Thailand is ready to discuss the impact of a sudden rise in rice prices with Vietnam in order to strengthen cooperation between the world’s two biggest exporters to market the grain globally.
Thai rice exporters will meet their Vietnamese counterparts and the Vietnam Food Association in mid-September to evaluate the potential impact of the new government’s revival of crop mortgages to help raise farmers’ incomes.
The Pheu Thai-led administration has pledged to pay farmers 15,000 baht for a tonne for paddy _ about 4,000 baht more than prevailing market rates _ during the next harvest starting in November. That could push up the export price of Thai 5% white rice to about US$800 a tonne from around $550 now.
Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association, said it would be critical for both countries to review strategy since market prices in effect would no longer be set based on supply and demand.Rising prices for Thai rice will hurt its competitiveness, likely leading to more Thai investment in Vietnam and Cambodia to source cheaper rice.
He said Vietnam was already delaying exports in anticipation of the policy change in Thailand, lowering supplies to drive up prices. Vietnamese 5% white rice is now $550-560 a tonne, only $30 cheaper than similar Thai grain. In the past, the price gap was as high as $100.
“This will create a psychological impact as exporters, millers and farmers have started stocking rice. Thailand is benefiting from Vietnam’s slow exports as well,” said Mr Chookiat.
He estimates exports in August will reach 810,000 tonnes, bringing the total for the first eight months to 8 million, with full-year shipments at 11 million.
Higher prices will attract more farmers to cultivate rice so production this year may reach 34-35 million tonnes, up from 32 million last year. Next year, volume may reach 36 million tonnes of paddy, or around 22 million tonnes of rice.
Yanyong Phuangrach, the Commerce Ministry’s permanent secretary, said Thailand had 5 million tonnes of rice in stock, 2 million held by the government.
He said Vietnam was likely to raise its export prices in line with the Thai price as Thailand has more bargaining power as the world’s leading supplier.
The government expects the mortgaging programme to cost 100 billion baht and believes it can effectively manage exports. It also plans to release stocks to packers to sell cheap rice to consumers.