China on Friday threw cold water on Thailand's claims of selling rice to cut its huge stocks, saying it will buy one million tonnes but over the next five years and making no mention of government deals. The Thai government is under enormous pressure to shift record stockpiles of rice built up in a populist programme to support farmers. It has announced a series of sales to numerous countries, many of which deny taking Thai rice.
Chinese premier Li Keqiang said purchases over the next five years will be from private firms, making no mention of 1.2 million tonnes that had been flagged by the Thai government last month as sold in a government-to-government deal. His comments came in an article published by Thai media on Friday, according to the Chinese central government website which published the article in full.
"Thailand is famous for rice production among other farm products and China is willing to support domestic firms to import 1 million tonnes of Thai rice in 5 years, in addition to other agricultural products," Li wrote in the article. Thailand's controversial intervention scheme, in operation since October 2011, buys rice from farmers at prices way above the market level. This has made the country's rice exports uncompetitive and led to a buildup of government stockpiles.
Opponents of the scheme say it is riddled with corruption, and Moody's rating agency has warned about the damage it has done to the state budget. Thailand now sits on rice stockpiles of 16 million tonnes, more than double last year's exports and around 40 percent of the annual global trade of 38 million tonnes.
BUYERS DENY DEALS Thai Commerce Minister Niwatthamrong Bunsongphaisan has said government's stocks will fall to 10 million tonnes by the end of the year after 5 million tonnes has been shipped out. But the Chinese state-owned agri-firm named by Niwatthamrong to have bought 1.2 million tonnes of Thai rice has denied signing any contract.
"We have never imported Thai rice and we only source rice locally," said an official with the Heilongjiang Beidahuang Rice Industry Group Co Ltd. Indonesia and the Philippines, the other importers mentioned by Niwatthamrong as buyers, also said no such business has taken place. "We have bought a total of 205,000 tonnes this year, all from Vietnam," said Rex Estoperez, spokesman of the Philippines' National Food Authority.
"Nothing from Thailand and I am not aware of any recent meeting between the Philippines and Thailand on a rice deal. We don't need to buy more this year." In Jakarta, Sutarto Alimoeso, chief executive of state procurement body Bulog, said there was no deal with Thailand. Thailand's claims of selling rice and denials from the purported buyers mirror the situation last year when Boonsong Teriyapirom, the country's previous commerce minister, made similar statements.
Boonsong had said Thailand sold 7.3 million tonnes of rice but it was promptly denied by buyers listed by him. Thai Prime Minister Yingluck Shinawatra's support base is mostly in rural districts, and her government mistakenly bet that Thailand could corner the world rice market by building up stocks. The populist scheme, which has cost Thailand its title as the world's biggest rice exporter, will add about 10 million tonnes by year-end to existing stocks unless the government can sell off the stocks.
The intervention price of $480 per tonne of unmilled rice translates to $750 a tonne for milled rice, making Thai rice uncompetitive in the global market. China's state-owned trading house, COFCO Co Ltd, signed a memorandum of understanding with Thai private firms on Friday. "The deals would be done later case-by-case between COFCO and Thai firms at market prices," Cookiat Ophaswongse, a honorary president of the Thai Rice Exporters Association, told Reuters.
Traders said the MOU is unlikely to have a major impact on the global rice market. "China normally imports around 300,000 tonnes of rice from Thailand each year. An additional around 200,000 tonnes it would buy via this MOU is not a surprise," said a Thai trader close to the deal. China's rice imports from Thailand in the first eight months of the year rose 37 percent on year to 134,622 tonnes, against 175,353 tonnes for the whole of 2012.