As a quick response to the Pheu Thai Party's promise to restore the rice-price pledging scheme, domestic rice trading has ground to a halt, as millers are keeping their supplies off the market on speculation that prices will shoot up.
Chookiat Ophaswongse, honourable president of the Thai Rice Exporters Association, said the suspension of sales by rice millers had also created problems for exporters, which cannot quote prices and must also stop selling rice.
"If the pledging scheme is resumed, it will mark up export prices of white rice from the present US$550 to more than $850 a tonne. Exporters can't calculate the real cost of rice, as they don't know when it will be restarted," he said.
If the pledging scheme starts soon, millers will not sell rice to exporters because they can get a higher return from the higher pledged price by selling directly to the government under the programme.
Paddy white rice is currently quoted at Bt9,000-Bt9,500 a tonne, but under the pledging scheme, the pledged price would be Bt15,000 per tonne.
This means the export price of this type of rice would soar to $850 (about Bt26,000) a tonne, compared with Vietnamese rice at $450-$500.
If Thai rice prices are too high, it will also create difficulty for Thai rice exports.
The new government should delay the pledging scheme to let the market adjust, Chookiat said. Foreign buyers could panic at the skyrocketing price of Thai rice and shift to ordering from Vietnam and other countries.
After Thailand exported large volumes of rice during the first half of this year, shipments could drop from an average of 1 million tonnes a month to 200,000-300,000 a month, he added.
Charnchai Ratthananon, president of the Thai Rice Mills Association, said the rice price would be on the rise now that the market acknowledges that Pheu Thai has won the election.
"Foreign traders will rush to stock up on rice, as the pledging scheme will push prices up.
"Rice traders will have no urgent reason to release rice stocks, as rice prices will gradually rise," he said.
The new government will likely reinstate the pledging scheme this November for the main crop, Charnchai said.
Prasith Boonchuey, president of the Thai Rice Farmers Association, does not believe the scheme will cover every farmer. The new government cannot purchase every rice grain from farmers for warehousing. The pledging benefit will fall to a small group of farmers.
The pledging policy will not create any sustainable benefit for Thai farmers, while the credit cards promised for farmers will spoil them into overspending, he said.
The new government should find a new, sustainable policy to help farmers in the long run, Prasith said.
