One million tonnes. Thailand yesterday gave the kickoff to the biggest sale of rice auction since 2004. It is the first of the ten transactions contemplated by the government this year. The idea is to bring to market 10 million tonnes in total by December, still 7.8 million next year.
The world’s largest exporter will attempt to sell huge national reserves accumulated over the past few years, now graze the 18 million tonnes … a level equivalent to almost 40% of world exports.
The previous government, ousted by the junta in May 2014, was set up in 2011 a subsidy policy to support Thai rice farmers, which he bought their production up to 50% above the market price. But this program has had the perverse effect of driving up export prices, slowing the international sales (costing the country in passing its leadership for two years), and the national rice reserves were piled up.
Nearly a hundred of bidders qualified to participate in this first sale in 2015, said the Ministry of Foreign Trade, speaking of a “high demand”. Four smaller auctions were conducted in 2014, they have enabled Thailand to dispose of nearly 700,000 tons. But they kept the pressure on the price of Thai rice, which declined by 28% since early 2013, and industry experts expect the decline to continue this year. “Official sales continuously on an already well-stocked market will bring lower prices in 2015,” said Hamish Smith at Capital Economics.
Expectations are similar to the Food and Agriculture Organization, FAO. “The sale will irrevocably depress the market,” adds David Dawe and quoted by Bloomberg. “Thailand is not the only country to have the stock on wants to get rid. The world in general has a very high level of stocks, “says FAO economist.
The major rice importers them either are not missing. In the two largest, China and Nigeria, the current stock status is good, according to FAO. Thailand says she will try to disrupt the market as little as possible.
But soon she will have to sell because the quality of the stored rice deteriorates. The junta has conducted an audit after taking power revealed that 90% of the reserves were damaged, and 20% were now unfit for human consumption.
With these tons of rice dumped on the domestic market, Thailand is expected to export much more than in 2014, according to the US Department of Agriculture. What bolster his return to World in the standings.