The caretaker government's plans to step up disposal of its massive rice stockpiles to raise funds to pay farmers are expected to put mounting pressure on global and Thai rice prices.

"There's much concern among not only among Thai exporters but also exporters in countries such as Vietnam that are now afraid global rice prices may fall if the Thai government dumps its mountainous stocks," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, who spoke with representatives of the Vietnam Food Association last week.

"More importantly, new supplies, particularly from Vietnam's winter-spring crop, are due to be churned out by the middle of next month."

The winter-spring crop is Vietnam's biggest, and most of the grain is exported. The harvest often peaks in March.

Mr Chookiat said certain Thai exporters are offering to sell 5% white rice in Africa at a relatively low price of only US$370 a tonne, while Vietnam sold the same grains at $400-405 a tonne.

"Vietnam's exporters are very upset about this issue, as they're concerned it will destroy overall global rice trading," he said.

The Thai prices do not reflect production costs, making it unfair on other rice producers who are expected to bring new supplies to the market, Mr Chookiat said.

He warned that a price war is likely since Vietnam has no advanced facilities or warehouses to keep its rice for long after harvests.

"No one knows the extent that rice prices will drop," said Mr Chookiat.

"Vietnam itself has never said whether it will cut its rice prices or how it is capable of stocking its output. So it's highly likely that global 5% rice prices will hit $350 per tonne."

Mr Chookiat said negative factors are affecting global rice prices, with overall supply expected to outpace demand.

Production is also expected to increase in India, Cambodia, Vietnam and Myanmar.

According to the London-based International Grains Council's forecasts, global rice production is expected to reach 470 million tonnes this year, up from 469 million last year, while global rice consumption is forecast at 471 million, up from an estimated 467 million last year.

Final stocks this year are expected at 108 million tonnes, down from beginning stocks of 110 million.

The global rice trade is expected to rebound to 38.6 million tonnes, up by 1.3 million or 4% from last year s 37.3 million.

Caretaker Deputy Prime Minister and Commerce Minister Niwatthamrong Bunsongphaisan earlier announced the government planned to sell 1 million tonnes a month in January, February and March.

That would enable it to pay farmers what they are owed this month or next.

Somkiat Makayathorn, president of the Thai Rice Packers Association, also voiced concerns that government plans to unload its rice stocks may dampen domestic paddy prices and lower the price of packaged rice to 80-120 baht per five-kilogramme pack from 100-150 baht last year.

The government put up another 230,748 tonnes of its rice stocks yesterday on the Agricultural Futures Exchange of Thailand.

The move drew several interested potential buyers, mostly retailers and rice packers.

Suchart Sinrat, deputy director-general of the Internal Trade Department, said authorities expect this latest sale to fetch more than 1.5 billion baht

Source: Bangkok Post