Decline in production unlikely to hit global prices as stockpiles remain high
BANGKOK, Jan 8 (Reuters) - Drought will cut major rice exporter Thailand's 2015 off-season crop by over 30 percent, according to the latest report from the Office of Agricultural Economics.
Thailand is one of the world's top three rice exporters but the smaller harvest is unlikely to have a big impact on global prices, which are under pressure from still large stockpiles in Thailand and bumper output in rival exporters India and Vietnam.
The expected decline in production, however, could provide a floor under the local market <RI-THBKN5-P1>, where prices slid 5 percent in the last quarter.
Thailand's off-season rice is grown between November and April after the main crop is harvested. The second crop needs irrigation as there is little rain during that period.
But Thailand is experiencing drought in eight provinces, according to the Ministry of Agriculture, and the government has said it would not provide water for rice farming along the length of the Chao Phraya river from October through April.
The Chao Phraya, Thailand's main river, flows south through the fertile central rice-growing region and on to Bangkok.
Thailand will produce around 6.7 million tonnes of off-season rice this year compared to 9.7 million tonnes in the previous year, the ministry said.
"We don't see a big impact because Thailand has to compete with other exporters," said a Singapore-based trader. "One benefit is that lower production will be less of a headache for the Thai government."
Thailand's military government is still trying to sell off stockpiles bought under the previous government's rice-buying scheme that paid farmers well above market rates for their rice.
Thailand's legislature begins a hearing against ousted former Prime Minister Yingluck Shinawatra on Friday over the rice subsidy scheme that critics denounced as a wasteful handout to her supporters.
If found guilty, she could be banned from politics for five years.
Thailand was expected to surpass Vietnam and India last year to regain the rank of largest rice exporter, with 10.2 million tonnes to be shipped, compared with India's 10 million tonnes, according to the U.N. Food and Agriculture Organization.
India toppled Thailand three years ago to become the world's top rice exporter as the government intervention scheme priced Thai rice out of the export market and as Delhi lifted a four-year ban on non-basmati rice sales in 2011 to trim stocks. (Reporting by Kaweewit Kaewjinda and Panarat Thepgumpanat, with additional reporting by Naveen Thukral in SINGAPORE; Editing by Simon Webb, Amy Sawitta Lefevre and Tom Hogue)
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