The military government wants to increase sugarcane planting at a time when world sugar prices are at a seven-month low because of a supply glut.
The junta wants to increase farmland dedicated to sugarcane by 800,000 rai from around 9.5 million rai, said Somsak Suwattiga, secretary-general of the Office of the Cane and Sugar Board (OCSB).
That would expand refined sugar production by between 800,000 and 1 million tonnes, from around 10 million that the OCSB forecasts for the 2014-15 crop year.
"The plan is likely to be approved by the end of this year, and we could start growing more sugar immediately in the 2015-16 crop," Mr Somsak told Reuters.
Local raw sugar stockpiles are already forecast to surge 36% to a record 4.9 million tonnes in the season ending in November, according to the US Department of Agriculture.
Workers load bundles of harvested sugarcane onto a truck in Saraburi province. (Photo: Bloomberg)
However, the global glut has eased from last season and forecasters now expect that demand will exceed supply by a small margin in the 2015-16 season.
The government would turn over more state-owned land to agriculture to create some new cane plantations, while also asking some farmers to switch to sugarcane from other crops.
Local rubber farmers have been feeling the impact of a global surplus, with prices at four-year lows. A rush to plant trees a decade ago when the market was booming has led to the current glut as those trees have now matured but supply exceeds demand.
Similarly, many rice farmers are wondering about their futures as the prices they receive for their grain have fallen now that the former government's disastrous pledging programme has ended. Global rice prices also remain weak though demand and supply are coming closer to being balanced.
Mr Somsak said local millers would have no trouble absorbing extra sugarcane supplies.
"There are 20 millers, mostly located in the impoverished northern region, that are happy to run at full capacity to help absorb rising cane output," he told Reuters. "There's no need to build any new sugar factories."
He also played down concerns that it could be difficult to sell more sugar into an oversupplied market, saying that fundamental demand in Asia was strong.
The International Sugar Organization (ISO) this week estimated the global sugar surplus at 1.3 million tonnes in 2014-15, down from 4.0 million in the previous harvest season, as consumption picks up.
Thailand, the world's second biggest sugar exporter after Brazil, produced a record 11.3 million tonnes of sugar in the 2013-14 crop due to good weather.
As a result, the country has millions of tonnes of unshipped sugar, forcing sellers to offer raw sugar at prices below New York futures rates.
The last time that Thai raw sugar traded at discounts to New York futures was in 2009.
The OCSB's prediction for 2014-15 refined sugar production of around 10 million tonnes is slightly higher than traders' and industry officials' forecasts of 9.5 million.
Bloomberg reported on Friday that traders may ship Thai raw sugar equivalent to 16% of the global surplus against October contracts on the ICE Futures exchange in New York, the first deliveries from the country since 2012.
About 625,000 tonnes of unrefined sugar would be delivered when the futures contracts expire, it said, basing the figure on estimates by analysts and traders.
Sugar from Thailand has been shipped against ICE contracts only five times since July 2008, according to exchange data.
Traders are renewing deliveries after Thai stockpiles swelled, contributing to a global oversupply that has driven down US futures prices by 17% since June amid a bumper harvest in Brazil.
"The forward outlook now depends on resolving this low- quality surplus sugar, which we think is likely to end up being delivered onto the exchange," said Andrew Slinger, the managing director of Enerfo Sugar Ltd in Singapore.
Prices dropped 5.5% this month after an 8.6% decline in July and settled at 15.56 cents a pound yesterday.
Thai sugar exports declined 18% to 3.67 million tonnes in the first seven months from a year earlier as a large Brazilian harvest reduced demand for Southeast Asian sugar, according to the Commerce Ministry.
The delay in selling off stockpiles has hurt the quality and caused the colour to darken, said Piromsak Sasunee, CEO of Bangkok-based Thai Sugar Trading Corp, the country's top exporter.
The world market will have a surplus of 1.3 million tonnes in the year starting in October, a fifth straight glut, and a small shortage the year after, Lindsay Jolly, senior economist at the International Sugar Organization, said this week.