The economics of production and international trade of Thai maize

Abstract

Maize has been one of the important export crops of Thailand since the early 1960's. The main maize producing areas of Thailand are in the North, Northeast and the Central regions. More than 70 percent of the total production of maize is exported while the rest is used domestically for the animal feed industry. The main countries which import Thai maize are Malaysia, Singapore, Hong Kong, Japan, the Middle East, the USSR and China. The remarkable increase in maize output during the past 20 years has been due to significant increases in the area planted in maize rather than the maize yield. Maize yield has been fluctuating without any real growth trend. Maize yield has been largely dependent on changes in weather conditions, variable inputs. The weather conditions have proved the most important factor in the determination of maize yield in all important producing areas of Thailand. The only exception to that has been the Northeastern region where the variable inputs have been the most important factor. At the same time, maize yield in the Central region has fluctuated with weather conditions. Although Thai maize farmers are responsive to price, estimated price elasticity is low. Farmers in the Northeast region have the highest price responsiveness. Maize farmers in the Central region and in the North region seem to have lower responsiveness. Weather conditions are also an important factor influencing the changes in maize acreage as are competitive crops. An estimate of import demand for maize, and more specifically for Thai maize, has been attempted in four main maize importing countries; Malaysia, Singapore, Hong Kong and Japan. Because the price of maize is found to significantly affect imports, an analysis of Thai maize price based on the effects of the exchange rate and the cost of production is attempted. Domestic demand for Thai maize has also been looked at. The results of demand analysis indicate that the livestock population in importing countries is the most important factor explaining the import demand for Thai maize. This is followed by the importing countries consumers' income and the price of Thai maize. In the Singapore market price has no is not only dependent on its actual price but also on the relative price from other exporters. Therefore, in order to increase exports of Thai maize, it is necessary to lower Thai maize price so that it can better compete with other exporters. In the Japanese market, quality factors are also important. To lower Thai maize prices, improvements in maize yield are needed in order to lower cost of production per unit. This can be obtained by increasing variable inputs such as high-yielding seeds, fertilizer, insecticide and labour in maize production. This calls for government assistance in yield improvement by encouraging the private sector to produce high-yielding seed and educating farmers on the importance of high-yielding seed, fertilizer, insecticide and suitable production processes. Show more