THB (right scale), with the % of growth year on year (left scale), from 2002 to 2007 (source BOT).

Since 4 years, the % of growth decreases. It’s not surprising (the base effect).

But obviously many thai politicians don’t understand it, because they continue to call for astonishing growth and other “targets” Mao style.

The truth is that in 2007, exports went up by 6,43 %, to 5 255 billions THB.

Last word : there is no point to calculate exports in… USD (because the USD is falling). The honest way is to look at the total in the local currency, the THB.

Because eventually most of thai exporters will convert their incomes USD or Euros in… THB. Locally.

This is why the fall of the USD is a bad news : exporters get less money for the goods they sell.

Rice will cost consumers Bt3-Bt5 more a kilogram after the Commerce Ministry committed itself to boosting the local price to the export level for the benefit of farmers.“We want to give more benefits to farmers while balancing the impact on consumers,” said Deputy Prime Minister and Commerce Minister Mingkwan Sangsuwan yesterday. The ministry would also take into account rising fertiliser prices. (TNA)

That’s a freaking HUGE increase.

Check the prices with Tesco Lotus (here, then click on the left “Dry grocery”, then “Agricultural Products”).
Jasmine rice = 22 THB per kilo
Fragrant rice = 15 THB per kilo

Therefore, the hikes could be from 10 to 20 % or 13 to 33 % !

The situation about rice is a cas d’ecole that shows the deadly trap in which the thai authorities are.

Some facts :

-the demand on the world markets has exploded, therefore the prices have surged.

-meanwhile, the thai authorities were willing to boost rice exports in order to boost GDP (with other components depressed like consumption and investments).

-therefore, the thai exports of rice have litteraly exploded since october 2007

[value on left scale, volume right scale, source BOT]

-but the price of rice on domestic market is controled.
Before it was higher than export, due to a policy of subsidy to boost income of farmers (policy initiated by Thaksin).

-the problem now has reversed : the prices on domestic market are inferior to those on the world market !

-And meanwhile, the costs to produce rice have increased too (fertilizers, transports etc.)

-Inflation is surging

So now we could face risks… of shortage, black market, smuggling etc.

It’s Economy 101.

Why farmers would continue to sell their rice on the domestic market, at a price inferior to export, and with increased costs ?

Confronted to this problem, the thai government has only one solution : to accept a hike on the local market.

They try in a very pathetic way to present this as a deliberate policy to help farmers…

The truth is : they have no choice.

And by doing so… it will seriously backfire on the inflation front (no need a drawing to understand that rice is consumed by the entire thai population).

As I wrote many times : the game is over, the party is over.

The current situation of the world economy is volatile. Policy makers can not continue to hope to win on every front : boosting exports with a weak currency, and meanwhile keep inflation low, helping farmers and meanwhile continue with price controls, decreasing oil consumption and meanwhile keeping subsidies etc.

Choices must be made. And this is precisely what the authorities don’t want to do. Because it’s obviously too painful (on a political level).