Bloomberg News

Thailand Faces Loss on Rice Sales to Drain Record Stockpiles (2)

July 19, 2013

The Thai government, seeking to offload record stockpiles of rice built up through a state-buying program, is prepared to sell the grain at a loss as it plans to open bids for the hoard every two weeks.

“The sale will probably be at a loss as the government aims to increase domestic prices, not to make profits out of the program,” Deputy Commerce Minister Yanyong Phuangrach told reporters in the central province of Ayutthaya. “Our main purpose is that the distribution must not affect prices.”

Thailand’s plan to cut the stockpiles risks hurting prices, potentially reducing global food bills. Moody’s Investors Service has said that if the Thai program realizes increasing losses, it could be credit negative for the country. Worldwide rice production is forecast by the U.S. Department of Agriculture to expand to an all-time high this year.

“Thai releases of public stocks will only exacerbate the oversupply situation and the price weakness,” Concepcion Calpe, secretary of the Food & Agriculture Organization’s inter-governmental rice group, said in an e-mail. “World prices are on a sliding path and may remain so for some time, especially under current expectations of bumper crops.”

The export price of Thai 5-percent broken white rice has dropped 10 percent this year to $525 a ton on July 17. That compares with $390 a ton for rice from Vietnam and $440 a ton from India, according to the Thai Rice Exporters Association. Rough rice futures have gained 1.8 percent in Chicago.

World Imports

Thailand’s rice stockpile will total 15.5 million tons in 2013-2014, up from 12.5 million tons last season and 9.3 million tons in 2011-2012, according to USDA data. The latest holdings are enough to meet about 41 percent of world imports.

The government would like to see export prices of the 5-percent broken grade at about $450 to $500 a ton, with sales from the stockpiles targeted at other governments including Indonesia, Iran and Iraq, Yanyong said yesterday. If prices offered are too low, the government will not sell, he said.

Thailand has spent 588.7 billion baht ($18.9 billion) since October 2011 to last month buying about 40 million tons of rough rice from farmers to lift rural incomes. Losses from the program were 137 billion baht in the last crop year, according to a government estimate.

The country faced a looming shortage of storage space for the stockpiles, the Rome-based FAO said in a report in February.

Sales will have to accelerate, with prices at competitive levels, as the new crop will come onto the market from October, said Hiroyuki Konuma, Bangkok-based assistant director-general of the FAO. Holdings would likely increase from about 12 million tons at the end of 2012 to 17 million tons at the end of this year if present situation continues, he said in an e-mail.

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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