Thai rice subsidy scheme to push up world prices

BANGKOK (AP) — Thailand’s plan to pay its rice growers far above market rates is expected to push up prices for the staple that feeds almost half the world’s people as rice importing nations look to other countries for tightened supplies.

A new government in Thailand, the world’s biggest rice exporter, has promised growers higher prices for rice in a scheme that will take effect Oct. 7. It’s putting no limit on the amount of rice it will buy.

What’s good for Thai farmers, who have long complained of being shortchanged by middlemen, is proving less popular elsewhere in Asia. The effects of the rice policy are rippling through the region, where many countries are already struggling with fast rising food prices.

Thailand’s rice exporters say they will ship less overseas because they will be unable to compete with the price the government pays. That in turn will tighten the global rice market, forcing up the staple’s price in other countries.

The U.S. Department of Agriculture forecasts that Thailand’s rice exports will drop 20 percent to 8 million metric tons in 2012 because of the rice buying scheme. That could see Vietnam overtake Thailand as the No. 1 exporter.

“The rice prices in the global market will definitely escalate, since the supply from Thailand, the biggest exporter, is seeing a downturn,” said Witchuda Chummee, an analyst at Siam Commercial Bank’s Economic Intelligence Center in Bangkok.

“Using the Thai prices as a benchmark, other countries, like Vietnam, will likely increase their prices also.”

The Pheu Thai Party that swept to power in July 3 elections has said the government will pay farmers baht 15,000 ($ 500) per ton for unmilled paddy rice and baht 20,000 ($ 665) for unmilled jasmine rice. Before the election, unmilled paddy rice sold for baht 8,150 ($ 271) a ton and milled paddy rice sold for baht 13,000 ($ 432) a ton.

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