Thai rice exporters are looking for alternative sources of supply in Vietnam and Cambodia in case the new government makes prices too high for export.
>> VN exports 3.5 mln tonnes of rice in first half
The Thai Rice Exporters Association (TREA) has been crying foul about the newly-elected Pheu Thai's announced policy to allow farmers to mortgage their entire harvest for 15,000 baht ($500) a tonne for white rice and 20,000 baht ($660) for fragrant, or hom mali, rice, the English-language Bangkok Post newspaper reported.
The association's vice president, Charoen Laothamatas, said if the mortgage programme was revived, the free-on-board price of hom mali would reach $1,400 per tonne, even higher than the price of Indian basmati, currently the most expensive rice in the world.
"If Thai exporters cannot buy such expensive rice for export, they may opt for much cheaper rice from Vietnam, Cambodia, or Burma as they must maintain their market bases and customers," Charoen was quoted by the newspaper as saying.
"With the ASEAN Free-Trade Agreement, such an alternative would be possible."
Some rice exporters and millers had already established trading firms or representative offices in Cambodia and Vietnam to buy rice, TREA said.
"We have to accept that Vietnam's rice quality has improved a lot," Charoen said.
Vietnam 's fragrant rice sold at $650 per tonne, $400 to $500 cheaper than Thai hom mali rice and $150 to $200 lower than pathum thani rice, he said.
Competition from Vietnam had resulted in hom mali 's share of traditional markets such as Hong Kong dropping from 85 per cent to just 50 per cent, he said.
Vietnamese fragrant rice had grabbed a 35 per cent share in Hong Kong and 20 per cent in Singapore, he added.
Thailand is at a disadvantage in terms of logistics, since the cost for shipping a 20-foot container to the US is between $1,700 to $1,800 from Thailand but only $1,350 from Vietnam .
Rice exports shipping to China cost $320 compared to $100 for Vietnam .
The Honorary President of TREA, Chookiat Ophaswongse, warned Thailand 's rice exports could fall to half if the government had no measures to assist exporters.
"The government must support exporters by offering the government's stockpile at special prices or open bidding for the stocks rather than asking only some exporters to bid," he told Bangkok Post.
Thailand exported 6.3 million tonnes of rice in the first half of this year, a year-on-year increase of 58.3 per cent.
It targets whole-year exports of 10 million tonnes.
Prices of rice increased sharply over several weeks due to a surge in the world market's demand for rice, according to the Vietnam Food Association (VFA).
Across the Mekong Delta in Vietnam, paddy prices rose by VND200-300 per kilogramme even though the harvest of the summer-autumn rice crop is in full swing.
Purchasing price of material rice on July 29 jumped to VND8,600-8,700 per kilo for five-per cent-broken rice, and to VND8,450-8,500 per kilo for 25-per cent-broken rice, against the previous week.
Price of finished rice also climbed by the same rate, VND300 per kilo to VND10,150 per kilo for five-per cent-broken rice, VND9,850-9,950 per kilo for 15-per cent-broken rice, and VND9,350 -9,450 per kilo for 25-per cent broken rice.
The association said the increase of the domestic rice prices was due to a promotion of purchasing rice for previously signed export contracts of local rice exporters.
The Vietnam Food Association said prices went up since July 11, when it suspended plans to buy 1 million tonnes of rice for the national reserve.
It attributed this to the inking of new contracts for exports to Asian countries.
"We are informed that Thai exporters have unveiled plans to purchase rice from Vietnam," Duong Nghia Quoc, director of the Mekong Delta Dong Thap province Department of Agriculture and Rural Development, told Vietnam News on August 1.
"However, so far no rice purchase contract has been signed between Thai traders and Vietnamese exporters in Dong Thap."
Mekong Delta farmers have harvested less than half of the 1.62 million ha they planted for the summer-autumn crop and hope to complete their harvest by early September, according to a meeting held by the Ministry of Agriculture and Rural Development in Can Tho last week.
Exporters have signed contracts to ship 1.3 million tonnes in the third quarter.
In the second half Vietnam is set to export around 3.2 million tonnes, taking total export of the grain this year to 7 – 7.4 million tonnes.