The rice-pledging plan has led to widespread hoarding, with an estimated 3 million tonnes of rice having been stockpiled in recent weeks to gain from higher prices offered by the plan.

All parties _ exporters, traders, millers _ have stocked up and expect prices to rise when the mortgage plan begins next month, said Sumeth Laomoraphorn, the chief executive of CP Intertrade Co, a rice unit of CP Group.

While some portion of the rice might be kept as regular business inventory, operators will definitely benefit as the launch of the pledging plan on Oct 7 drives up rice prices by at least 30%.

The plan, which will pay 15,000 baht per tonne for paddy rice and 20,000 baht per tonne for Hom Mali paddy rice, will raise milled rice to 26 baht a kilogramme from 16-17 baht this week and Hom Mali rice to 37-38 baht/kg from 30 baht this week.

CP, a leading local rice seller and exporter, declines to reveal its existing stock, saying its reserves is essential to ensure constant delivery to customers.

Mr Sumeth assumes that not all traders will benefit from the rice they have in stock, as market prices will not increase instantly. Those who have export orders must honour sales at agreed-upon older prices, he said.

How much the industry will gain from escalating prices is unknown, but a market source expected more than 20 billion baht in profit gained by hoarders, based on an increase of 10 baht per kilogramme.

Mr Sumeth predicted that high mortgage prices would cut the volume of Thai rice exports by at least 20% but would be offset by higher selling prices.

Some 8-9 million tonnes are expected to ship out next year, compared with 11 million tonnes this year, but revenue income will increase 30% in line with the cost of paddy.

Local consumers as well will have to pay extra, and Mr Sumeth stressed that there will be no cheap rice any more. He supports the pledging plan, citing the benefits to farmers.

Over the past few years, all key commodities _ wheat, maize, soybeans _ have enjoyed strong prices except rice, while the income guarantee that cost the previous government 120 billion baht has even dampened Thai rice prices, Mr Sumeth said at a seminar in Phuket over the weekend.

He added that farmers do not need to sell high when their income is guaranteed. While the pledging programme could lead to heavy malpractice among officials and traders, he suggested that all parties, including the Department of Special Investigation, step in to prevent any scandal.

He added that 7-8 million tonnes of rice in state stock is a sufficient reserve in case of a food shortage caused by natural disaster or drought.

China and India hold as reserves a combined 46 million tonnes out of the entire 90 million tonnes worldwide.

CP is one of a handful of exporters that largely benefited from state rice sales in the past. The company is upbeat that the rice-pledging scheme will raise revenue by 10% this year from its previous target of 30.30 billion baht.

CP's new 4-billion-baht rice processing facility in Ayutthaya province, to be opened officially Nov 11, will support the company's expansion goals.

Source: Bangkok Post