Sept. 1 (Bloomberg) -- Thailand’s export rice price may climb to more than $700 per metric ton because of a government plan to buy the grain from farmers at guaranteed prices, Permanent Secretary for Commerce Yanyong Phuangrach said.
    
Thailand plans to buy unmilled grain from farmers at 15,000 baht a ton to boost rural incomes, Yanyong told reporters today in Bangkok. The measure won’t have a major impact on inflation in neighboring Asian countries, he said.
    
The government will start buying rice on Oct. 7 in “unlimited” volumes, Korbsook Iamsuri, president of the Thai Rice Exporters Association, said after a meeting with Commerce Minister Kittiratt Na Ranong today. The government plans to eventually sell any stockpiled rice at a profit, she said.
    
“It may accelerate purchases by overseas buyers ahead of the plan’s implementation, boosting prices,” Korbsook said.
    
Thailand’s effort to raise farm incomes may fuel price gains across a region that the U.S. Department of Agriculture estimates accounts for 87 percent of global rice consumption. Higher grain prices helped send the United Nations Food Price Index to a record in February.
    
“Prices may jump to $700 a ton by the middle of October, sooner than expected,” said Banjong Tungjitwattanakun, vice president of the Thai Rice Mills Association. “The government also asked farmers and millers to delay rice selling until the plan starts to benefit from the price increase,” he said. The government initially planned to start purchases in November.

Benchmark Price Surges
   
Asia’s benchmark rice price may rise to $750 per metric ton by Dec. 31, according to the median estimate in a Bloomberg News survey of seven exporters, traders and millers conducted Aug. 24-26.
    
The price of 100 percent grade-B Thai rice has surged 15 percent since Thailand’s July 3 election, data from the local exporter group show. Rough rice has gained as much as 15 percent to 11,000 baht a ton as of Aug. 31, according to the Thai Rice Mills Association.
    
Thai shipments may fall at least 30 percent next year as Thai rice becomes less competitive compared with supplies from Vietnam, the second-largest exporter, Korbsook said.
    
“Exporters will suffer tremendously,” she said.
    
Thai exports should meet the government’s 10 million-ton target this year, she said. The country shipped 8.1 million tons of rice through Aug. 26, data on the exporters association’s website showed.
    
Output from Thailand’s main rice crop, which accounts for about 70 percent of total production, is projected to rise to a record 25.1 million tons, from a revised 24.3 million tons the previous year, the Office of Agricultural Economics said June 21. The harvest of the main crop starts in October.
    
The state-run Bank for Agriculture & Agricultural Cooperatives will seek 290 billion baht in funds to buy rice from farmers, the bank’s President Luck Wajananawatch said yesterday. The funds may come from loans, the sale of bonds or the bank’s own cash flow. The plan is subject to cabinet approval, he said.

Source: Bloomberg