Thailand, the world’s top rice exporter, must expand its shares of the market for premium-grade grain because it is losing out to Vietnam in a Southeast Asian price war for lower-quality white rice, a senior official said.

Thailand aimed to produce an extra 160,000 tons of premium-grade white rice in the current 2010-11 crop, expanding planted area by around 64,000 hectares, said Prasert Gosalvitra, director-general of the rice department in the Agriculture Ministry.

"The 160,000 tons is a conservative figure as we will not only increase plantations but also increase our yield as well," Mr. Prasert told Reuters on Monday.

Thailand currently produces around seven million tons of premium fragrant rice out of total annual production of 30 million-32 million tons. Premium-grade fragrant rice was quoted at $900 per ton this week.

Simple white rice grades were quoted at around $435-$465 per ton, traders said. That is down by about a quarter this year and well under half the record high of $1,080 per ton set in April 2008.

Thailand’s fragrant rice is popular, but output is limited as it can be grown only once a year.
The 10-member Association of Southeast Asian Nations (ASEAN) implemented a free trade deal on rice this year.

This has cut import tariffs on rice to zero, and Vietnam has seized the opportunity to export more grain to member countries due to its competitive prices.

The Philippines, the world’s biggest rice importer, has been a big customer. It has ordered a record 2.45 million tons of rice for this year, of which more then 90% will come from Vietnam.

Vietnamese 5% broken grade white rice was at $360 per ton this week, well below the same grade of Thai rice at $435 per ton, exporters said. "We can’t compete with Vietnam on white rice any more. We need to go upmarket, where I think we can do well as Vietnam can’t produce premium-grade rice," said Chookiat Ophaswongse of the Thai Rice Exporters Association

Source : Reuters