Rice operators claim record-high pledging price will hit market

Rice traders and exporters criticised the government's rice policy of imposing a record pledging price of Bt14,000 a tonne, calling it a backtracking strategy that would lead to market distortions.

The highest-ever intervention price will directly affect not only domestic rice prices, but also exports, they said.

The government's high pledging price has prompted exporters and millers to suspend purchasing, because the price is higher than the market price. In addition, rice-export orders have slowed down.

The government announced it would spend Bt24 billion to start the rice-pledging scheme by paying Bt14,000 a tonne for 2 million tonnes of white paddy rice despite the previous government's suspension of the programme for two years.

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

"It'll be a big burden for the government, because it must continue to support rice farmers with unrealistic prices," said Chookiat.

For the short-term impact, exporters and millers are suspending rice purchases from farmers, because the price is too high. Rice prices fell after other rice exporters lifted their export bans, while their prices were lower than for Thai rice.

The export price of 100-per-cent white rice dropped from US$960 (Bt31,900) per tonne to $880 between May 28 and last Wednesday, while that for jasmine rice fell from $1,192 a tonne to $1,108 during the same period. Five-per-cent white rice dropped from $944 a tonne to $864, and broken rice fell from $755 a tonne to $677.

The Vietnamese rice price is quoted of $750 per tonne, $100 below that for Thai rice.

In the long term, rice prices will not increase, because rice supplies will rise after farmers turn to growing rice, while other cereal grain products will also increase. Export volume is expected to drop next year because the price is high compared with that of other countries.

Thai Rice Packers Association secretary-general Rut Subniran said the project would be a big burden for the government. The government has s et a guaranteed price that is too high, while the cost of rice planting was lower than Bt7,000 a tonne.

"The scheme will damage market mechanisms, because it will signal that the price for the upcoming harvest season must be higher than the current price. Buyers may not dare buy Thai rice at this high price," he said.