Thailand drops plan for rice cartel that would have fixed prices

Thailand is dropping plans to create a Southeast Asian rice cartel that would have fixed the price of the skyrocketing commodity over food security concerns, the country's foreign minister said Tuesday.

The proposal to create an OPEC-like cartel was first floated last week by Prime Minister Samak Sundaravej to give rice producers greater control over rice prices, which have tripled since December. But the idea was heavily criticized by senators in the Philippines, a major importer, as well as some Thai rice exporters.

"We are not talking about setting up a rice cartel," Foreign Minister Noppadon Pattama said after a meeting with ambassadors from six rice exporting countries in Asia. "If Thailand sets up a rice cartel and fixes a price, that will make matters worse and worsen food security."

Instead, Noppadon said Thailand proposed holding a meeting on rice in the next month or two that would work with top Asian exporters including India, China, Vietnam, Myanmar, Cambodia and Pakistan to improve productivity. He also said exporting countries would discuss sharing of technology, market information and price information.

Noppadon denied that the about face on the cartel had anything to do with concerns about the impact on the Philippines.

"We are sympathetic to all human beings, not just the Filipinos," he said.

Rice prices have tripled this year, with the regional benchmark hitting $1,000 a metric ton for 100 percent Grade B white rice.

The run-up in rice prices has come amid global food inflation, poor weather in some rice-producing nations and demand that has outstripped supply. Some Asian countries, including India and Vietnam, have contributed to the problem by curbing rice exports to guarantee their own supplies.

Supporters say that a rice cartel - tentatively named Organization of Rice Exporting Countries - would ensure farmers benefit from the increasing demand for the staple.

Despite Thailand's reluctance, Cambodia's Information Minister Khieu Kanharith insisted that an association of rice exporting countries could still be useful for avoiding a "price war, which could affect livelihoods of peoples" in the region and beyond.

He said his government will pursue discussion about forming such an association at a meeting of the leaders of five Southeast Asian countries in Vietnam later this year. The five countries - Cambodia, Laos, Vietnam, Thailand and Myanmar - have formed a sub-regional cooperation forum known as Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy, ACMECS.

Their next meeting is planned to be held in Vietnam in October, Khieu Kanharith said.

But Edgardo Angara, chairman of the Philippine Senate's Committee on Agriculture, has expressed concerns that a small group of producers could control the staple food and price it out of reach for "millions and millions of people."

"It is a bad idea," he said Friday. "It will create an oligopoly and it's against humanity."

Meanwhile, China said it has enough grain to keep food prices steady, amid reports authorities were struggling to prevent the smuggling of rice to overseas markets.

China views basic self-sufficiency in staple grains for its 1.3 billion people to be a national strategic priority, and with grain prices soaring internationally it is moving to ensure domestic supplies and curb exports, the National Development and Reform Commission said in a statement on its Web site.

The comments, published in the form of a question-and-answer session with an unnamed official, emphasized Beijing's ability to keep grain prices stable after four straight years of bumper harvests.

"Our grain supply and demand is basically steady, our reserves are full and we can guarantee the supply and stability of grain prices," the statement said.

It said reserves alone could meet demand for six months. The government is shifting grain from the north to heavily populated southern areas where consumption outstrips production.