Indonesia deal boosts Thailand's rice market

Indonesia deal boosts Thailand's rice market

BANGKOK (Reuters): Thailand's rice market has been lifted by expectations the government might soon conclude a deal to sell a large amount of rice to Indonesia, trade sources said yesterday.

They estimated Indonesia would seek between 100,000 and 300,000 tons of 25 percent grade rice from Thailand under the government-to-government deal.

Commerce ministry officials told Reuters the ministry was likely to submit a request for government guidelines on the deal on August 3.

Indonesia would then send delegates to discuss and possibly finalize the deal with Thai authorities on August 6.

"We heard from the government that Indonesia has asked for deferred payment and is no longer interested in a counter trade deal as conclusion of such deal could be very time consuming," said a marketing manager of a major rice firm.

"Indonesia urgently needs rice to ensure food security. It will have to secure as much food as possible from whatever means -- loans, grants, or aid," he said.

Another trader said the amount of rice to be bought under the deal was likely to be dictated by the Thai government's willingness to take risks.

"The financially restrained Thai government is not in a position to help much. I don't think it will accept a deferred payment of a longer period than one year," he said.

"Moreover, it will have to judge Indonesia's ability to repay the debt as well, given the rupiah's slump. And don't forget, the government of Indonesia not only has to face the currency burden, but also the burden of subsidy," he added, referring to Jakarta's need to subsidize essentials such as rice to minimize the burden of rising prices.

With the rupiah having lost more than 80 percent of its value against the U.S. dollar since the crisis started last year, prices of imports, including rice, have jumped.

The Indonesian government has said almost half its 200 million people will be below the poverty line by the end of this year.

Securing enough food and maintaining affordable prices is a key goal of the new government of President B.J. Habibie.

Also in the market were buyers from the region such as Malaysia and Singapore and some from the Middle East coming in for regular purchases.

The price of benchmark 100 percent B grade was steady at $335 per ton on FOB basis. Parboiled rice edged up to $340 per ton from $335 last week as rains tightened supplies.

Thailand exported 3.76 million tonnes of rice between Jan. 1- July 28 compared with 2.69 million tonnes during the same period last year.