Thai rice prices to stay high

BANGKOK -- Thai rice prices are expected to remain firm, supported by a government subsidy, and that could cut exports by 10 percent in 2009, an official at the country's top rice exporter said on Friday.

"We have to admit that we can't sell as much as we did last year. It's because of our high prices," Wanlop Pichpongsa, deputy managing director of Capital Rice, told Reuters. "The outlook for Thai rice export in 2009 is not bright."

Capital Rice expects to sell around 1.6 million tons of rice this year, down from 1.8 million tons in 2008 when it accounted for around 18 percent of Thailand's overall rice exports, making it the country's top exporter.

Thailand is the world's biggest rice exporter. It shipped 10 million tons in 2008, up from 9.5 million tons in 2007, according to the Commerce Ministry data.

The government believes exports will reach 9.5 million tons in 2009 but many exporters reckon it will be 8.5 million at best because demand is thin now that worries about food security have subsided and most buyers are well stocked.

"We have braced ourselves for a contraction in exports as we expect a significant drop in white rice exports, which account for a big portion of overall Thai rice exports," Wanlop said.

That is mainly because government intervention to support prices, aimed at helping farmers, has pushed up export prices and encouraged buyers to switch orders to Vietnam, whose rice is cheaper, he said.

Vietnam's top-quality 5.0 percent broken grade white is quoted at $460 per ton, well below the price of the same grade from Thailand, at $570 per ton.

Under a Thai intervention scheme that expired on Feb. 28, farmers were paid 12,000 baht ($334) per ton, a level that has pegged export prices at around $600 per ton.

Exporters expected the government to pay the same price in a new intervention program due to start next week in a bid to placate farmers at a time when the Thai economy is slumping and heading for a recession this year.

In 2009, Thailand was likely to sell more parboiled rice, which goes mainly to Africa, and that would compensate a little for the fall in white rice sales.

"Parboiled rice is the answer as it's not available in Vietnam. We'll try to sell more parboiled rice this year as we can't compete with Vietnam on the white rice market," Wanlop said.

Thailand sold 2.7 million tons of parboiled rice in 2008, up from 2.1 million tons in 2007 and 1.7 million tons in 2006.

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