Thai rice prices have fallen this week and could drop further next month after the government cut the guaranteed price it pays farmers by 20 percent and as demand remains thin, exporters said on Wednesday. Thailand's 5 percent broken white rice eased to $520 a tonne, free on board (FOB) Bangkok, from $530 last Wednesday.
"The government has also said it would open tenders from time to time to release stocks over the next few weeks so prices should soften as supply is about to rise," said a Bangkok-based trader. A second Thai trader said he expected prices for Thai 5 percent grade price to fall to $450 next month if the government kept its current intervention price.
Other traders have said the new price the government will pay to farmers for their paddy is still above the estimated market level, so would not bring export prices down far or make Thailand much more competitive with rival exporters India and Vietnam. The government has cut the intervention price to 12,000 baht ($387) per tonne from 15,000 baht from the end of this month, saying the move will maintain fiscal discipline and cut losses incurred in the state budget.
The move has angered farmers. Several hundred rallied at the prime minister's office on Tuesday to demand that the 15,000 baht price be reinstated, making some exporters reluctant to forecast near-term trends in export prices. It remains unclear if the revised intervention price is just for the remainder of the present crop year to September or if it will also be applied to the next main crop from October.
HOLDING BACK A trader in Ho Chi Minh City said potential buyers of Vietnamese rice were monitoring the impact of the policy change in Thailand and were not rushing into the market, even though harvesting is picking up pace in Vietnam. Export prices there have edged up slightly, but the impact of a stockpiling scheme has been limited because of thin demand and quality problems, traders said.
"The quality of the summer-autumn grain is still low, so companies have so far bought just 10 percent of their targeted volume," a Vietnamese trader said. Rice exporters have begun buying summer-autumn grain under a government-backed scheme and will keep the grain off the market for three months to support prices. Vietnam's 5 percent broken rice rose to around $370 a tonne FOB, from $360-$370 last Wednesday. Twenty-five percent broken rice stood at $340-$345 a tonne versus $340 a week ago.
Several companies have signed small contracts to export rice to Africa but that did little to help sentiment, traders said. Harvesting of the summer-autumn crop in the Mekong Delta, Vietnam's food basket, is expected to peak in July. Traders said many buyers were waiting for prices to drop before making new purchases. With demand slow so far this year, Vietnam's rice exports in the first half of 2013 dropped 6.8 percent from a year earlier to an estimated 3.57 million tonnes, the Agriculture Ministry said. China remains the largest buyer, with purchases in January-May jumping 28 percent from a year before to 1.13 million tonnes, it said in a report.
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