Resolution of Thai rice stockpile in sight, risks remain

LAUNCESTON, Australia, Nov 2(Reuters): Two things have become clearer from the Thai military government's review of the nation's massive rice stockpile. Firstly, rice prices will remain depressed for some time yet, and secondly, the situation isn't as dire as it could have been.
The recent audit of the country's estimated 18 million tonnes in storage showed only 10 per cent was of standard export quality, about 70 per cent was deteriorating but still edible and 20 per cent had spoiled.
The positive news in this is that the market overhang for good quality rice is now less than 2 million tonnes, which means that once this is worked through it's likely that prices can stage some sort of recovery.
This will still take some time, as Thailand, when it was the world's top exporter of the grain, shipped around 10 million tonnes a year, meaning even 2 million tonnes of stockpile is a significant amount for the market to absorb.
The not so positive news is that Thailand has 12.6 million tonnes of rapidly deteriorating rice that it will become increasingly desperate to sell in the next year or so.
This 70 per cent of the stockpile was described by Duangporn Rodphaya, chief of the country's foreign trade department, as discoloured and of diminished quality, but still fit for sale.
The military government's current plan is to shift this rice within three years, but the likelihood is that they will have to do it far quicker or more of it will spoil, joining the 20 per cent that already falls into this category.
This means the government is likely to look to offload this rice at substantial discounts to buyers less concerned about quality. Whether there are enough buyers out there who will be prepared to take rice of dubious quality, even at a bargain price, remains to be seen.
The Thai authorities are likely to target less wealthy countries, particularly in Africa, but even if they are successful in selling some of the deteriorating rice, it's unlikely they will be able to move all of it.
This means that more of the current stockpile is likely to end up going to waste, which was always a risk once it became clear that ousted Prime Minister Yingluck Shinawatra's generous rice-pledging scheme was doomed.