Rice exporters are predicting prices will jump sharply the day after a Pheu Thai election victory, but the market seems unwilling to wait, judging from current levels.

The selling price for 5% white rice alone is 14,000 to 14,200 baht a tonne this week, up by 500 to 600 baht from last week and expected to increase further, although the export price remains unchanged at US$489 a tonne.

Traders are complaining that election promises aimed at capturing the farm vote could push up retail rice prices and adversely affect consumers.

And if the state caps the prices, supply could disappear and lead to a market shortfall such as happened with cooking palm oil a few months ago.

The Pheu Thai Party is promising to pay farmers 15,000 baht a tonne for white rice paddy and 20,000 baht for Hom Mali if elected.

This is much higher than the current market prices of 8,500 baht and 13,700 baht, respectively, or increases of 76.5% and 46%.

The guaranteed prices are 11,000 baht for paddy and 15,300 baht for Hom Mali, and Pheu Thai's promises are 36.4% and 30.7% above these, respectively.

Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association. said operators from six rice-related segments including farmers, millers, exporters and packers would question Pheu Thai and Democrat economists at a seminar at Chulalongkorn University's Sasin Graduate Institute of Business Administration tomorrow.

"Packers are concerned the most. They need measures to reduce their burden of having to buy high and sell low, as local rice prices are controlled by the Commerce Ministry," he said.

Somkiat Makcayathorn, president of the Thai Rice Packers Association, said that his organisation had held the line on prices for some time now, but it was impossible to continue doing so if production costs keep growing.

"We'll ask the economists what measures they have in mind for minimising effects on both consumers and operators," he said.

The capped prices are 90-125 baht for a five-kilogramme bag of white rice and 150-190 baht for 5 kg of Hom Mali. Requests for a price adjustment after the July 3 election are anticipated.

An industry source said Pheu Thai's high pledging scheme would add 10 baht/kg to packed rice.

Refusal to increase prices could result in the disappearance of rice from supermarket shelves similar to what occurred in 2008, when a food crisis sparked rampant hoarding among suppliers and consumers alike.

Mr Chookiat said there were signs that millers and traders have started stocking up on paddy to gain handsome profits under the new pledging plan.

He said he is not convinced the credit cards that Pheu Thai plans to give to farmers carry sufficient safeguards to prevent any wrongdoing, especially by those buying low-priced rice from neighboring countries for resale under the scheme.

The industry source said collusion among officials, farmers, millers and traders could result in false information being reported in a bid to take advantage of the scheme.

Under the credit card system, a database of farmers, their production capacity and use of farm essentials will be entered onto the card, and this will be read each time during pledging or when purchasing fertilisers or seed.

"Rice millers that are not allowed to take part in the programme directly could pay farmers for using their low-priced paddy to pledge in the scheme instead. It's a win-win situation, as farmers might not have as much as rice as indicated by the cards," said the source.

Meanwhile, Mr Chookiat said exporters are afraid of making forward sales, as importers are growing concerned about volatile markets. "They are not happy and have classified Thailand as 'least priority' for buying rice. Now they're eying other markets such as Vietnam, Pakistan and India," he said.

Buyers are upset about artificially high prices, and this could lead to a loss in competitiveness for Thai rice in the long run.

Source: Bangkok Post