Rice in Thailand Climbing on Signs Army Won’t Allow Cheap Sales

May 27, 2014 3:11 am ET

May 27 (Bloomberg) -- Rice prices in Thailand are set to advance as much as 8 percent as the lowest rates in five years attract buyers and on speculation the military government won’t allow sales at cheap levels, exporters said.

The cost of the 5 percent broken variety may rise to $400 a metric ton from $370, Somkiat Makcayathorn, secretary general of the Thai Rice Exporters Association, said by phone yesterday. New-crop rates already increased $5 this week, said Mamadou Ciss, the president of Alliance Commodities (Suisse) SA.

The army last week removed the cabinet led by the Pheu Thai Party in a coup. The government started buying rice from farmers at above-market rates in 2011, boosting stockpiles to a level equivalent to about a third of annual global trade. Prices plunged 23 percent last year and the program lapsed in February. The junta-led National Council for Peace and Order will check the amount and quality of stockpiles before going ahead with sales, the commerce ministry said.

“We feel that we have to pay more than before,” said Ciss, who’s traded rice since 1984. “Thai rice is now the cheapest in the world” and demand has increased from China, Nigeria and Ivory Coast, he said by phone from Geneva.

Prices of 5 percent broken white rice from Thailand extended their decline by about 12 percent this year and Somkiat described the price of $370 as a market floor.

The rally will be limited by stockpiles in Thailand, Somkiat and Ciss said. State inventories stood at 16.7 million tons as of Feb. 11, the commerce ministry estimated. That compares with global trade of 41 million tons this year, U.S. Department of Agriculture data show.

Rising demand will boost Thai exports to 10 million tons this year, beating an earlier prediction of 7.5 million tons, Somkiat said. The country will regain its position as the world’s biggest shipper in 2015, the USDA estimates.

“The military government is signaling it won’t offload rice at cheap rates,” Chookiat Ophaswongse, the exporters’ association’s honorary president, said by phone. “This will prompt buyers to increase purchases as prices may continue to rise.”