Ethanol makers have agreed to buy 10,000 tonnes of cassava root a day from farmers at 1.9 baht a kilogramme in a bid to raise farm income and stabilise fresh cassava prices.
According to Nuntawan Sakuntanaga, director-general of the Internal Trade Department, the Commerce Ministry will witness the purchase agreement to be signed on Dec 23 between the Thai Ethanol Manufacturing Association and the Confederation of Tapioca Farmers.
The cassava root that ethanol makers buy should contain 25% starch.
Massive supply of fresh cassava root is scheduled to enter the market in January, and the deal is one of the preparatory measures jointly handled by the government and private sector to ward off a price slump, Mrs Nuntawan said.
"Demand for cassava root in the industrial sector is rising, and the supply of quality cassava is still insufficient," she said, adding that ethanol producers are now capable of buying about 2.5 million tonnes of cassava root a year.
According to Mrs Nuntawan, Thailand's cassava output has yet to achieve the standards required by the industrial sector, as most farmers do not use sieving machines to sort out the fresh cassava root, leading the cassava to contain contaminants and thus fetching relatively low prices.
In order to tackle the issue, the government has launched a lending programme worth 1.5 billion baht handled by the Bank for Agriculture and Agricultural Cooperatives for farmers to buy sieving machines.
"With fresh cassava root prices now at 1.8 baht a kg, we're afraid the prices will come under great pressure once the massive supply is churned out in January and February," Mrs Nuntawan said.
The government in October introduced new measures, including minimum export prices for tapioca products, to boost domestic cassava root prices in the 2016-17 harvest season that started in November.
The 2016-17 harvest season is expected to produce some 31 million tonnes, with about 21 million tonnes to be churned out between January and April next year.
The free-on-board minimum export prices for tapioca starch are set at a minimum of US$320 a tonne, with those for tapioca chips at a minimum of $180 a tonne. This floor will help enable farmers to fetch fresh cassava root prices of 1.9 baht a kg, which matches their production costs.
The minimum export price measures will run until April 2017.
In addition, exporters will be required to maintain tapioca stocks before export at a ratio of 1 to 1.5. This means that exporters hoping to export one tonne need to keep stocks at 1.5 tonnes.
Imports are also more stringent and strictly supervised, and to be allowed only through permanent border checkpoints.