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Rice Exports From Thailand to Advance as Support Prices Cut

Rice Exports From Thailand to Advance as Support Prices Reduced
Harvested rice collects in a catch bin from a combine during harvest in a field in Bang Pla Maa, Suphan Buri province, Thailand. Photographer: Dario Pignatelli/Bloomberg

June 19 (Bloomberg) -- Rice shipments from Thailand, the second-biggest exporter, are set to increase after the government reduced the price paid to farmers to rein in spending, according to the Thai Rice Exporters Association. Thai Ha Pcl shares fell to the lowest level since 2008.

Sales may total 7 million metric tons this year and 8 million tons in 2014, said honorary president Chookiat Ophaswongse. His previous forecast was 6 million tons to 6.5 million tons for 2013. The cabinet today approved a 20 percent reduction to 12,000 baht ($390) a ton from 15,000 baht in support prices for the country’s top variety of unmilled white rice, said government spokesman Pakdiharn Himathongkham.

Thailand has paid farmers as much as 50 percent more than domestic market rates since October 2011 to boost incomes. About 588.7 billion baht have been spent to buy 27 million tons of milled rice, equivalent to 70 percent of annual global imports. The program may have lost 136.9 billion baht in 2011-2012, the government estimates. Moody’s Investors Service Inc. said on June 3 that losses hamper the goal of achieving a balanced budget by 2017 and are negative for sovereign ratings.

“The reduction in support will make Thai rice cheaper on international markets, boost exports and put pressure on world prices,” Chookiat said in a phone interview yesterday. “The extent of the increase in shipments will depend on the reaction from Vietnam and India, which could lower prices to compete with Thailand.”

Price Declines

Thailand’s 5 percent white rice dropped 8.9 percent this year to $532 a ton last week, the lowest since January 2012, according to association data. The rate fell on speculation the support price would be cut and on increased supply from India and Vietnam. Asian prices are sliding as wheat, corn and soybeans enter bear markets, curbing global food costs.

Rice of the same grade was quoted at $445 a ton from India and at $370 from Vietnam, association figures show.

Purchases will be limited to 500,000 baht per family starting from June 20, while the reduction in prices will be effective from June 30 to Sept. 15, said Pakdiharn. Rates of other unmilled white varieties will also be reduced by 20 percent. That cuts the price of the 5 percent type to 11,840 baht a ton, according to the government statement.

Fiscal Discipline

The National Rice Policy Committee will consider support prices in the range of 12,000 baht to 13,000 baht for 2013-2014, said Commerce Minister Boonsong Teriyapirom. The committee may set the rate in one of three ways. It could reduce the price by 15 percent to 20 percent, use the farm ministry’s assessment of output costs plus 25 percent, or use market prices with a 10 percent premium. The committee will finalize the proposal by the end of this month, Boonsong said.

“The revision is not because the government doesn’t have enough money,” Boonsong told reporters yesterday. “We want to be responsible for fiscal discipline and the program shouldn’t carry losses of more than 100 billion baht a year,” he said.

Thailand has been selling rice from inventories to domestic users and importers including China and Ivory Coast. The country sold 76 billion baht of stockpiled rice from October 2011 through March and sales will rise to 149 billion baht by September, according to the government.

Inventories in Thailand will probably increase to a record 15.2 million tons in 2014, from 12.1 million tons this year, according to the U.S. Department of Agriculture.

Thai Ha, a rice supplier, fell as much as 3.7 percent to 2.10 baht, the lowest intraday level since 2008, and finished at 2.14 baht.

To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at ssuwannakij@bloomberg.net;

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

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