Bangkok, Oct 20 - Thailand, the world's biggest rice exporter, has renewed a scheme to buy rice directly from farmers in an effort to shore up prices during the harvest period, a deputy Thai prime minister said on Tuesday.
The move was likely to keep prices from falling significantly in the short term, but would not boost prices further as overseas demand remains thin, while bigger government stocks could feed downward pressure on prices in the long term, traders said.
"The cabinet has approved a plan to buy paddy rice from farmers at an unlimited amount in a bid to support farmers," Deputy Prime Minister Korbsak Sabhavasu told reporters.
He said the intervention price would be set by the Ministry of Commerce twice a month.
The current reference prices, known as an intervention price, was set at around 8,000 baht ($240.2) per tonne, slightly higher than market prices, which were quoted at 7,000-8,000 baht per tonne, said an official at the Ministry of Commerce.
The renewed rice buying scheme would be implemented at the same time as the new "guaranteed prices" scheme, Korbsak said.
"Despite having a new scheme, the cabinet had to approve a renewal of the old style intervention in a bid to ensure that domestic prices would not fall sharply during the harvesting period," another minister at the cabinet meeting told Reuters.
Thailand is estimated to produce around 23.5 million tonnes of paddy in the main crop, with the harvest due to peak in November.
Prime Minister Abhisit Vejjajiva said earlier the government would halt rice purchases from farmers after the latest intervention scheme expired on October 15, and replace it with a new "guaranteed prices" scheme instead.
That plan ran into criticism on the grounds that it would inflict unfamiliar paperwork on poor rural farmers.
In the new scheme, the government will pay farmers the difference if they sell paddy rice to millers at less than the guaranteed price, which is now set at 10,000 baht per tonne.
Korbsak said the government would keep rice bought from farmers in stocks in the form of paddy, which it planned to release gradually within a few months to avoid depressing prices.
Demand for parboiled rice from Africa has helped support Thai rice prices although Thailand has ceded its market share on white rice grades to Vietnam this year because of high prices.
Prior to this rice buying plan, the government held an equivalent of 6 million tonnes of milled rice from farmers in previous years in a bid to support them.
PRICES TO STAY STABLE
Traders said the buying plan would support Thai rice prices in the range of $480-$520 per tonne on limited supply as the government drained significant grain amounts from the market.
But they did not expect Thai rice prices to rise sharply as export demand remained thin.
"That would help prices to be stable, but the measure could not push up prices to rise sharply," said Chookiat Ophaswongse, President of Thai Rice Exporters Association.
Benchmark 100 percent B grade white rice was quoted at $520 per tonne on Tuesday.
Another trader said "Don't forget that we are holding 6 million tonnes of government stocks that has weighed on prices already."
Thailand plans to release its huge rice stock through government-to-government deals with several countries, including the Philippines, Indonesia, the Middle East, Brunei and Timor, the government official said.
But he declined to say which government Thailand was in talks with. ($1=33.31 Baht)