Thai rice prices to drop at least 20 percent if stockpile is sold
But unless no reserve price is set, or it is lower than comparable prices for Vietnamese and Indian rice, it's hard to see this tactic working either.
Chinese Cancelling Cargoes
Even without Thai rice, the market appears over-supplied, with Vietnamese traders reporting cancellations of cargoes of up to 1 million tonnes, with some Chinese buyers terminating deals because they expect prices to fall further.
China has been the salvation for the rice market so far in 2013, boosting imports almost 12 percent in the first half of 2013 from the same period a year ago.
But imports fell 37 percent in July from a year earlier, bringing the year-on-year gain for the first seven months to just 4 percent.
If Chinese buyers continue to scale back purchases, the Philippines maintains some import restrictions and Indonesia also buys less on higher domestic output, then it's hard to see rice demand increasing in the next few months.
This makes it even tougher for the Thai government to sell, and there is a time consideration as well given the next main harvest is in October, after which more rice will flow to already bursting warehouses.
Yingluck's government is also preparing to have a second go at lowering the price paid to farmer to 12,000 baht, having abandoned an earlier attempt at this on July 1 after farmers threatened protests.
The current scheme expires on Sept. 30 and may be renewed at the lower price from Oct. 1, assuming the government doesn't get another bout of popularity jitters.
Commerce Minister Niwatthamrong Bunsongphaisan has said that the government has paid up to 650 billion baht, or $20.37 billion, to farmers so far.
He hasn't said how much has been recovered through sales, but it won't be anything close.
Thailand exported 6.9 million tonnes of rice in 2012, and if an average price of $550 a tonne is assumed, it translates into revenue of around $3.8 billion.
Add to this revenue from sales in late 2011 and so far in 2013 and it's safe to assume that the government is still well over $10 billion out of pocket.
This is a situation that can only get worse for the government, and rice buyers are aware of this and furthermore can afford to wait for the lower prices that should come if Thailand does try to offload its stockpiles.
It would be reasonable to assume that Thai rice prices will have to drop to match those for Vietnamese supplies, and both will come under further downward pressure from increased supply.