The government is prepared to take a big loss as it struggles to offload record stockpiles of rice built up through the state-buying programme, with plans to call for bids on the ageing hoard of grain every two weeks.
Workers at Choke Santi miller load rice bran on to a truck for shipment. (Photo by Panumas Sanguanwong)
"The sale will probably be at a loss as the government aims to increase domestic prices, not to make profits out of the program," Deputy Commerce Minister Yanyong Phuangrach told reporters on Friday in the central province of Ayutthaya, where the cabinet was meeting.
"Our main purpose is that the distribution must not affect prices."
Thailand's plan to cut the stockpiles risks hurting prices, potentially reducing global food bills.
Moody's Investors Service has said that if the Thai program realises increasing losses, it could be credit negative for the country. Worldwide rice production is forecast by the United States Department of Agriculture (USDA) to expand to an all-time high this year.
"Thai releases of public stocks will only exacerbate the oversupply situation and the price weakness," Concepcion Calpe, secretary of the Food and Agriculture Organisation's inter-governmental rice group, said in an email.
"World prices are on a sliding path and may remain so for some time, especially under current expectations of bumper crops."
The export price of Thai 5% broken white rice has dropped 10% this year to US$525 a tonne on July 17. That compares with $390 a tonne for rice from Vietnam and $440 a tonne from India, according to the Thai Rice Exporters Association.
Thailand's rice stockpile will total 15.5 million tonnes in 2013 to 2014, up from 12.5 million tonnes last season and 9.3 million tonnes in 2011 to 2012, according to USDA data. The latest holdings are enough to meet about 41% of world imports.
Too Low
Prime Minister Yingluck Shinawatra samples rice while visiting a rice packing plant in Ayutthaya on Thursday. (Photo by Pattarapong Chatpattarasill)
The government would like to see export prices of the 5% broken grade at about $450 to $500 a tonne, with sales from the stockpiles targeted at other governments including Indonesia, Iran and Iraq, Mr Yanyong said on Thursday.
If prices offered are too low, the government will not sell, he said.
Thailand has spent 588.7 billion baht ($18.9 billion) since October 2011 to last month buying about 40 million tonnes of rough rice from farmers to lift rural incomes. Losses from the program were 137 billion baht in the last crop year, according to a government estimate.
Thailand faced a looming shortage of storage space for the rice stockpiles, the Rome-based FAO said in a report in February, forecasting that the country's reserves would increase to 18.2 million tonnes.
Rice Quality
Mr Yanyong said Prime Minister Yingluck Shinawatra wanted all agencies to quickly upgrade the overall quality of Thai rice, in an effort to boost consumers' confidence.
"The packed rice issue will not affect the country's rice exports but there might be more quality inspection procedures," said the deputy minister.
Earlier this month, popular cable television show host and producer Sutthiphong Thammawuthi posted a Facebook comment suggesting that packaged rice produced by Charoen Pokphand (CP) Group was contaminated with toxic chemicals. He later apologised for his comment and said the criticism he had made was wrong and he publicly ate some of the rice on Thursday.
Price and Politics
Chavanond Intarakomalyasut, spokesman of the opposition Democrat Party, said the government should not lower the pledging price for ordinary white rice paddy to 13,500 baht a tonne for the 2013 to 2014 harvest season.
"The Democrats were against the government's rice mortgage scheme since the beginning, but the government should not create more burdens for farmers (by cutting the pledging price)," Mr Chavanond said. "The price should be kept at 15,000 baht per tonne."
He said the rice problem could be easily solved. The government would have enough money to keep the pledging price at 15,000 baht a tonne if the prime minister shows that she is sincere about suppressing corruption.
The rice pledging scheme was an election policy of the Pheu Thai Party ahead of the 2011 general election, which the party won. Its state purpose is to improve the incomes of farmers. However, Moody's Investor Service reported last month that losses from the scheme for the 2011 to 2012 harvest year are estimated to reach 200 billion baht (US$6.5 billion).