Thailand's government approved a 20 percent cut in the guaranteed price it pays rice farmers, a move that will relieve pressure on the state budget but still leave Thai grain significantly more expensive than that of rivals.
Exporters doubted the cut would help them regain their spot as the world's top rice exporter, lost when the original intervention price made Thai rice about 50 percent more expensive than grain from rivals like India and Vietnam.
"Exports are unlikely to revive immediately. The lower intervention price is unlikely to bring Thai offer prices closer to India and Vietnam," said Chookiat Ophaswongse, an honorary president of the Thai Rice Exporters Association.
Thai 5 percent white rice was offered at $530 per ton on May 19, well above the same grade from Vietnam at $370 and India at $420 a ton.
The buying price would be cut to 12,000 baht ($390) per ton from 15,000 baht from June 30 until Sept. 15, Varathep Rattanakorn, a minister without portfolio, said. It was not clear if the same price would apply to the new crop year starting in October.
"The 12,000 baht intervention price could equate to around $600 a ton. Adding in rice that gets into the free market, Thai offer prices won't change much from the current $530 a ton," said one Bangkok-based trader.
Uncompetitive prices cut Thai exports to 6.9 million tons in 2012 from a record 10.6 million in 2011. Exporters forecast just 6.0 million tons for this year.
The cut to the intervention price came after mounting losses suffered by the state budget, officially estimated at 136 billion baht for the 2011/12 crop year, led to a warning from Moody's rating agency about the threat to the country's budget.
The government bought 40 million tontons of paddy rice in the 2011/12 crop year, at a cost of nearly 600 billion baht, a quarter of its total spending.
"We have cut the price as we want to make sure we are on track to have a balanced budget by 2017," Commerce Minister Boonsong Teriyapirom told reporters.
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