Thailand keeps buying plan, risks adding to pile-up
By Pracha Hariraksapitak, ReutersBANGKOK -- The Thai government on Tuesday approved an extension of its rice-buying scheme that will slightly lower prices and quantities, but not by enough to prevent another mountain of the grain being delivered to state-run warehouses.
September 4, 2013, 2:20 am TWN
The intervention, which would have expired in September, has seen the government spend 600 billion baht (US$18.71 billion) to buy rice since Prime Minister Yingluck Shinawatra ramped up the minimum price in 2011 to shore up support for farmers.
Most of the grain has ended up in government stores that now stand at around 17 million tons, and another 10 million tons looks headed that way as the government struggles to sell the overpriced grain.
With prices for benchmark Thai rice falling by nearly a fifth since April to a two-year low of US$470 a ton, the scheme threatens to become even more costly as bulging stockpiles force the government to sell at a loss.
Deputy Commerce Minister Yanyong Phuangrach said the government will continue to buy rice from farmers at 15,000 baht per ton of paddy for the main 2013/14 crop due to start in October, but at 13,000 baht per ton for the second crop from Feb. 28.
It would also lower the maximum amount it buys to 350,000 baht per household for the main crop and 300,000 baht for the second crop, from 500,000 baht in the current scheme.
“This time we limited the amount we would buy at 16.5 million tons of paddy,” Yanyong said, or around 50 percent of 33-35 million tons of paddy Thailand produces annually. This would mean the equivalent of another 10 million tons of milled rice the government either has to sell or store.
Traders said the minor tweaks to the scheme could leave more available for the free market, but are unlikely to lower the costs to the government by much, or make Thai rice competitive on world markets.
“It would help cut costs in the new intervention scheme, but the costs it have been facing such as storage, depreciation and losses keep rising,” said a Bangkok-based trader.
Even 13,000 baht per ton would mean an export price for 5 percent white rice of around US$620 per ton, including milling, packaging and logistic costs. Top exporters Vietnam and India offer the same grade at US$375 and US$420 per ton respectively, traders said.
“It's not easy to sell rice no matter how cheap your prices are. It is because India and Vietnam have good crops too and they can offer even lower than us,” another Thai trader said.
Thailand lost its spot as the world's biggest rice exporter for the first time in three decades in 2012, when its exports fell to 6.9 million tons, from the record 10.6 million tons in 2011.