Asian rice prices dropped further this week due to thin demand ahead of the year-end holidays, but intervention by the Thai government and Vietnam's industry association was likely to limit the falls, traders said on Wednesday. The price of Thailand's benchmark 100 percent B grade white rice dropped to $580 per tonne from last week's $590, they said.
That was well below this year's high of $650 per tonne in mid-October, when the Thai government launched an intervention scheme to push up prices and support the millions of poor people in rural areas that helped it win power in July. "Some millers offered us grain at lower prices so we can quote cheaper prices, too, in order to attract buyers. But demand is still very thin as most buyers are already well stocked," said a Bangkok-based exporter.
Millers, some of whom faced a liquidity crunch after being affected by severe floods and falling demand, have lowered their price for milled rice to about 16,500 baht ($520) per tonne from 18,000 baht last week. But prices were unlikely to fall much further over the next few weeks as the government is accelerating its buying scheme.
It started buying paddy rice from farmers at 15,000 baht per tonne on October 7 and is believed to have bought around 3.5 million tonnes so far. Traders and exporters are worried that the high intervention price, if it keeps export prices high, could depress exports next year, some even forecasting that shipments could be halved from this year's level to around 5 million tonnes. If that happened, Vietnam could overtake Thailand to become the world's biggest rice exporter. Vietnam is expected to export a record 7.19 million tonnes this year, but it may also struggle next because of cheaper grain available from India.
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