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Thai government set to cut rice intervention price

Source: Reuters - Tue, 18 Jun 2013 04:20 GMT
Author: Reuters
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* Govt set to limit amount of rice it will buy

* Farmers may accept changes if broad scheme continues (Adds losses from intervention, industry comment)

By Apornrath Phoonphongphiphat

BANGKOK, June 18 (Reuters) - Thailand plans to cut prices and limit the amount of rice bought in a controversial support scheme for the grain as it attempts to retain vital political support from farmers and sustain a budget-draining programme.

Commerce Minister Boonsong Teriyapirom told reporters a proposal will be put to the cabinet on Tuesday under which the price to be paid to farmers for their paddy could be cut to between 12,000 baht ($390) and 13,500 baht ($440) per tonne in the 2013/14 crop from the current 15,000 baht.

The cabinet will also discuss a proposal to limit the amount of rice the government will buy in the crop year from October to around 14 million to 15 million tonnes, Boonsong told reporters late on Monday.

The move could help lift rice exports from the world's third-largest exporter of the grain by regaining some price competitiveness. The current support price is estimated by exporters to be as much as 50 percent above the market level.

"We plan to cut the intervention price and limit the amount of rice we will buy because we want to maintain fiscal discipline. We don't want to put a huge burden on the country's budget," Boonsong said.

On Monday the National Rice Committee estimated losses in the crop year from October 2011 at 136 billion baht, the first real estimate announced by a government body since the present scheme began in October 2011.

Moody's rating agency warned earlier this month that losses from the scheme threatened the government's goal of a balanced budget and were therefore "credit negative", adding fuel to a political row over a programme that critics say is wasteful and corrupt.

'SOFT LANDING'

In 2011/12 the government said it would buy all the grain offered to it. In the current crop year, it started by offering to buy an unlimited amount but later excluded some low-grade varieties.

Thailand is forecast to produce 27.5 million tonnes of paddy from the 2013/14 crop, up 2.2 percent from the previous crop as the high intervention price has encouraged farmers to grow more rice, according to the Agriculture Ministry.

Farmers have said they would accept some restrictions to the intervention and even a lower price if that helped the government maintain the scheme and support their income.

Traders and industry officials said the cut in the intervention price was the best option for the government, which needed to retain the political support of millions of rural voters but also had to contend with the financial strains caused by the scheme.

"This is the only way for the government to survive as it can't stop the scheme, which brought it to power for sure. It needs a soft landing," said Niphond Wongtra-ngarn, a former head of the Thai Rice Millers Association who is now an adviser to a parliamentary agricultural committee.

The government has not yet given details of the cost of the scheme in the current crop year or the volume it has sold.

It has put the amount of rice left in stockpiles at 17 million tonnes. As a comparison, before the intervention price made Thai rice uncompetitive on world markets, the country exported a record 10.6 million tonnes in 2011.

The Bangkok Post said on Tuesday the government spent around 352 billion baht on buying 21.7 million tonnes of rice in 2011/12. Sales were put at around 59.2 billion and the value of remaining stocks, based on Jan. 31 prices, was 156 billion, giving the provisional loss of 136 billion. ($1 = 30.6550 Thai baht) (Editing by Alan Raybould and Muralikumar Anantharaman)

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