Exporters unable to buy rice because of widespread hoarding and speculation have begun defaulting on orders from around the world worth up to $5 billion.
The president of the Thai Rice Exporters Association, Chookiat Ophaswongse said on Friday, "There will be a lot of defaults coming up, because we cannot find any rice in the market.
"What's happening now is a lot of traders have started to negotiate with buyers abroad on how to compensate them because we cannot buy any rice."
The rice trade has been hard hit this year by unprecedented price volatility in the market, sparked by India's decision to halt rice exports. Vietnam and Cambodia also have ordered a halt to foreign sales.
India traditionally exports about 4 million tons of rice a year.
"And this year they just stopped, so that 4 million tons out of a market of say 29 million tons was removed," said Chookiat.
Vietnam, the world's second largest rice exporter after Thailand, has also put a cap on its exports at about 3.5 million tons this year, 1 million tons less than expected, and Egypt has stopped all exports, taking another 1 million tons off the world market.
"So now everyone is turning to Thailand, and this is a problem," Chookiat told the news agency Deutsche Presse-Agentur dpa.
Rice exporters, who usually sell forward at a fixed price and then buy on the local market to meet orders, have suffered unprecedented losses this year in the face of dramatic price increases, sometimes jumping $20 a day per ton.
The price of 100 per cent Grade B white rice, for instance, has jumped from $420 per ton in early January to $720 now, almost doubling.
"By my estimates, the rice traders have lost around 4 to 5 billion baht ($127 million to $159 million), at least," said the rice trader.
Chookiat criticised Thai Commerce Minister Mingkwan Sangsuwan for encouraging Thai farmers to hoard their rice in order to fetch better prices for it. Not only farmers, but millers and local businessmen have started hording and speculating on Thai rice, creating an artificial shortage for exports.
The government currently has a 2.1-million-ton stockpile that it has promised to distribute to the poor to alleviate high rice prices.
The stock is expected to last about three months, after which the government will need to go to the market to replenish their stocks, predicted Chookiat.
The crunch for the export market will also come in three to four months, when Indonesia and Iran are likely to seek imports of 1.5 million tons and 1 million tons, respectively, to meet local demand, Chookiat forecast.
Thailand has been the world's leading rice exporter since the mid-1960s. Last year, Thailand's rice exports hit an historic high of 9.55 million tons, earning the country $3.6 billion.
This year's rice exports are estimated to reach 8.75 million tons, if exporters aren't forced to default on orders, earning as much as $4.7 billion. (BangkokPost.com, dpa)
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