The rush to revive rice pledging this year will likely benefit certain groups of traders and millers, as the amount of second-crop grain in the hands of farmers is low, say experts.

The programme will start on Oct 7 and is aimed at mortgaging all of this year's second crop.
However, the Office of Agricultural Economics said output from the second crop has been low, so it is not necessary for the government to speed up the mortgage plan.

Some 84,000 tonnes of paddy will enter the market this month or only 0.84% of the 10 million expected. Production will be an even smaller 20,000 tonnes next month.

The tiny paddy volume has raised questions about the haste to launch the programme only a month ahead of the main-crop harvesting season that starts in November.

A trade source said most of grain from the output to date had been sold and was not in the hands of the farmers, accounting for this week's strong market in which paddy moved at 9,800 to 10,000 baht a tonne.

"The government must have a mechanism to ensure that the paddy pledged next month does not come from traders or millers trying to gain a big margin," said the source.

On Thursday, Deputy Prime Minister Kittiratt Na-Ranong announced the government would begin the pledging scheme on Oct 7, paying 15,000 baht a tonne for white rice and 20,000 baht for Hom Mali fragrant paddy.

Pramote Vanichanont, honorary president of the Thai Rice Millers Association, said the rice harvest in October is normally light, with only early-rice varieties such as of Hom Mali.

"Thailand harvests 20% of its output in November, 50% in December and the rest over the next two months," he said.

The programme will be run in the absence of the proposed farmers' credit-card scheme, a tool that the Pheu Thai Party vowed to use to guard against malfeasance.

Mr Pramote said that means there will be no way of preventing the corruption through pledging that damaged the industry so badly in the past.

"How do we stop paddy from Burma and Cambodia, which is low at 6,000 baht and 7,000 baht a tonne, respectively, from coming in and enjoying such a big difference?" he asked.

Moreover, he wondered about plans to unload the mortgaged paddy, which is going to be a huge amount since Mr Kittiratt has announced plans to pledge all grain, meaning 23 million tonnes of paddy.

The state-owned Bank for Agriculture and Agricultural Cooperatives has earmarked 300 billion baht to finance the scheme.

Despite the high amount of money, there will be no redemption by farmers, but rather a large volume of paddy will be spread out mainly among millers' warehouses, farmers' barns and state enterprise godowns.

The previous pledging programme that ran from 2004-07 amassed 6 million tonnes of rice before the Abhisit Vejjajiva government replaced it with income guarantees.

The rice was sold for lower than the mortgaged prices due to the lengthy storage periods, resulting in heavy losses to the state.

"The average selling price for paddy was 11,000 to 12,000 baht a tonne against more than 20,000 baht for milled rice. During that period, some officials even colluded with traders to sell good-quality grain at lower prices," added Mr Pramote.

He said a few giant exporters have been able to buy up low-priced rice at auctions called by the Commerce Ministry.

A total of 2.18 million tonnes were auctioned in 2006, with President Agri Trading Co winning two bids for a combined 1.24 million tonnes.

Top exporters such as Asia Golden Rice, Capital Rice, CP Intertrade, Chia Meng and Chaiyaporn Rice won a combined 3 million tonnes worth of tenders called last year.

Korbsook Iamsuri, president of the Thai Rice Exporters Association, called for the government to unload rice stocks gradually by requesting bids for small volumes, to allow small exporters to participate.

She also expressed concern that the high mortgage prices could push up export prices of white rice to more than US$850 a tonne from $550-560 now.

Some buyers can still afford the escalating prices of Thai rice, but others have shifted to other countries, meaning Thailand will not be able to sell as much as it did in the past, said Ms Korbsook.

Mr Pramote agreed, saying: "Our prices have become the benchmark, driving up export prices of Vietnam, Bangladesh and Pakistan. But buyers will buy Thai rice only after these countries are sold out."

Source: Bangkok Post