Cost of support could double

Government spending on its rice-price guarantee programme could exceed
Bt50 million despite earlier budget estimates of only half that amount,
due to a sluggish market and a recent fall in prices beyond projections.

The price-guarantee project is scheduled to kick off early next month
with the start of the new-crop harvest. However, if the market price
continues to fall, the government could face even higher losses from its
price-intervention scheme, a rice-trading source warned yesterday.

At present, the export market price for rice has dropped dramatically,
by Bt1,000 per tonne. This has been attributed to foreign importers
waiting for the government to release its huge stockpiles, while rice
millers and exporters here have delayed buying rice in view of the
imminent start of the price-support scheme.

"If the market price continues to fall, the government could lose twice
its present budget for the price-guarantee project," the source said.

Earlier, the government expected to compensate farmers by about Bt2,000
per tonne if market prices fell. It now seems the compensation may
exceed Bt4,000 a tonne, because rice prices have plunged dramatically in
the past month, the source said.

At present, the market price for export white rice is quoted at Bt15,700
a tonne, down from between Bt16,500 and Bt16,700 last month.

The source said the Commerce Ministry's plan to appeal for cooperation
from millers and exporters in purchasing rice at market prices might not
be effective in stabilising the falling prices.

Rice millers are concerned about the government's measures to stabilise
rice prices, because a substantial price fall could hurt them badly, the
source said.

Thai Rice Exporters Association secretary-general Korbsook Iamsuri said
rice trading had slowed down over the past two months, because importers
were waiting for the Thai government to release its rice stockpiles.

Moreover, traders are waiting for the upcoming rice harvest, which will
start next month, she said.

Thai Rice Farmers Association president Prasit Boonchuey said rice
prices had fallen in the past month because traders were |awaiting the
start of the guaranteed-price scheme. When the scheme gets under way, he
expects prices to rise.

Under the guaranteed-price scheme, the price is set at Bt10,000 a tonne
for paddy (unmilled) white rice, Bt15,300 a tonne for paddy jasmine
rice, Bt14,300 for paddy provincial fragrant rice and Bt9,500 for paddy
sticky rice.