The government is being urged to sell its stockpiles of rice in small lots, rather than in batches of several hundred thousand tonnes, to enable small-scale exporters to participate in rice bids and to increase competition.

"The government should scrap its rice auctions in big lots that require exporters to bid for a million tonnes, as this allows only large exporters to participate in the bids," said Nipon Poapongsakorn, president of the Thailand Development Research Institute (TDRI).

"The rice bids should rather be broken down into smaller lots, ranging from just one tonne to 1,000 tonnes."

The Public Warehouse Organisation should be directed to declare the rice prices every morning according to types of rice and their depreciation, he said.

If exporters offer to buy in big lots at lower than market prices, a working panel could consider whether to sell.

When prices are low because of oversupply, the government could also opt to suspend its rice sales to avoid a loss.

"Selling rice in hundreds of thousands of tonnes with five to six months in credit creates an advantage for certain groups of winning exporters, as they avoid extra expenses in keeping stocks. This also makes them profitable as exporters are able to sell rice in futures."

Government stockpiles currently hold about 4-5 million tonnes of milled rice. The coalition government's unclear rice selling policy is drawing fire from the exporters who won the latest state rice auction totalling 2.6 million tonnes.

The cabinet last month stopped the Commerce Ministry's planned sales for fear of losses, even though the ministry had signed deals with 17 companies.

In a related development, Mr Nipon supported the government's crop price guarantee or insurance pilot project, which pledges a price for 200,000 tonnes of Hom Mali rice in the coming harvest.

The pilot project, approved by the cabinet early this month and to be run by the Bank for Agriculture and Agricultural Co-operatives, will cover eight provinces including Surin, Buri Ram, Maha Sarakham and Yasothon. The project will likely run from July until this December.

The price guarantee or insurance programme, functioning like a put option in the financial sector, would cost the government less than a conventional price intervention or pledging programme.

An option programme would give farmers an incentive to hold on to their rice in hope of benefiting from higher prices in future. This would reduce pledges under the mortgage programme, reducing state stockpiles and helping support market prices by reducing supply distortions.

Unlike the crop mortgage scheme, the scheme will give all farmers a chance to sell products at a set price, he said.

In the mortgage scheme, quotas are set according to crop areas nationwide.

If the quota in a farmer's area is full, or his province is not granted a quota, then he misses out on price-pledging measures.

Source: Bangkok Post