In an attempt to shore up domestic prices, the government has suspended the plan to release its rice stockpile via the futures market and auctions, a senior official at the Commerce Ministry said yesterday.

The government had planned to release its stock through three major channels: government-to-government contracts, selling via the Agricultural Futures Exchange of Thailand (Afet) and auctions.

Only government-to-government deals will now be undertaken, as this channel will not affect domestic prices.

The domestic market has been sluggish as rice exporters and millers have had to cope with huge stocks in their warehouses since last year. The government does not, therefore, want to add to the problem by increasing the supply of rice and pulling prices down.

Commerce Ministry permanent secretary Yanyong Phuangrach said the government was suspending the release of rice from its stockpile, thus delaying its plan to trade 300,000 tonnes via Afet.

It is estimated that 6 million tonnes of second-crop paddy rice will enter the market from March to July. About 400,000 families in 18 provinces grow second-crop rice.

"We cannot say how long the suspension will be in place. We will hold the stock until we see prices going up and then becoming more stable," said Yanyong.

Rice prices have fallen sharply over the past month as traders panicked over the government's plan to release 500,000 tonnes onto the market. Despite facing high monthly stockpiling costs of Bt55 a tonne, the government will now hold on to its stocks to assure a good return for farmers, he added.

To solve the pressing problem of low prices, the Cabinet has ordered agencies to directly purchase rice from farmers, mainly in the Central region. It has set aside Bt20 billion for shoring up the market price this way.

The government has set the price at Bt9,074 a tonne for rice with 15-per-cent humidity.

It also plans to set up 30 sites to facilitate purchases from farmers. However, farmers can only sell up to 25 tonnes per family via this means.

White paddy rice is currently traded at Bt8,700 to Bt9,500 a tonne.

Under the government's income-guarantee policy, farmers will receive Bt926 per tonne in compensation for the difference between the guaranteed price of Bt10,000 and the reference price of Bt9,074.

Chookiat Ophaswong, president of the Thai Rice Exporters Association, yesterday agreed with the government's plan to suspend the release of its huge stockpile.

"The cultivation of second-crop rice has just started, and exports have continued to drop over the past few months. Vietnam is also predicting higher rice production of between 8 million and 10 million tonnes. It is the right decision," said Chookiat, adding that prices would increase next month when exporters place new orders.

Rice prices have dropped steadily since February 24. The price of 100-per-cent rice fell from US$555 (Bt18,146) to $548 a tonne in the period, while Pathum rice dropped from $816 to $813 a tonne. Only the price of Hom Mali has increased - from $1,006 to $1,021 a tonne - due to the end of the harvest season for this type of rice.

Meanwhile, Deputy Prime Minister Trairong Suwankhiri yesterday insisted the government would not scrap the rice-price guarantee scheme, but would seek a discussion with the National Rice Policy Committee on how to improve it.

He said he would also investigate farmers' complaints about the insufficient number of rice-buying windows. If the complaints are valid, he will via the Commerce Ministry urge rice millers to widen the purchase windows.

If that is not enough, he will allow millers not registered under the price-guarantee scheme to take part in the purchases.

"The pledging scheme involved corruption, and that's why we replaced it with the guarantee scheme. We're through with corruption. We've stopped it and should move forward under the new scheme," Trairong said.

Source: The Nation