By Apornrath Phoonphongphiphat
BANGKOK, May 9 (Reuters) - Thailand kicked off rice planting season with an auspicious ritual on Friday but a bountiful crop is the last thing farmers need as they sell into a depressed global market, without the support of a state subsidy for the first time in three decades.
In an ancient ritual held in front of the Grand Palace in Bangkok and presided over by the Crown Prince, sacred oxen predicted another good crop.
Thailand's controversial rice scheme, which has led to billions in losses and fuelled a political crisis in the country, came to an abrupt end on Feb. 28 as former prime minister Yingluck Shinawatra's caretaker government had no authority to extend the subsidy.
The lack of subsidies, lower rice prices and rising production costs for everything from fertilizer to pesticides will result in a major hit to the country's northeast, the stronghold of Yingluck's brother and billionaire former premier Thaksin Shinawatra.
Some farmers, who have yet to be paid for last October's crop under the now-ended subsidy program, are resorting to land sales to repay debts, local media said.
Planting rice is the only option for many farmers who have been producing the staple for generations, and enjoyed some sort of subsidy-backing for more than 30 years.
"It's painful that we have to grow rice even as prices are falling," said Prasit Boonchuey, head of Thai Rice Farmers Association. "We grow rice not just for sale, but it's part of our lives."
Thailand's anti-graft agency indicted Yingluck for negligence this week, a ruling that came a day after a court threw her out of office and could kill off any hopes she has of staging an electoral comeback.
The rice subsidy scheme, the focus of the anti-corruption commission case, was a flagship policy of Yingluck's administration, aimed at helping her rural supporters, under which the state paid farmers well above market prices for their crops.
But the rapid-fire sale of close to four million tonnes to help pay farmers means losses of about $1.5 billion, with 2011/12 crop being offered at an average $370 a tonne, free on board, compared with the $750 a tonne the government incurred.
BILLIONS IN LOSSES
Thailand is likely to produce a record 28.5 million tonnes of rice from the main crop which will be harvested in September, according to farm ministry estimates.
But global rice prices have failed to rebound from historically low levels in recent years amid plentiful global supplies, and prices are likely to remain under pressure as Thailand winds down its massive stockpiles.
"It's time to pull off a bandage and accept a painful truth that prices are falling and there would be no aid at all from the government," said Chareon Laothamatas, president of the Thai Rice Exporters Association.
Thailand's rice stocks have dropped to 10 million tonnes now
from 14-15 million tonnes at the end of 2013 as the government scrambles to raise money to make overdue payments to farmers and repay an intergovernmental loan that briefly supported the rice scheme.
Thailand spent more than 600 billion baht ($18.5 billion) buying rice since the scheme started in 2011.
Offering the lowest prices, Thailand is now on track to emerge as the world's biggest exporter of rice after a gap of two years, overtaking India and Vietnam.
"Thailand has taken over the African market and it is also selling rice in some government-to-government deals to China," said one trader in Singapore.
It is offering common grade 5 percent white rice at $380 per tonne, below the same grade from Vietnam at $390-$400 a tonne for the first time in decades.
A similar variety of Indian rice is being offered at $410 a tonne and Pakistani $420 a tonne.
In addition to regular tenders to liquidate stockpiles, last month, Thailand shipped 100,000 tonnes of rice to China as part of a government-to-government deal to sell 400,000 tonnes, traders said.
Thai rice was offered at the lowest price in an international tender from Iraq's state grains buyer to purchase at least 30,000 tonnes.
(Writing and additional reporting by Naveen Thukral; Editing by Amran Abocar and Richard Pullin)
((apornrath.phoonphongphiphat@thomsonreuters.com)(+66 2 648 9738)(Reuters Messaging: apornrath.phoonphongphiphat.thomsonreuters.com@reuters.net))
Keywords: THAILAND RICE/RITUAL
