Ministry mulls rice sales to China, Malaysia

Economy July 31, 2014 00:00

By Petchanet Pratruangkrai


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The Commerce Ministry will negotiate with China and Malaysia over the purchase of rice from the upcoming harvest season, and is also seeking additional distribution channels at home - such as military camps, hospitals and prisons - to prevent a domestic o

After opening the "Community Products Festival" in Muang Thong Thani yesterday, permanent secretary Chutima Bunyapraphasara said the ministry had drawn up many plans to release rice from the state stockpiles, as well as absorbing rice from the market during the upcoming harvest season.

Under the plans for the next three to six months, it will negotiate with China for the purchase of more rice from Thailand.

China’s COFCO – a state-owned rice-import agency – previously agreed to purchase 1 million tonnes of Thai rice. The ministry will send a team from the Foreign Trade Department to try to persuade the agency to buy an additional 1 million tonnes from the 2014-15 new crop season, she said.

Officials will also hold discussions with Malaysian importers about purchasing around 700,000 tonnes of Thai rice. If successful, these efforts to sell more rice abroad will ensure that the domestic price does not decrease dramatically during the main harvest season, which starts in late October, she added.

Chutima said the ministry would also continue to negotiate with other countries such as Indonesia and the Philippines, as well as countries in Africa and the Middle East, over the purchase of Thai rice.

The goal is to sell a total of 3 million to 4 million tonnes from the government’s stockpiles to rice-importing nations within the next year.

Meanwhile, in an additional move aimed at releasing stockpiled rice, the ministry will soon hold the first of a series of auctions for some 200,000-500,000 tonnes within the next two months. Any rice sold via this method will have already been inspected and passed laboratory testing, so that traders can have full confidence about the quality of the government’s stocks, said the permanent secretary.

The first auction is scheduled to take place early next month for a small lot of rice. Both local traders and exporters can join the bidding.

"The bidding will be transparent and opened widely for all to take part. Traders can offer their best prices to the government, with no kickback money," Chutima stressed.

However, despite these various efforts to maintain prices, the government will temporarily release rice from its stockpiles during the harvest season to prevent falling market prices, she said.

Moreover, the ministry is seeking new distribution channels for the sale of stockpiled rice, and hospitals, military camps and prisons are targeted for the sale of a combined 1.8 million tonnes each year, she said.

Additionally, to prevent an oversupply of rice in the upcoming harvest season, and a serious price drop, the government has provided a budget of Bt315 million to help rice millers and local traders to purchase produce from the market.

Offsetting interest rate

Under the project, the government will offset the normal interest rate of 3 per cent per annum in order to help traders buy rice. The project will cover the purchasing period from November to January, and stocking from November to July, she explained. It should help absorb about 2 million tonnes of paddy rice from the market.

The Bank for Agriculture and Agricultural Cooperatives (BAAC) will also provide a soft loan worth Bt300,000 for each farmer, so that they can delay selling rice during the harvest season by stocking it in their barns instead.

This should help minimise any potential oversupply and price drop during the harvest season, Chutima said.The BAAC project will cost about Bt1.12 billion to absorb 1.5 million tonnes of paddy from the market.

Rice output this year is expected to be lower than previously projected because of drought, while there is higher demand in the world market, she said.

Rice prices should be more stable in the next harvest season, as there will be no subsidy project to interfere with the market mechanism, she added.

Rangsant Sriworasart, permanent secretary of the Finance Ministry, said PTT would consider buying damaged rice from the stockpiles for the production of ethanol.

The inspection teams under the National Council for Peace and Order found about 100,000 tonnes out of 18 million tonnes of rice in the government’s stocks were deteriorated in quality or otherwise damaged because of poor storage conditions.