The government will attempt to auction up to 40,000 tonnes of newly harvested fragrant rice under the government's new paddy mortgage scheme to test market response and pricing.

The plan, which requires approval from the commerce minister, is aimed at stimulating the premium rice market, said Manat Soiploy, director-general of the ministry's Foreign Trade Department.

Officials will seek bids to establish free-on-board (FOB) prices for 30,000 to 40,000 tonnes of 100% Hom Mali rice based on the guaranteed price at 20,000 baht a tonne of Hom Mali paddy plus milling and packaging expenses.

The paddy mortgage programme will start on Oct 7 with a budget estimated at 410 billion baht, reduced from 450 billion earlier because floods have damaged some rice-growing areas due to damages from the floods. White rice will be pledged at 15,000 baht a tonne.

"This auction will be open to all. It will be the first release of the government's stock after the mortgage scheme with premier quality guaranteed by the government," said Mr Manat.

The government will also handle packaging, whether in sacks or small 250- gramme packs, by outsourcing to the private sector, to ensure no adulteration.

Mr Manat said problems had been reported with substandard Hom Mali rice in countries including the US, Indonesia, Malaysia and Singapore. The problem occurred mostly in importing countries but not from Thailand.

Thailand normally produces around 4 million tonnes a year of Hom Mali rice, half for local consumption. The main export markets are the US, Africa, China, Hong Kong and the Middle East.

The government has certified that 22 provinces cultivate genuine Hom Mali.

Discussing broader rice strategy, Mr Manat said the country was working to open up intra-regional rice trading under the Asean Free Trade Area. For example, a memorandum of understanding for one million tonne of rice trade between Thailand and Indonesia will expire in December. Thailand still has a similar agreement in place with the Philippines.

However, Mr Manat said the memoranda represented only a cooperation framework and that those countries may or may not buy rice from Thailand.

Thailand and Vietnam, the world's two largest rice exporters, hold annual meetings and the most recent one last year agreed that the two would not cut prices. Ministers and senior officials from both sides keep in touch on ways to avoid a sharp drop in global rice prices.

The Foreign Trade Department is also working on a zoning system to allow imports of paddy from neighbouring countries to mill in Thailand, but only in specific locations.

"Creating special zoning to import paddy from bordering countries to mill for the export will help Thailand maintain leadership in the global rice trade and create cooperation with neighbouring countries such as Cambodia," he said.

A rice industry executive said the government should conduct roadshows to promote Hom Mali after pledging begins, in order to stress its premium quality despite the expected higher prices.

"We should not have roadshows for white rice as it may create the feeling that Thailand has difficulty selling rice."

Source: Bangkok Post