The United States will challenge Thailand over what it terms rice subsidies at the World Trade Organization next week, Reuters has reported.
Washington is worried that more rice now in government stockpiles could end up on the world market and depress prices, hurting US exporters.
Under its pledging programme, which pays farmers about 40% more than market prices, the government has effectively become the only rice buyer in the country.
However, the government is under pressure to sell millions of tonnes of rice, almost certainly taking a loss, so that it can clear out warehouses and make way for the next crop.
A worker lifts sacks of rice at a warehouse in Bangkok. AFP
Thai officials claim to have several giovernment-to-government deals for rice but have released few details about volumes or prices, saying the deals are sensitive.
The USA Rice Federation believes Thailand is determined to maintain its status as the world's top rice exporter, which is under threat from Vietnam and India this year. As a result, it said, stocks bought by the government would be released onto the world market at a loss.
Tikhumporn Natvaratat, deputy director-general of the Foreign Trade Department, told the Bangkok Post earlier this month that the government would not cut rice prices to stay competitive on the world market.
Instead, he said, it would focus on looking for export markets that want the high-quality rice for which Thailand is famous.
The US rice industry group has urged the US Trade Representative to take action against the Thai scheme, alleging that it acts as an export subsidy prohibited by the WTO.
The United States has asked Thailand to supply answers at a WTO agriculture committee meeting this coming Wednesday, according to an advance copy of questions seen by Reuters.
"The United States remains concerned that with government procurement of rice at rates as much as 40% above world market prices ,it will be difficult for the government of Thailand to export any procured rice without incurring a loss," the US submission to the committee says.
"What steps is the government of Thailand taking to ensure rice procured by the government under the programme is not being sold for export at prices below acquisition cost?"
It also asks for details of the rice purchasing scheme and Thai government rice stocks and sales, and asks why the Thai Board of Trade has stopped publishing daily data on the scheme.
It says the Thai government uses loans from the Bank for Agriculture and Agricultural Cooperatives and other specialised institutions to fund the purchases, then repays the loans by selling the procured rice, with some operational costs reimbursed from the fiscal budget.
According to Reuters, WTO members with an interest had invited Thailand to discuss its policies at an informal meeting before the committee convenes on Wednesday.
Thailand is expected to export only 7.5 million tonnes of rice this year, below the target of 8.5 million and down sharply from the 10.6 million tonnes exported last year.
Exporters have blamed the sharp fall in volume on the government's pledging programme. As a result, Thai rice in the world market cannot compete with cheaper grain from Vietnam and India.
While Thailand is in danger of losing its decades-old title as the world's top rice exporter by volume, it should still emerge on top in terms of value, according to Mr Tikhumporn of the Foreign Trade Department.
Since the beginning of the year, he said, the country had exported 5.5 million tonnes of rice, worth US$3.6 billion, up 18% in value from the same period last year.
He believes the country's rice export value this year will not be lower than $4 billion, keeping Thailand on top.
As of the end of October, Vietnam had exported an estimated 5.9 million tonnes of rice and India 5.6 million so far this year.