Thai rice prices are expected to come under pressure in the remaining months of the year, particularly as India will resume its rice shipments in July.

Rice prices may weaken slightly in the second half of this year since India's production has risen to about 100 million tonnes and Delhi has allowed 1 million tonnes of non-basmati rice exports by state firms, said Nipon Poapongsakorn, president of the Thailand Development Research Institute (TDRI), at seminar at the Thai Rice Conference 2009 yesterday.

India's aim is to ease tight trade curbs as the country struggles to manage surplus stocks of grain, said

India banned non-basmati rice exports last year to stave off shortages at home but a bumper harvest encouraged it to allow sales to some countries. In January, it scrapped the export tax on basmati rice and reduced the floor price for shipments.

Chookiat Ophaswongse, president of the Thai Rice Exporters Association, added India's plan was a critical variable factor in the Thai rice outlook.

A new important variable is a rice export plan by Burma, which has shipped over 700,000 tonnes so far this year.

Last year, Burma exported about 540,000 tonnes of milled rice. Rice production in Burma this year was estimated at about 1.01 million tonnes. However, Mr Chookiat said Thai rice prices were unlikely to weaken significantly in the second half of the year, as the government's price-pledging scheme had entrenched high local prices.

The association expects the Thai rice to stand firmly in the range of $450-500 a tonne. Thai 5% white rice is currently $510-520 per tonne.

According to Mr Chookiat, higher prices of Thai rice over those of key competitors, notably Vietnam, contributed to a 36.61% fall of exports in the first quarter to 2.03 million tonnes.

Vietnam has already shipped 2.9 million tonnes and secured futures contracts for up to four million tonnes more for delivery in the first half of this year.

Thai rice is $80-90 a tonne more expensive than Vietnamese rice.

Mr Nipon said the Thai outlook would also rest on the government's rice stockpiles. Exports would drop by 6% whenever the state rice stockpile rose 10%, he said.

"In the past, we felt very proud to be the rice-exporting champion. But right now we are losing the title mainly due to the government's rice price intervention scheme which fosters corruption and weakens Thailand's rice competitiveness," he said.

"Therefore, the government must have the courage to seek new ways to assist farmers, either through an insurance plan or setting pledging prices at 5-10% lower than the market prices. The pledging scheme should be only one alternative for farmers."

Source: Bangkok Post