The government should allow a free rice market or risk ending up with 10 million tonnes in its stock, say observers.

Niphon Wongtra-ngarn, a former director of the state-run Public Warehouse Organisation (PWO), said he had nothing against the government's rice mortgage programme, which set a mortgage price of 15,000 baht a tonne for paddy to improve the lives of farmers and stimulate the economy.

However, he strongly suggested the government sell rice at world prices now instead of waiting for Vietnam and India to do so in the hopes of fetching $700 a tonne for white rice.

Vietnam will never run out of rice because, like Thailand, the country can produce three crops each year, he reasoned.

In Vietnam, around 25% of production will be harvested in the main crop, 50% in the second crop harvested in the summer and the rest in the autumn. "The government should change its mindset and stop challenging market mechanisms. It should use traders as the mechanism instead. It's certain rice traders want to buy at market prices, so if they already have some orders in hand, the government should sell to them at market prices," he noted.

He believes if the government does not change its policy, it may have to carry up to 10 million tonnes of rice by the end of this year.

"If the stock is that massive, prices next year will likely drop. And the government will not be able to lower the mortgage price for fear of opposition from farmers. As a taxpayer, I don't want to see the government squander a large sum that could be spent on development in other areas," he said.

Pornsilp Patcharintanakul, vice-chairman of the Thai Chamber of Commerce, said the rice mortgage policy has failed to shore up prices to targeted levels.

The market price of paddy is about 5,000 baht below the mortgage price, making the project unsustainable. Farmers still expect higher mortgage prices next year without improving production efficiency.

He added the government loses money as rice is smuggled from Laos and Cambodia to take advantage of the scheme.

In his view, the solution is to draw medium- and long-term plans on rice-production zoning.

As for government-to-government rice sales, he said the past decade showed Thailand sold very little through this channel, further strengthening the call to allow an open market.

The free-on-board price of 5% white rice was quoted at around US$550 a tonne last week, about $100 higher than prices in Vietnam and India. From the beginning of this year to April 11, Thailand shipped 1.84 million tonnes of rice, down 45.7% year-on-year from 3.39 million tonnes, said the Thai Rice Exporters Association.

Commerce Minister Boonsong Teriyapirom said the government still has no policy to release its stock at the moment, though several countries expressed interest in Thai rice.

The minister added he will sign a memorandum of understanding to sell 1 million tonnes of rice to Bangladesh.

The government also has no plan to adjust the mortgage price for the second crop and has received 3.96 million tonnes of paddy for this crop since implementation on March 1.

The government spent around 90 billion baht on the mortgage scheme for 6.7 million tonnes of white paddy for the first crop ending on Feb 29.

Source: Bangkok Post