International rice traders are concerned about world rice prices skyrocketing if the new Thai government reinstates the rice mortgage scheme, causing buyers to divert their orders to other countries.

However, they believe that, whatever happens, the general election will be a factor in raising domestic rice prices.

At the Thailand Rice Convention 2011, held yesterday with participants from more than 50 countries, sources with foreign rice traders said rising prices stemming from the election was considered the most important issue.

The sources said rice will be more expensive if a renewed mortgage programme sets the price at 15,000 baht a tonne as has been promised. If local rice becomes too dear, African customers may shift their orders to Vietnam or Pakistan.

Korbsook Iamsuri, president of the Thai Rice Exporters Association (TREA), said Thai rice prices have risen continuously, with paddy rice now at 9,000 to 9,500 baht a tonne and the free on board (FOB) price at US$580 to $590 a tonne.

This is due to the end of second crop production and some rice mills hoarding paddy to take a profit if the rice mortgage policy is reimplemented.

In the second half of this year, paddy is expected to reach 10,000 baht a tonne on a renewed rice mortgage policy, with an FOB price of $800 a tonne.

Most exporters prefer price guarantees to the rice mortgage scheme due to less market distortion by the former.

Ms Korbsook said the new government should help reduce farmers' costs by distributing free fertiliser and seeds.

Chookiat Ophaswongse, the TREA's honorary president, predicts exports will drop significantly, possibly to 400,000 tonnes a month, if the Pheu Thai Party makes good on its promise to reinstate the rice mortgage programme.

Commerce Minister Porntiva Nakasai said Thailand exported almost 6 million tonnes in the first half and will possibly ship more than 10 million tonnes for the full year thanks to a good harvest, with 20.3 million tonnes of milled rice on hand and demand still rising.

The ministry is negotiating a government-to-government deal with Bangladesh, while Malaysia and China also have high demand.

The government has a remaining stock of about a million tonnes for immediate sale.

Last year, Thai rice exports totalled 9.05 million tonnes for a value of $5.35 billion (169 billion baht), with an average price of $591 a tonne.

Prasert Kosalwit, director-general of the Rice Department, said local paddy production may climb to 32.4 million tonnes this year, up by 1.4 million tonnes from last year.

The department targets increasing production by 15% in 2015 from this year's figure.

Jeremy Zwinger, president of the US trade publication The Rice Trader, said Thai rice exports may reach 14 million tonnes this year.

Source : Bangkok Post