"The latest forecast after floods showed that we could produce 25.1 million tonnes of paddy from the major crop which is due to be harvested in November," Apichart Jongsakul, head of the Office of Agriculture Economy, told Reuters.
That was down from the previous forecast 25.6 million tonnes, but was still higher than last year's output of 24.0 million tonnes, he said.
Tropical storm "Nock-Ten" hit Thailand in late July, bringing heavy rains and flooding to major rice areas in the north and northeast.
Apichart said higher output was due to a broadening of plantation areas, due to price intervention that has led to farmers switching their crops to rice. The previous government raised intervention prices from 10,000 baht ($334) to 11,000 baht per tonne.
The new government, which took office early last month, has gone further, promising 15,000 baht per tonne of paddy.
"Of course, the current government's policy... will definitely make farmers grow more rice in the second smaller crop," Apichart said, referring to planting of the next crop in late November, to be harvested in late February.
In the second crop, Thailand was expected to produce around 10 million tonnes of paddy, up from 7-8 million tonnes produced normally.
That means total rice output would be 35 million tonnes of paddy, or around 21 million tonnes of milled rice, for consumption and exports in 2012, he said.
PRICES FIRM FOR NOW
Exporters said rising supply was unlikely to bring prices down, at least in next few months, as prices had been pegged at relatively high levels as a result of speculation on higher government intervention prices.
"Prices have gone up already and I think prices should stay high, although demand was not strong as the government promised to buy every single grain at high prices to support farmers," said Chookiat Ophaswongse, honorary president of the Thai Rice Exporters Association.
The Puea Thai-led government promise of buying paddy from farmers at 15,000 baht per tonne is almost double the current 8,000 baht.
Its decision to push ahead and implement the policy has pushed Thai rice prices higher due to tight domestic supply as it encouraged local traders to hoard rice in order to re-sell it to the government at higher prices later on.
The benchmark 100 percent B grade Thai white rice had fetched around $500-$550 per tonne since the start of the year but the price rose gradually after the new government took office and stood at $615 per tonne on Tuesday, the highest since December 2009.
However, traders have doubts about how long the government can run its aggressive intervention plan given the huge budgetary burden for buying and storage.
"Everybody is concerned on how the government would manage its stocks as well as manage a huge budget deficit in a bid to fund this programme at a time that foreign buying is not strong," said a Bangkok-based trader.