UPDATE 3-Thailand to sell rice from stocks, may need to cut prices

Wed Jul 10, 2013 6:26am EDT

* Traders say Thailand must cut prices to secure sales

* Thai sales would further pressure world grain market

* Govt to sell both milled and unmilled rice

* Thailand to seek government rice sales (Adds comments from Manila)

By Apornrath Phoonphongphiphat

BANGKOK, July 10 (Reuters) - Thailand plans to start selling rice from government stockpiles next week, offloading up to 1.5 million tonnes a month for the rest of the year, but traders said it would have to slash prices and accept big losses in order to move the grain.

World prices have fallen due to expected bumper crops and high stockpiles and Thai sales would put even more pressure on the market.

Global production could rise 1.9 percent to a record 479.2 million tonnes of milled rice in the next 2013/14 crop, the United State Department of Agriculture (USDA) said.

Thai officials estimate stocks at 17 million or 18 million tonnes, or almost double the export volumes of a normal year.

"It's a good time to start selling stocks, as we see rising demand for several grades of rice," Commerce Minister Niwatthamrong Bunsongphaisan told reporters.

He said the government aimed to sell up to 1 million tonnes of milled rice per month and another 500,000 tonnes of paddy. It also planned to sell an unspecified amount on the Agricultural Futures Exchange of Thailand (AFET).

Last year, the Thai government said it had sold 7.3 million tonnes to foreign governments for delivery over several months into this year, but the purported buyers denied the deals and activity at ports did not suggest such large-scale loading.

Traders said the Thai government would have to accept huge losses if it wanted to release stocks to get fresh funding for its intervention programme, which helped win the votes of millions of farmers and carry it to power in 2011.

"Bidding prices are expected to be really low and the government has no choice, except to cut prices, if it really wants to offload the rice," said Rakesh Sodhia of Fortuna International Ltd in Bangkok.

The government has estimated it suffered losses of 136 billion baht ($4.33 billion) from the scheme in 2011/12 but even that was based on getting prices for remaining stocks that now seem wildly unrealistic.

"Prices will drop as supply is rising everywhere. India, Thailand and Vietnam are about to harvest their 2013/14 crop in the second half of this year but demand is steady," said Sompong Kitireanglarp, president of Thai exporter Ponglarp Co Ltd.

THAILAND TO SEEK GOVT SALES

Niwatthamrong was appointed in a cabinet reshuffle at the end of June, when his predecessor lost his job over losses that had piled up under the intervention programme and his failure to be open about costs and how much rice was sold.

The new minister is to visit several countries that have pacts with Thailand on rice sales, to discuss new deals. "The countries I plan to visit are Indonesia, Iran, the Philippines, Malaysia, China and Singapore," he said.

Indonesia, a big buyer that is trying to become self-sufficient, said it could import up to 600,000 tonnes of rice this year depending on local output, stocks and prices.

Jakarta normally buys from Vietnam, whose rice is cheaper.

The Philippines, which aims to be self-sufficient in rice by the end of 2013, said it had no plan to buy more through the National Food Authority.

"Thailand has approached the NFA for a government-to-government deal. But for this year the NFA has no plans of buying more after our deal with Vietnam," a spokesman told Reuters. "And we're not sure if we need to import rice for next year."

Vietnamese 5 percent broken rice stood at $370 to $385 a tonne on Wednesday against $475 for the same grade from Thailand.

The Thai rice cost $520 a tonne at the end of June and fell sharply when the government announced a cut in the intervention price it pays to farmers. The price stuck near the lower levels even when the government did an about-turn and reinstated the original purchase price after protests from farmers.

The government pays 15,000 baht ($480) a tonne for rice, a figure traders estimate is 40 percent above the market price. Milling, storage and other costs suggest the government would need to get about $700 a tonne to break even. ($1=31.3050 Thai baht) (Additional reporting by Nguyen Phuong Linh in Hanoi, Michael Taylor in Jakarta and Enrico Dela Cruz in Manila; Editing by Alan Raybould and Clarence Fernandez)

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