Rice Exports From Thailand to Advance as Support Prices Reduced – Bloomberg

Rice shipments from Thailand, the second-biggest exporter, are set to increase as the government reduces the price paid to farmers to rein in spending, according to the Thai Rice Exporters Association.

Sales may total 7 million metric tons this year and 8 million tons in 2014, said honorary president Chookiat Ophaswongse. His previous forecast was 6 million tons to 6.5 million tons for 2013. The National Rice Policy Committee approved yesterday a 20 percent reduction to 12,000 baht ($388) a ton from 15,000 baht in support prices for the unmilled white variety, said Commerce Minister Boonsong Teriyapirom. The decision needs final endorsement from the cabinet.

Thailand has paid farmers as much as 50 percent more than domestic market rates since October 2011 to boost incomes. About 588.7 billion baht have been spent to buy 27 million tons of milled rice, equivalent to 70 percent of annual global imports. The program may have lost 136.9 billion baht in 2011-2012, the government estimates. Moody’s Investors Service Inc. said on June 3 that losses hamper the goal of achieving a balanced budget by 2017 and are negative for sovereign ratings.

“The reduction in support will make Thai rice cheaper on international markets, boost exports and put pressure on world prices,” Chookiat said in a phone interview yesterday. “The extent of the increase in shipments will depend on the reaction from Vietnam and India, which could lower prices to compete with Thailand.”

Price Declines

The price of Thailand’s 5 percent white rice dropped 8.9 percent this year to $532 a ton last week, according to data from the exporters association. That’s the lowest since January 2012. The rate fell on speculation the country would cut support prices and on increased supply from India and Vietnam. Rice prices in Asia are declining as wheat, corn and soybeans enter bear markets, curbing global food costs.

The cut in support prices announced yesterday will probably take effect from July 1 for the second harvest of the year which ends in September, according to Boonsong. Purchases will be limited to 500,000 tons per farmer, he said. For rates in 2013-2014, the National Rice Policy Committee will consider prices in the range of 12,000 baht to 13,000 baht, he said.

The committee may set the support rate for 2013-2014 in one of three ways, according to a government statement. It could reduce the price by 15 percent to 20 percent, use the farm ministry’s assessment of production costs plus 25 percent, or use market prices with a 10 percent premium, it said. The committee will finalize the proposal by the end of this month, Boonsong said.

Fiscal Discipline

“The revision is not because the government doesn’t have enough money,” Boonsong told reporters yesterday, saying no date had been set for the cabinet approval. “We want to be responsible for fiscal discipline and the program shouldn’t carry losses of more than 100 billion baht a year,” he said.

Thailand has been selling rice from inventories to domestic users and importers including China and Ivory Coast. The country sold 76 billion baht of stockpiled rice from October 2011 through March and sales will rise to 149 billion baht by September, according to the government.

Inventories in Thailand will probably increase to a record 15.2 million tons in 2014, from 12.1 million tons this year, according to the U.S. Department of Agriculture.

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij;

To contact the editor responsible for this story: James Poole at jpoole4