One-third cut in rice support by Thailand?

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(AgProfessional Editor Richard Keller: As a journalist that was in Thailand as a guest of the former government regime when rice farmers were being promised highly subsidized income by the opposition party, I have personal interest in Southeast Asia and the staple crop for feeding that portion of the world where so much of the anticipated 9 billion people will be living in 2050. The opposition party is in power, and subsidized rice prices to farmers have created an interesting financial problem that months ago I questioned might undermine the financial strength of Thailand. See the latest report from Reuters news service.)

The Thai government plans to cut the price it pays farmers for their rice to 10,000 Thai baht ($330) per tonne from 15,000 baht to limit the losses from the intervention scheme, according to a newspaper report on Monday that quoted the commerce minister.

The move could help lift rice exports from the world's third-largest exporter of the grain by regaining some price competitiveness. It could also shore up finances of the Thai government by curbing state losses on the scheme, which are estimated by some to be as high as 260 billion baht.

"If the National Rice Committee agrees to lower the ceiling prices, the new criteria would be applied in the next crop year," Commerce Minister Boonsong Teriyapirom was quoted as saying by the Bangkok Post daily.

The National Rice Committee is due to meet on Thursday. The next crop year starts in October.

Boonsong was not immediately available for comment.

Prime Minister Yingluck Shinawatra won the July 2011 general election with a promise to pay farmers 15,000 baht per tonne for unmilled rice, way above the market level at the time.

That has pushed Thai export prices up to around $540 per tonne for 5 percent broken rice, which is well above offers from Vietnam and India of $370 and $420 per tonne, respectively.

As a result, Thai exports plunged to 6.9 million tonnes in 2012 from a record 10.6 million in 2011 and India seized the title of top rice exporter from Thailand.

Much of the grain bought by the government remains in state stockpiles, around 17 million tonnes according to Boonsong on Friday.

Pressure on the government to amend the scheme grew last week after Moody's rating agency said rising losses could threaten fiscal discipline.

It was reacting to a report that the losses in the 2011/12 crop year were 200 billion baht, around 8 percent of the state budget. Other reports put the losses as high as 260 billion baht. Both figures were denied by the government.

Boonsong held a briefing on Friday that was billed as an effort to be more transparent, but he gave few figures.

Prasit Boonchoey, president of the Thai Farmers Association, said farmers were not happy with the prospect of a lower intervention price but they would accept it if it allowed the government to maintain the scheme.

"It would be OK to make some changes to the intervention price. The key issue is that the intervention must continue," Prasit told Reuters. ($ = 30.63 baht) (Reporting by Apornrath Phoonphongphiphat; Editing by Alan Raybould and Muralikumar Anantharaman)

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