The government expects drought from the El Nino weather phenomenon to shave Thai rice production for this year's main crop by 2% to 26 million tonnes, though this could mean a rise in prices.
The estimate from the Agriculture Ministry is based on a delay in rice farming for two months until August. However, if the drought is prolonged, the rice yield may be much lower.
The ministry expects El Nino will cut global rice production by 1% from 476 million tonnes last year.
Commerce Minister Chatchai Sarikulya said yesterday at the meeting of the National Rice Policy Committee chaired by Prime Minister Prayut Chan-o-cha that rice prices have risen since the middle of last month, as importers are wary about potential higher rice prices thanks to lower supply from India, Vietnam and Cambodia.
However, Nipon Paopongsakorn, a distinguished fellow at the Thailand Development Research Institute, argued it remains difficult to predict the impact of El Nino on agriculture.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said the dry spell has had a psychological effect on global rice trade. Importers are increasingly aware the dry weather may worsen rice production.
Buyers who had been reluctant to purchase rice and stockpile it in recent years are now doing just that because they are worried global rice prices will rise, he said.
In a related development, yesterday the committee approved the Commerce Ministry's plan to open bids for rice sales for industrial use such as ethanol production.
However, a panel handling the rice sales was told to reconsider the appropriate volume for ethanol in order to curb the impact on other crops used for ethanol production such as tapioca and sugar cane.
The Commerce Ministry reported state rice stocks as of June totalled 15.46 million tonnes. Since Gen Prayut took office, the ministry has held seven auctions to speed up disposal of 18 million tonnes of stocks accumulated from rice pledging schemes. It has sold 3 million tonnes for 30 billion baht.
Existing state stocks consist of 4.6 million tonnes of C-grade poor quality rice, which the ministry plans to call bids for this month for industrial use.
"Some 1.29 million tonnes are categorised as rotting rice that cannot be sold for ethanol production, but could be used as fuel for cement production," said Gen Chatchai.
The committee also approved measures to stabilise main crop prices, including 200 baht per rai to cut production costs, a 3% interest rate subsidy for millers to purchase paddy, and a 3% interest rate subsidy for cooperatives to delay their stock sales.