Rice price to be cut

Despite deciding to raise the minimum price for rice back to Bt15,000 a tonne under its price-pledging scheme, the government plans to cut the pledging amount to Bt13,000 a tonne for the next harvest season, due to begin by November, a Commerce Ministry source says.

Exporters, meanwhile, have warned that the move to re-impose a purchase price of Bt15,000 for the remainder of the current harvest reason, which will end by September, will cause a huge burden on stockpiles as the government will face difficulty selling paddy at such a high price.

A senior Commerce Ministry source said the government would reduce the pledging price to Bt13,000 a tonne in order to reduce the cost of the rice-subsidy scheme.

“The government still needs to cut the pledging price in the upcoming harvest season, which will begin in November. The reduction of the pledging price will help cap spending for each year to not more than Bt200 billion a year,” the source said.

The government will curb the budget to ensure “fiscal discipline”. Farmers should understand the new sum since it is still above the market price and the cost of production, the source said.

Premier Yingluck Shinawatra defended the about-turn yesterday, which came just a few days after the government agreed that the rate should be cut to Bt12,000 a tonne, but caved in to criticism from farmers, who planned mass rallies in protest at the reduction.

Yingluck said finalisation of the National Rice Policy Committee’s decision, plus reviews of rice stocks by all relevant agencies found that the government should sustain the original rate of Bt15,000 at least for another crop season.

Farmers who pledged their rice at the Bt12,000 rate before the Cabinet decision to go back to the original Bt15,000 rate would be compensated. “The total amount of compensatory payments should not be high,” she added.

The market price is expected to be Bt10,000-11,000 a tonne in the upcoming harvest. The current average cost of production is about Bt8,000 a tonne for white rice.

Under the new pledging project, the government may not cut the price for jasmine rice because the product is unique and has high value-added. The pledging price would be Bt20,000 per tonne of paddy.

New Commerce Minister Niwatthamrong Boonsongpaisal is due to meet with rice millers today to explain the new situation for the subsidy project.

Honorary president of the Thai Rice Exporters Association Chookiat Ophaswongse said while the government would cut the pledging price, the export price of Thai rice was still high compared with other rivals.

 

‘Still a high price’

 

He gave an example that if the pledging price was Bt12,000 a tonne, the FOB price for 5 per cent Thai white rice would be US$620-$630 (about Bt19,175-Bt19,485). This was still much higher than Vietnamese rice, which is quoted at $360 a tonne.

A pledging price of Bt13,000 would put Thai rice above $650 a tonne, almost $200 a tonne higher than the price of Vietnamese rice. The high pledging price would create a mark-up cost of more than 40 per cent for Thai rice.

Chookiat said the pledging price was much higher than the market, and would make it difficult for the government to sell rice and cut its stockpiles.

“The government needs to shoulder high sums to stock rice. The warehouses will continue to hold more if the government does not cut its costs by selling rice at prices below the market.” 

He noted that after the government decided to maintain its pledging price at Bt15,000 a tonne, it would need to shoulder huge losses and sell rice at a cheap price in order to clear its stocks.

Meanwhile, new Deputy Commerce Minister Yanyong Phuangrach plans to seek help from the Tourism Authority of Thailand to promote jasmine rice as a souvenir for travellers. The plan is part of strategies to release rice from stockpiles and promote Thai rice around the world.

Thai rice is well known as good quality rice. There is high demand among consumers for jasmine and Hom Mali in particular. The ministry will create attractive packaging for small 1-2 kilogram packs that can be distributed at the airport or popular destinations nationwide.

“Many countries have their own unique souvenir, such as South Korea’s Ginseng, the Netherlands’ tulips, and Japanese green tea. Thailand should also be able to promote Thai jasmine rice to the world market,” Yanyong said. The ministry would also propose that the Cabinet and private firms use Thai rice as a souvenir for special occasions.