Risk of more state intervention pushes up Thai rice price

The export price of Thai rice rose on Monday because of the likelihood of aggressive intervention by a new government to push up domestic prices to help farmers, which has already encouraged traders to hoard rice, resulting in tight supply. Benchmark 100 percent B grade white rice was offered at $545 per tonne, up 3.8 percent from last week's $525 per tonne, exporters said.
"People expect to see aggressive intervention sooner or later. However, prices did not rise sharply as the market wanted to see a clear picture of the cabinet first," said Korbsook Iamsuree, president of the Thai Rice Exporters Association. Traders said Monday's rise in the baht was another factor, as it obliged exporters to offer higher dollar prices. The baht rose about 1 percent against the dollar, in part because the election outcome might persuade some overseas investors to return to Thai financial markets. The Puea Thai Party, controlled by ex-premier Thaksin Shinawatra won an outright majority in Sunday's general election.
Puea Thai has promised to reinstate a price intervention system and buy paddy direct from farmers at 15,000 baht ($492) per tonne. That is more than double the current market price of 7,000 baht. The intervention price could push Thai export prices as high as $850-$870 per tonne, and at that level buyers would probably switch to other origins, notably Vietnam, which already undercuts Thailand, albeit with lower-quality grain.
Exporters and traders said local millers had been hoarding rice, expecting to be able to sell it later to the authorities at higher prices. Local media suggested that up to 2 million tonnes of rice was being kept in warehouses, waiting to be re-sold to the new government when it launches its intervention scheme, probably later in the year around the time of the main harvest, from November. "That caused tight supply at a time when overseas demand is not strong and has pushed domestic prices higher, forcing exporters to offer at uncompetitive high prices," said a Bangkok-based trader.