Commerce Minister Krirk-krai Jirapaet said over the weekend the ministry wanted rice-trading prices to rely mainly on market mechanisms. As a result, the ministry is drawing up a plan to systematise rice trading, which will not only help the government reduce subsidies, but also reflect real rice prices when compared with production costs.

For instance, one government-to-government deal has agreed to sell 200,000 tonnes of 100-per-cent white rice to Iran for US$320 (Bt11,600) per tonne, slightly above the market price of $317. This is also part of the government's marketing strategy.

Delivery is scheduled for between next February and May. The ministry expects the amount of rice sold to Iran next year to exceed the 800,000 tonnes sold this year. Rice from Thailand accounted for about 80 per cent of Iran's total rice imports this year.

Foreign Trade Department director-general Apiradi Tantraporn yesterday said the strategy to sell rice above the market price was part of the government's strategy to push up domestic rice prices.

However, the government quoted a slightly higher price because of several factors: premium quality, special polishing methods, transportation costs and a long-term contract.

In addition, world grain prices are expected to move upwards, because of supply shortages in major exporting countries.

"High demand in the world market tend to increase Thai rice prices, but major suppliers like Vietnam have announced a policy of suspending exports," said Apiradi.

The ministry is also prepared to introduce other marketing measures to create real demand instead of artificial demand through the government's rice-intervention programme. The normal practice is to create artificial demand by purchasing rice from farmers to be stored in warehouses.

Achara Pongvutitham

The Nation