The government is planning to cut its huge rice stockpile of about 5 million tonnes from the trading system in a bid to reduce supply, shore up domestic prices and boost exports to as many as 100 countries.

"We want to manage only the new rice crop instead of struggling with existing stocks. The government's plan to cut the stock from the rice trading system should not [adversely] affect prices or market mechanisms," Deputy Commerce Minister Alongkorn Ponlaboot said yesterday.

Falling commodity prices is a major problem for the government, which needs to act swiftly to mitigate the effects in the domestic market.

Both the previous administration and the government of Prime Minister Abhisit Vejjajiva have approved a combined budget of Bt120 billion for a farm-subsidy programme covering palm oil, corn, rice and other crops.

Alongkorn said the government was considering an appropriate method to release the rice stockpile and would make an announcement soon.

There are two potential ways of doing so: government-to-government and government-to-organisation. Whichever method is chosen, the ministry's future export plans for rice will not need to be concerned about releasing the huge stockpile, but rather will be supplied by the new crop only. As a result, global rice trading of an average of 30 million tonnes a year will not be affected.

The ministry will also try to boost annual rice exports by another 3 million tonnes to about 100 high-potential countries, including those in the Middle East, Africa, the Commonwealth of Independent States and nations under the Gulf Cooperation Council.

Those countries have high export potential, but there is currently no marketing plan to penetrate the markets, Alongkorn said.

Thai Rice Exporters Association president Chookiat Ophaswongse said he favoured the release of rice via government-to-government deals, in order to reduce the stock burden.

"Foreign buyers know Thailand has shouldered huge rice stockpiles, which they can use to pressure for low prices.

If the government can release a part of its huge rice stockpile through government-to-government contracts, it will shore up rice prices," he said.

Chookiat said the government should focus on such direct talks with the Iranian government, as private exporters have problems about payment terms with commercial banks.

It is expected that Iran will need to import 2 million to 2.5 million tonnes of rice this year.

He also supported a government plan to promote new rice exporters. However, new enterprises must assure good export performance to maintain the international image of Thai rice exports.

Source: The Nation