A combination of the approaching drought season, the impact of the turmoil in North Africa and the Middle East and projected lower supply is expected to increase the price of Thai rice after a fall over the past month, the Foreign Trade Department said yesterday.

The department expects the price will surge beyond US$600 (Bt18,350) a tonne in the next few months if a serious drought hits the Kingdom soon. This would drive the domestic price to more than Bt10,000 a tonne for paddy white rice.

During last month, exported white rice fell slightly to $538 per tonne.

Department director-general Manat Soiploy said that despite the recent drop in price, things would pick up soon as the expected drought would lead to lower supply and high demand.

Moreover, government-to-government contracts are being negotiated with rice-importing nations, which if successful would cause lower stockpiles in its warehouses and increase the bargaining power of Thai rice traders due to lower supplies, he said.

The average price of domes?tic produce was Bt8,912 a tonne for paddy white rice from February 1-25. As of February 25, the price had increased to Bt8,970.

"Rice prices should now increase steadily, as it is the end of the main harvest, besides which the fast-approaching drought will lower supply for second-crop rice in April," Manat said.

About 8 million tonnes of paddy white rice is expected to come on to the market during the second crop. However, overall output is expected to be lower because of the projected drought.

The department also pointed to Asian importing nations such as China, the Philippines and Indonesia having higher demand for overseas rice, as they are starting to face supply uncertainties due to natural dis?asters at home.

The Philippines is expected to import an additional 1.5 million tonnes in the current and third quarters.

China is facing a drought in the southern part of the country and may also need to import more rice soon.
Manat added that government-to-government contracts were being negotiated with three countries.

The combined amount to be sold via this route is about 800,000 tonnes. Countries negotiating to purchase rice from Thailand include Bangladesh, Libya and other nations in Africa and the Middle East.

Vietnamese rice production from its main crop is expected to be sold out soon, which will also drive up prices in the world market, he said.

The department declined to mention how much stockpiled rice was being kept in government warehouses after the release of more than 5 million tonnes last year.

Manat said the government had not yet decided whether to release its stockpiled rice. However, it must maintain some of the produce as security stock for the country.

A rice-trader source said about 1 million to 1.5 million tonnes was left in the stockpiles, and that prices should start to rise because of more orders from importing nations.

Thailand is projected to export 9 million to 9.5 million tonnes of rice worth Bt5.3 billion to Bt5.6 billion this year.

From January 1 to February 24, exports totalled 1.75 million tonnes worth Bt1.01 billion, for respective increases of 35.27 per cent by volume and 26.16 per cent by value compared with the same period last year.

Source: The Nation