Thailand’s government may sell most of its stockpiled rice to ethanol and animal-feed producers because it’s no longer fit for human consumption, a move that could dwindle supply from the world’s largest exporter of the grain.
The junta will decide in about a month how to dispose of poor quality rice that was purchased under the previous government’s rice subsidy program, Deputy Prime Minister Pridiyathorn Devakula told reporters Friday in Bangkok.
A reduction in Thai inventories would cut global supply just as an El Nino weather pattern threatens to parch crops across Asia. The stockpiles of the Southeast Asian nation accounts for 37 percent of the global rice trade.
“It will take a big burden out of global rice supply,” said Mamadou Ciss, who’s traded the grain since 1984 and is president of Alliance Commodities (Suisse) SA in Geneva. “This will be bullish to the rice market and we could see prices rising to $500 or more.” That would be the highest since August 2013.
The price of Thai 5-percent broken white rice has fallen 9.3 percent this year to $379 a metric ton, the lowest since January 2008. State reserves in Thailand stand at about 16 million tons, up from about 2 million tons before the previous government began buying supplies directly from farmers in October 2011, government data show.
The government is considering whether to sell 13 million tons of poor quality rice to producers of animal feed or ethanol, or whether to sort the grain into different grades before any sale, Duangporn Rodphaya, director-general at Department of Foreign Trade, said Friday.
“Grading the rice is quite costly, and selling to the industrial sector is a better way out,” Duangporn told reporters. A further 2.6 million tons will be sold gradually for human consumption, she said.
Separately, the government plans to sell 1.07 million tons of rice at an auction on June 15. Since taking power in May last year, the military government has sold about 2 million tons of stockpiled rice.
The El Nino weather pattern may reduce rain-fed rice production in South and Southeast Asia, according to the Rome-based Food & Agriculture Organization. El Ninos are caused by periodic warmings of the Pacific and can roil agricultural markets as farmers contend with drought or too much rain.