Thailand could lose its leadership in rice exports if the Pheu Thai-led government brings back the price-pledging scheme, as in the worst case that would lead to unsold stocks of 8 million to 10 million tonnes, smuggling from neighbouring countries and sourcing cheaper supplies from abroad, the Thai Rice Exporters Association warned yesterday.

"Thai exporters cannot compete with the government to purchase at such high rice prices, so we have to find new suppliers to serve our customers and maintain our business," said Charoen Laothamatas, vice president of the association.

Normally, the country exports between 8 million and 10 million tonnes per year, but this year, exports are forecast to break the record, as shipments have been running at an average of 1 million tonnes per month.

Cambodia, Burma and Laos will flood Thailand with their rice instead of selling the grain in their homelands, as the highly subsidised prices here would be much better, he said.

"How can the government prevent the problem, as rice from those countries has been developed to nearly the same quality as Thai Hom Mali rice?"

To protect their market share and competitiveness, Thai rice exporters would have to look for cheaper supplies, particularly jasmine rice from Vietnam, which is quoted at an average of US$650 per tonne compared with $1,400 for Thai jasmine rice under the pledging scheme.

Without any supporting measures from the government, exporters and traders would avoid purchasing local rice at such high prices because of the export risk.

The government would have to manipulate all rice trade with highly subsidised prices. This means the country's rice would be monopolised by the government's marketing arms. The government would find difficulty in exporting rice at such high prices, so it would have no choice but to dump its inventory on the market. Thailand would face an oversupply problem at the same time every year with the same quantity as the export volume when the new harvest enters the market.

Exporters have to wait and see the extent of the policy, whether it will sweep all rice into government warehouses. If so, the government will be moving towards monopolisation of the rice business.

"We will become a trading company purchasing rice from Vietnamese traders and shipping [direct to customers] from their ports," said Charoen, who is also president of Uthai Produce.

The company has already set up a trading company in Vietnam to purchase and export jasmine rice instead of Thai Hom Mali rice.

"The government's price-pledging policy will pave the way for Vietnam's jasmine rice to replace Thailand's in the global market because of the jack-up in the price of paddy rice from Bt10,000 to Bt15,000," he said.
Thailand's export of jasmine rice averages 1.2 million to 1.5 million tonnes.

Indian basmati rice is now the most expensive, with quotes of $1,200 per tonne, but the new pledging policy will raise Thai Hom Mali rice to $1,400.

Vietnamese jasmine rice is seizing global share particularly in major markets such as Hong Kong and Singapore. For instance, Hong Kong imports 300,000 tonnes of jasmine rice per year, of which Thai rice used to account for 80 per cent. But Thailand's share is dwindling, while rice from Vietnam has increased to 35 per cent.

Thai Hom Mali rice is facing the same problem in Singapore, where it had monopolised nearly 100 per cent of the country's imports of 200,000 tonnes. But now Vietnamese rice has captured 20 per cent of the market there.

Singapore does not want premium fragrant rice, so it will allow Vietnam to boost its share.

"The increasing rice exports of Vietnam are partly shipped by Thai exporters," Charoen said.
Vietnam's rice exports are forecast to set a new high of 7 million tonnes this year.

Chookiat Ophaswongse, honorary president of the association, said major Thai rice exporters were seeking opportunities in Vietnam to avoid business risk here.

Thailand will lose export competitiveness because of the launch of the high-subsidy programme, he said.
"The rice-pledging programme will allow the government to monopolise the rice business."

Source: The Nation