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Thai Rice Reserves Seen at Record as UN Flags Warehouse Shortage

Rice stockpiles in Thailand will surge to a record this year driven by a government-price support program, according to the Food & Agriculture Organization, which said the country may be running out of room to store the staple.

Milled holdings may jump 40 percent to 18.2 million metric tons in 2013, the Rome-based United Nations’ agency said in a report yesterday on the global rice market. The reserves, which averaged 5.4 million tons a year between 2008-2010, have increased from 7.8 million tons in 2011, according to the report.

There may be a “looming shortage of storage space,” the agency said. “Government stock-release plans have progressed slowly, further aggravating the supply situation for an export sector that is faced with little offshore demand,” it said.

The projection highlights the buildup of rice in Thailand even as the country is forecast to reclaim its mantle as the biggest exporter this year as the government tries to step up sales. The FAO’s forecast compares with a Jan. 30 estimate from the Thai Rice Exporters Association, which put milled holdings at 17 million tons. Former Thai Prime Minister Thaksin Shinawatra said in September the rice-purchase program should be extended for several more years.

The buying program has elevated local prices, prompted increased production and “fostered a considerable rise in unofficial inflows” from neighboring countries, the FAO said in the report. An estimated 750,000 tons in unofficial shipments was moved in, up from 400,000 tons a year earlier, it said.

The government bought 9 million tons of unmilled rice last harvest and expects to purchase as much as 11 million tons this harvest, Commerce Minister Boonsong Teriyapirom said on Jan. 23. The stronger baht had made exports “quite difficult,” he said.

Declining Shipments

Thai rice shipments plunged 37 percent to 6.73 million tons last year, the Ministry of Commerce said on Jan. 23. That’s the lowest level since 2000, according to data from the U.S. Department of Agriculture, and dethroned Thailand as the world’s biggest exporter.

Exports may increase to 7.7 million tons this year, according to the FAO report. “Shipments from Thailand are anticipated to rebound, mostly on the expectation of releases of supplies from public inventories, which could even bring the country back into the leading rice exporter position,” it said.

Thaksin said that the program reaps economic gains that are about three times the cost, according to an interview in September. According to the World Bank, the total cost may be as much as 440 billion baht ($14.8 billion) in 2012-2013, compared with 376 billion baht or about 3.4 percent of gross domestic product the previous year.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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