rice exporters fear govt move will damage market

Despite the unstable political situation, the government yesterday set historically high intervention prices for rice in a move that will dramatically hurt the domestic market and exports, said rice traders.

The National Rice Policy Committee agreed the highest-ever intervention price of Bt14,000 a tonne for white paddy rice. The guaranteed price for jasmine rice is Bt16,000 a tonne, while sticky rice is Bt9,000 a tonne.

The new intervention programme targets 8 million tonnes of main-crop rice, which will be harvested from October 16 until February 28 next year.

The committee's proposal will go before the mobile Cabinet for approval in Udon Thani today.

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, said the government intervention would damage the rice market, both in the short and long term.

"It will be a big burden for the government because it must continue to support rice farmers with unrealistic prices," he said adding that the suitable price for white paddy rice is Bt12,000 a tonne as the production cost for farmers is Bt7,000 a tonne.

In the short term, exporters and millers are suspending rice purchases from farmers because the price is too high.

Rice prices fell after foreign rice producers returned to the export market with high volumes at lower prices than those of Thai rice.

The price of Bt14,000 a tonne for white paddy rice will push up the export price to US$750 (Bt25,863) a tonne, while the Vietnamese rice price is quoted at $550 per tonne, $200 less than Thai rice, Chookiat said.

Domestic rice prices have fallen gradually since May this year to Bt12,000-Bt13,000 a tonne for white paddy rice, lower than the current guarantee price of Bt14,000.

Chookiat said the volume of Thai rice exports would inevitably drop significantly to only 8 million tonnes next year from 10 million tonnes this year because of higher production costs.

A rice exporter said the government should not use a populist policy to hurt the rice mechanism.

"Rice is the Kingdom's major export good. The government's unrealistic price setting to gain popularity will hurt the rice system in the long run. Farmers should not delight in a short-term benefit as this government has not created any sufficiency development for the rice system," said the source.

However, Prasit Boonchuey, acting president of the Thai Rice Farmers Association, said farmers were satisfied with the new price guarantee, despite it being lower than the expected Bt15,000 a tonne for regular paddy rice.

Commerce Minister Chaiya Sasomsap said the government set a high guaranteed rice price as a way to ensure that rice prices will not drop.

He also said the government would release some blacklisted millers in order to ensure that there will be enough space for receiving rice for the new pledging programme.