The government will soon call a new bid to sell its rice stocks after it scrapped the latest bid for 375,000 tonnes of rice, from state stocks of 6 million, because of the low prices offered by exporters.

"A slight delay is likely to enable the government to gain better prices, as there are now indications in the market that rice prices could rise further given higher demand prospects and Thailand's lower production from an infestation of planthoppers," Commerce Minister Porntiva Nakasai said yesterday.

Reduced water supplies and insect infestation in key rice regions has prompted Thailand to cut its second-crop forecast by nearly 16%, which, combined with strong demand, should support prices in 2010.

Thailand may now only produce about 7 million tonnes of paddy from its second crop, rather than 8.3 million forecast earlier, according to the Office of Agricultural Economics.

The overall 2009-10 crop could therefore total 29 million tonnes of paddy - down from the previous forecast of 31 million and also less than the 2008-09 crop of 31.4 million tonnes - which could add upward pressure on prices.

The latest forecast from the UN Food and Agriculture Organisation (FAO) is that world rice trade in 2010 could rise to 30.5 million tonnes, from 30.3 million in 2009, mostly on demand from Asian countries, several of which could need to compensate for poor 2009 harvests.

Vichak Visetnoi, director-general of the Foreign Trade Department, said the government would scrap the latest bid as the offered prices were too low.

"Although some exporters proposed to buy white rice at as much as 16,200 baht per tonne, close to the market prices, which now stand at 17,200 baht, the offered prices are just for certain warehouses, with the prices offered for other warehouses mainly averaging only 15,000 baht a tonne," he said.

"A negotiating panel views that the government could earn higher prices over the rates offered, given high global demand and the rising price outlook, so we decided to scrap the bids."

The government opened bids last week to sell 375,000 tonnes from its stocks, drawing offers from 22 companies for far more than the amount available.

Bidders proposed offers for 489,308 tonnes, with 5% white rice making up 246,206 tonnes and glutinous rice the rest. Offers for white rice were between 14,000 to 16,000 baht a tonne, with glutinous rice at 10,000 to 17,000 baht. The market price for white rice is being quoted at 16,900 to 17,000 baht a tonne, with the price for glutinous rice as high as 22,000 to 22,100 baht a tonne.

The previous government bought paddy from farmers under the price-pledging programme at 14,000 baht per tonne during the 2008 season. That translates into milled rice at 23,000 to 24,000 baht per tonne. The pledged paddy price for 2009 was 12,000 baht, putting milled rice at 21,000 to 22,000 baht a tonne.

At tomorrow's meeting of the National Rice Policy Committee, the ministry will propose a new guideline that allows exporters to propose buying prices on a first-come, first-served basis at least twice a month, said Mrs Porntiva.

Source: Bangkok Post