Thailand and Vietnam, the world's two biggest rice exporters, will hold talks today on future trade arrangements and the effects from the Thai government's revival of the crop mortgage scheme.

The high pledging prices offered in Thailand have increased Vietnam's prices, even as its export volume is expected to reach a 10-year high of 7.5 million tonnes this year.

"We presume that all roads will lead to Vietnam next year, so are there any measures for [Vietnam] to cool down rice sales if they are too active?" asked Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.

The Thai association and the Vietnam Food Association (VinaFood) have cooperated since 2006 by exchanging information on output, exports and selling prices on a weekly basis.

Their annual meeting will be held in Chiang Mai today. Global conditions and pacts such as the implementation of Asean Economic Community in 2015 are among the topics.

VinaFood reported last month that its total paddy output this year would improve to 41.01 million tonnes, a 2.6% rise from the previous season. The increase ensures exports will rise to 7.5 million tonnes, up 1 million from 2010 and likely to be even larger next year.

Thailand and Vietnam control about half of the world's rice trade, which will likely be 31.85 million tonnes in 2012, down from 32.74 million as estimated by the US Department of Agriculture.

The decrease stems from falling Thai shipments to 7-8 million tonnes of rice next year, down from more than 10 million tonnes expected in 2011, as a result of the mortgage plan.

The Thai government's pledging plan aims to pay 15,000 baht a tonne for paddy rice and 20,000 baht a tonne for Hom Mali rice, pushing up export prices to more than US$800 a tonne from $550-560 a tonne for white rice now, which will put a big dent in Thai competitiveness.

Thai rice prices will likely level off a few months after the scheme when other countries harvest their crop.

"When the new crop from Vietnam is harvested between February to March, it could affect the sale of mortgaged rice," Mr Chookiat said.

Thailand also faces a challenge from India, as it announced it would lift a rice export ban with a projection to ship out 2 million tonnes of parboiled rice at attractive prices. India's prices were $470 a tonne this week, about $150 a tonne cheaper than Thai rice.

Even Thailand's famed fragrant jasmine rice is not free from competition. Vietnam's continued investment on research and development has improved this strain of grain.

"It's a big threat to Thai Hom Mali rice, as its aroma has faded due to lack of development," said Mr Chookiat.

"Unfortunately, Thailand spends a huge budget every year to artificially inflate the price of rice, but not much to promote the industry in a sustainable way."

Pramote Vanichanont, honorary president of the Thai Rice Millers Association, also supports a higher government budget for R&D to improve rice productivity and strains.

He said both the income guarantee plan used by the previous government and pledging cost the state about 50-60 billion baht per year and such funds should instead be used for sustainable improvement of the rice industry.

Source: Bangkok post