Thai rice could fall to $400 per tonne

CHIANG MAI, Thailand, Oct 21 - Thailand's benchmark rice price could fall around 40 percent more to around $400 per tonne by December or January because of rising global supplies and a lack of demand from top buyers, traders said.

Thailand, the world's top rice exporter, has not signed any deals to export rice from the upcoming crop as buyers were postponing their purchases due to rapidly declining prices and ample supply, traders said on the sidelines of a global rice seminar in Chiang Mai.

"At the beginning, when the market started coming down, we thought a reasonable price should be around $500 to $600," said Kiattisak Kanlayasirivat, managing director of Thailand's leading rice trading company, I.C.C Trading.

"But now the price will go down further. People are talking about $400 by December or January."

On Monday, Thailand cut the price it will pay farmers for their paddy rice by nearly 15 percent under a renewed six-month support scheme starting next month, bowing to pressure from exporters, who said the price initially set by the government would hurt their competitiveness.

It will pay its farmers 12,000 baht ($350) per tonne rather than 14,000 baht for paddy rice from the main 2008/09 crop, which traders say equates to a price of around $630-$640 a tonne free on board for Thailand's standard grade benchmark milled rice <RI-THWHB-P1>.

Thai rice prices fell to $660 per tonne last week, dropping for the fourth straight week and 39 percent lower than the all-time high of $1,080 in April.

Traders were still sceptical about the government's ability to buy up large quantities of paddy.

"The difficulty is that they do not have enough space in the warehouses because we still have the old stock," said one Bangkok-based trader. "Another thing is they don't have enough money to help the farmers until next year. They need to sell old stock and get money to buy more rice from the farmers."

The government's stocks stand at a record 4.3 million tonnes and global prices of grains, including wheat, corn and soybeans, have declined sharply.

"They want to sell but there are no buyers. All standing orders have already been completed and no new deal has been signed," said Kiattisak, whose company sells some 300,000 tonnes of rice a year to Africa.

"Last year demand was better because the market was moving up. A lot was sold by October, at least 1 million tonnes."

Thailand's main rice crop, which will be harvested in November, is likely to rise slightly to 23.8 million tonnes from last year's 23.5 million because of increased planting and favourable weather, traders said.