Despite warnings on the huge stockpiles it will have to handle and severe export competition this year, the government has insisted on going ahead with its rice-pledging scheme, as it believes the strategy will drive up prices both domestically and in the international market.

The private sector estimates that the scheme will result in a minimum rice stockpile of 6 million tonnes and could go as high as 10 million tonnes, the biggest volume ever. This raises the question of how to manage such a huge stockpile without incurring losses.

The first pledging scheme for the main crop, which is scheduled to end this month, has not produced the desired results. Although it has spent less on the project than estimated, the rice price has not increased, while trading has been sluggish.

The Commerce Ministry targets pledging 8 million tonnes of paddy rice from the second crop and 6 million from the main crop.

Commerce Minister Boonsong Teriyapirom told The Nation that the government had no plan to sell its stocks now as it was a buyers' market. In addition, India and Vietnam are continuing to export large quantities of rice at prices about US$100 per tonne lower than Thai rice. As a result, Thailand should launch its marketing strategy in the second quarter of the year, waiting for those two countries to run out of stocks.

India's rice stockpile is 30 million tonnes, while Vietnam targets export volume of 7 million tonnes, compared with Thailand's forecast for 9.5 million tonnes this year. Emerging exporter Burma projects its export at more than 1 million tonnes. However, the total global volume of rice trading is limited to between 30 million and 32 million tonnes per year.

Boonsong said Thailand should focus on exporting premium-grade types, especially jasmine rice, whose export price has been quoted at $800-$1,000 per tonne.

However, exporters note that while Thai jasmine rice has indeed been quoted at more than $1,000 per tonne, the same product from Vietnam costs an average of $800, or just above that. They question how the ministry can sell Thai premium-quality rice at such a high price when Vietnam's jasmine rice has almost the same quality in terms of glutinousness and aroma. In addition, Vietnam imports jasmine rice from Cambodia, which has same quality as Thai rice, for re-export.

Moreover, Thailand exports only about 2 million tonnes of jasmine rice per year. Exporters wonder how that amount can compensate for the loss of the Kingdom's share of the white-rice market.

But Boonsong said: "We are not worried whether we will lose our ranking as the biggest rice exporter in the world. We put our emphasis on how to sell rice at a high price to generate higher income for farmers."

The ministry is considering the method of releasing its rice stockpile to implement both government-to-government deals and opening bidding to rice exporters and traders.

Boonsong plans to visit Vietnam next month to seek Hanoi's cooperation on pulling up the rice price in the world market. Thailand, Vietnam and other rice-exporting nations have in fact cooperated for decades.

However, these alliances have been strained as countries raise their export volumes and cut prices.

Boonsong guarantees that the ministry has designed measures to ensure transparency under the rice-pledging policy. For instance, about 100 teams of officials will inspect rice millers participating in the programme.

However, millers and farmers alike point out that the subsidy programme has failed to shore up prices. Farmers complain that they have had to sell their produce at lower prices than the government pledging level because of the many restrictions they face.

Prasith Boonchuey, president of the Thai Rice Farmers Association, insisted that farmers have not enjoyed the high price of Bt15,000 per tonne of paddy rice promised by the government. The market price of white paddy rice now is Bt8,000-Bt10,000 per tonne. In addition, the domestic market is not active as traders are not competing to purchase rice because the price is too high.

Farmers want to see other measures besides the price-subsidy scheme, such as irrigation-system development, hybrid rice strains and innovative technology to increase yield. They need to see sustainable development of both the farming and trading sectors.

"The government should concentrate on the rice supply chain from farm, local trading through export," Prasith said.

"Farmers cannot survive if they have no millers and exporters, and exporters cannot operate their business without rice. We have to rely on one another."

Sombun Kongpoh, a farmer in Nonthaburi, said his income remained unchanged under the pledging price of Bt15,000 per tonne compared with the price-guarantee programme of the previous Abhisit Vejjajiva administration, which compensated for price gaps.

Sombun wants the government to help farmers reduce production costs by increasing yield rather than imposing high pledging prices.

Charnchai Rattananon, president of the Thai Rice Millers Association, said the government spent Bt100 billion on the first phase of the pledging scheme compared with its projection of Bt400 billion. The failure came after floods lowered rice production, as 10 million rai (1.6 million hectares) of plantations were submerged.

However, it is forecast that the second crop totalling 8 million tonnes of paddy rice will enter the market next month. The government is projected to spend about Bt120 billion on the second phase of the pledging scheme.

"The government failed to pull up local rice prices through its subsidy programme," said Charnchai, adding that the government's high subsidy had prompted millers to delay purchasing rice. Instead, they want to join the government's scheme for polishing rice.

Because of high export prices, Thai rice has lost competitiveness, causing both traders and exporters to delay purchasing rice as they wait for orders.

Source: The Nation