Thai rice subsidies would benefit Vietnamese farmers and exporters, propelling Vietnam to become the leading exporter of the grain in the world, Thai and European experts say.
Thailand's new Prime Minister Yingluck Shinawatra has committed her government, in fulfillment of campaign pledges made earlier, to buying rice from farmers at higher prices from next month to boost their incomes.
The price for unmilled rice will be set at 15,000 baht, or around US$480 per ton from October, compared to $330 a ton currently. For fragrant rice, the price will be over 25,000 baht or $830.
Chanchai Rakthananon, president of the Thai Rice Mills Association, said the government's rice scheme would improve lives of Thai farmers, and at the same time it would open more door for Vietnamese rice exports.
Rakthananon said Thai farmers have produced rice for domestic and global markets, but they are still poor. A Thai farmer earns about 10,000 baht a month, according to experts.
Vichai Sriprasert, president emeritus of the Thai Rice Exporters Association, said the scheme would make Thai rice less competitive than Vietnamese rice in the global market.
"Thai and Vietnamese rice is closely similar and Vietnamese exporters would replace their Thai rivals in the market," Sriprasert told Thanh Nien Weekly.
Thailand's government would buy up to 25 million tons of rice from farmers at a cost of about 400 billion baht in the first year, according to Olarn Chaipravat, advisor to Thai prime minister. This compares to the 55-billion baht budget implemented by former Prime Minister Abhisit Vejjajiva's cabinet.
Sriprasert calculated that overseas buyers could expect FOB export prices of $830 a ton, comparing to current prices of $629 a ton.
He said the new policy would position Vietnam as the world's largest rice exporter. Thailand has stayed at the top for 30 years.
Prices of Thai rice have already increased by more than 10 percent over the past few months and are set to increase a further 30 percent as a result of Yingluck's rice policy, according to Wong Ka-wo, chairman of the Hong Kong Federation of Restaurants and Related Trades.
Antonio Berenguer, head of Trade and Economic Affairs of the Delegation of the European Union to Thailand, said Thai government's rice pledging scheme was "a good sign" for Vietnamese rice farmers and exporters.
Berenguer said it would create a gap in the global rice market as Thai exporters would ship less due to high prices.
However the market gap would not be given to only Vietnamese exporters, said Berenguer.
He said suppliers in Cambodia, Myanmar and even India would be strong competitors who would share the gap with Vietnamese traders.
Thailand produces 20 million tons of rice a year and exports half of the output, which accounts for 30 percent of the world's rice market.
The US Department of Agriculture said Thai rice exports could fall to seven million tons this year.
Thailand should focus more on high quality rice to avoid a sharp fall in exports, said Thai experts.
Thai exporters proposed a rice price agreement with Vietnamese counterparts in their annual meeting held last week in Chiang Mai. They wanted Vietnamese exporters to refrain from lowering rice prices.
The Vietnam Food Association has said rice exports may reach a record seven million tons this year.