A tumble in rice shipments from Thailand, the world's top exporter, may prove even deeper than the 20% signalled by updated official US forecasts, thanks to a controversial state hoarding programme.
The US Department of Agriculture, in its much-watched Wasde crop report on Thursday, cut by 2.0m tonnes to six-year low of 8.0m tonnes its forecast for Thailand's rice exports in 2011-12, following the re-introduction of an intervention buying scheme.
However, a separate briefing by USDA attaches in Bangkok says the figure may come in at "7m-8m" tonnes, citing "limited exportable supplies" of white and parboiled rice as the government stockpiles the grain.
The "aggressive" intervention programme, promising prices up to two-third above market levels, will likely land the government with intervention stocks of 6m-7m tonnes of rice over 2011-12 – roughly 30% of domestic output.
Yingluck Shinawatra, the incoming Thai leader, won elections last month in part on a promise to reinstate the so-called paddy pledging programme of rice buying, ostensibly to boost rural incomes.
However, the idea has raised concerns abroad over its impact on exports from a country responsible for one-third of rice shipments in 2010-11.
Indeed, along with the prospect of a 20% drop in US rice production, it has been blamed for a 6% rebound in Thai rice prices last month, on United Nations data.
"The recovery was mainly supported by the prospect of changes in the support price policy in Thailand, the largest rice exporter, which could result in much higher export quotations," the UN's Food and Agriculture Organization said on Thursday.
On the Chicago futures market, rice futures have rebounded by more than one-quarter from a late-June nadir, and on Wednesday reached their highest for nearly three years.
Millers vs growers
The USDA attaches also questioned how effective the intervention policy was in supporting growers, saying the new government is actually "catering the requests of the millers, who would be the main beneficiaries of this policy shift".
About 70% of rice farmers may be worse off under the revived scheme if it, as it has historically done, favours large-scale growers.
"Small-scale farmers, particularly the north eastern farmers with average holdings of 10-20 rai (2-3 hectares), have limited ability to participate in the programme due to liquidity and logistical concerns," the attaches said.
"[They] will be forced to sell at market prices which are usually far below the intervention price."