Bloomberg News

Thailand May Sell 7 Million Tons of Rice From State Stockpiles

April 05, 2013

Thailand plans to sell as much as 7 million metric tons of rice from inventories to fund a grain purchase program, Commerce Minister Boonsong Teriyapirom said.

The grain from state reserves will be sold to foreign governments and through auctions for domestic use and exports, Boonsong told reporters in Nonthaburi province, outside Bangkok today. Governments of China, South Korea, Nigeria and South Africa have shown interest to buy grain, while the quantity and timing of auctions will depend on prices, he said.

Stockpiles in Thailand jumped after Prime Minister Yingluck Shinawatra started buying from farmers in 2011, fulfilling an election pledge to boost rural incomes. Rice, the staple for half the world, has fallen 15 percent from a three-year high of $18.54 per 100 pounds in September 2011 in Chicago as inventories tracked by the United Nations’ Food & Agriculture Organization swell to a record, curbing food costs.

“The key question is at what price the government will sell,” said Concepcion Calpe, the secretary of the United Nations’ Food & Agriculture Organization’s inter-governmental rice group. “If sold through tenders, the prices will have to be substantially lower than those at which rice was purchased, implying large losses to the Thai government.”

Global inventories advanced 7.2 percent to a record 173.11 million tons in 2012-2013 as production beats consumption for an eighth season, according to the FAO. Milled reserves in Thailand may jump 40 percent to 18.2 million tons in 2013, the agency forecast in February. Thai rice exports tumbled 37 percent to 6.73 million tons in last calendar year, according to the Ministry of Commerce.

Weaken Prices

“The government will have to subsidize,” said Samarendu Mohanty, a senior economist at the Philippines-based International Rice Research Institute. “It’s likely to weaken global prices.”

Rough rice for delivery in May climbed 0.4 percent to $15.730 per 100 pounds on the Chicago Board of Trade at 6:27 p.m. in Bangkok. Futures have advanced 3.5 percent this year.

The Ministry of Commerce expects to return 180 billion baht ($6.1 billion) to the government through sale from stockpiles and will not seek additional funds to continue the rice purchase program in 2013-2014, Boonsong said.

“We will use proceeds from the rice sale as a revolving fund for buying rice in the next crop,” Boonsong said. Losses from the program may not exceed 80 billion baht a year, he said.

Thailand decided to extend rice purchase program for the second harvest this year, maintaining purchase price for unmilled white rice at 15,000 baht a ton, Spokesman Tossaporn Serirak said March 31. The government has bought about 30 million tons of unmilled rice since the program started in October 2011, government data showed.

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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