Thailand to rent additional rice storage as warehouses fill up

Wed Jan 16, 2013 5:53am EST

* Additional 180 warehouses to be rented to store rice

* Around 8 mln to 10 mln tonnes to be harvested by late Feb

* Buying process slows as warehouses full

By Apornrath Phoonphongphiphat

BANGKOK, Jan 16 (Reuters) - Thailand, struggling to find storage for a rice buying scheme that cost the country its crown as the world's biggest exporter of the grain, will rent private warehouses to store next month's harvest, government officials said on Wednesday.

Thailand's rice millers had warned that collection might have to stop for lack of storage space, as the country expects to produce about 8 million to 10 million tonnes of paddy rice in the February harvest, or about 5 million to 7 million tonnes once husked.

That is in addition to government purchases of up to 20 million tonnes of milled rice in an intervention scheme kicked off in October 2011 aimed at helping farmers by paying prices above the market rate.

"There's no problem at all and we can rent more private warehouses to store rice," Boonsong told reporters. "However, we would need a few days or a week to check them out, and clean them up to make them suitable for storing rice."

The government will rent an additional 180 warehouses over the next few weeks to accommodate the grain, a commerce ministry official said. There are already 60 warehouses across the country storing the grain it has bought so far.

Despite the costs of the rice buying policy, Boonsong said the government had to maintain it to help poor farmers, who form the majority of the population.

The government has said it expects losses from the rice intervention scheme to amount to about 80 billion baht, or $2.6 billion, by last September, equivalent to about a fifth of Thailand's projected budget deficit in the last fiscal year.

COMPLAINTS OF COLLECTION DELAYS

Under the rice-buying scheme, millers collect paddy in return for certificates allowing farmers to get money from a state bank. Millers husk the grain and send it to government warehouses within seven days to be stored.

But bulging stocks have forced millers to slow the process.

The intervention scheme could grind to a halt unless the government acted quickly, Manat Kitprasert, head of the Thai Rice Mills Association said.

"We need to stop collecting rice from farmers as there's no space to store it," he said.

Some farmers in the main rice-growing central provinces have complained of having to wait more than three weeks for millers to collect grain because of lack of warehouse space, said a local government official who asked not to be named.

Such delays could force farmers to sell rice on the open market, eventually depressing prices, which have ranged as much as $135 to $140 per tonne above those of rivals such as India, Vietnam, Pakistan and Cambodia.

"Thai rice prices may ease as supply is rising, but we don't expect that would help boost exports significantly as our prices are still high compared to Vietnam and India," said a Bangkok-based trader.

India last year displaced Thailand from its position as the world's biggest exporter, which it had held since 1983.

India shipped 10.25 million tonnes, according to the United States Department of Agriculture (USDA). Vietnam remained the second-biggest exporter with 7.72 million tonnes, according to a Vietnamese newspaper.

Thai trade data showed the country exported just 6.9 million tonnes of rice in 2012, down 34 percent from a record 10.6 million in 2011.

The government has bought 9 million tonnes of paddy since renewing the rice-buying scheme last October, a commerce ministry official said.

That yields about 6 million tonnes of milled rice, adding to the 14 million tonnes of milled rice held from the previous crop year, traders and industry officials estimate.

Boonsong has said up to 7.3 million tonnes of rice has been sold from stocks in government-to-government deals.

But the ministry has halted publication of shipment data and exporters say they have not seen the type of port activity such a large figure would entail, so they are sceptical about Boonsong's claim. (Reporting by Apornrath Phoonphongphiphat; Editing by Alan Raybould and Clarence Fernandez)

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