Bangkok, Nov 3 - Thailand said on Monday it would dump 3.1 million tonnes of rice on the market from its stockpiles, equivalent to around a third of its 2007 exports, to clear warehouse space for a new buying scheme.
Traders said that would add to the downward pressure on Thai rice prices, which have already fallen more than 40 percent from a record high of $1,080 per tonne in April, with exporters putting in low bids to ensure they remained competitive with Vietnam.
The rice, part of stocks of around 4.3 million tonnes built up over the past three years, would be sold in a tender on Nov. 5, Thailand's commerce minister said. "The rice is from stocks that we bought from farmers during previous intervention schemes since 2005," Chaiya Sasomsab told Reuters, adding it could be sold to either domestic or foreign buyers.
Thailand, the world's biggest rice exporter, exported 9.5 million tonnes in 2007 and was expected to sell up to 10 million tonnes in 2008.
Exports are likely to fall in 2009 due to thin demand, and prices were expected to fall further due to increasing supply.
LOW PRICES
Several traders said they would join the tender but would bid relatively low prices for the milled rice, otherwise they could not compete with cheap Vietnamese produce.
"Exporters may bid at around 10,000 baht per tonne," Chookiat Ophaswongse, head of the Thai Rice Exporters Association, told Reuters. That would give an export price of around $380 per tonne, which compares with around $400 for Vietnamese rice.
He said the stockpiled rice had been bought during past buying schemes at around 7,000 baht per tonne. The cost of processing and storing the rice is on top of that.
"The government may have to accept losses, otherwise it won't have money and space for the current intervention scheme," one trader said.
Even so, traders doubted the government would sell all the 3.1 million tonnes in this tender as demand remained thin.
"It's not good timing to release that huge stock by the end of the year when the main crop is due to harvested," one trader said.
Thailand's main harvesting season usually starts in November and this year around 23.8 million tonnes of paddy is expected to flood the market, according to an Agriculture Ministry forecast.
The benchmark Thai export price fell to $580 per tonne last week, dropping under $600 for the fist time in seven months as the rare buyers turned to cheaper rice from Vietnam, exporters said.
The latest intervention scheme began on Nov. 1, when the government started buying unmilled rice from farmers at 12,000 baht per tonne, higher than market prices of around 9,000 baht.
The intervention price equates to an export price of around $630-$640 a tonne free on board, which exporters complain makes them hopelessly uncompetitive compared with Vietnam.
The government has said it would buy around 8 million tonnes of paddy under the new scheme.
"That is way below the 23 million tonnes or so that are coming. There will be cheap rice left in the market for exporters to buy," one exporter said.